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On October 14, 2019, The Trump Administration Issued an Executive Order Imposing Sanctions in Connection with Turkey’s Military Offensive in Syria

The Order imposes blocking sanctions on the Turkish Ministry of National Defense and Minister of Defense Hulusi Akar, the Turkish Ministry of Energy and Natural Resources and Minister of Energy Fatih Dönmez, and the Turkish Minister of the Interior, Süleyman Soylu.  Entities in which these parties have a 50% or greater state are also automatically deemed to be blocked.

However, the government also issued three general licenses, which (i) authorize official activity of the United States government (and its employees and contractors), (ii) authorize official activity of the United Nations (and its programs and agencies); and (iii) authorize a 30-day wind-down period for existing activities with the designated ministries.

The Order also provides authority for additional sanctions in the future, including on: other Turkish government entities and officials; parties that operate in as-yet-to-be-identified sectors of the Turkish economy; parties that provide goods or services or act on behalf of parties designated under the Order; parties that engage in human rights abuses or destabilizing activities in Syria; and foreign financial institutions that knowingly facilitate significant transactions for or on behalf of blocked parties.  Non-U.S. businesses should note that the U.S. government may impose such sanctions on foreign parties even if the underlying activity has no U.S. nexus.

The situation is volatile and it is not clear how long sanctions will remain in place or whether they will be expanded beyond the initial designations.  Much will depend on Turkey’s response and its willingness to alter course in Syria.  In the meantime, U.S. and foreign persons engaged in trade with Turkey should be aware that:

  • U.S. persons are broadly prohibited from any dealings with or for the benefit of blocked parties, unless authorized by the Office of Foreign Assets Control (OFAC) (e.g., via one of the three general licenses discussed above);

  • U.S. sanctions prohibitions also apply to transactions by foreign persons outside the U.S., if those transactions involve U.S. persons, U.S. goods, or the U.S. financial system (including a majority of transactions denominated in U.S. dollars);

  • Many banking institutions include broad sanctions-related restrictions in service agreements with their customers, and these clauses may prohibit (as a matter of contract) transactions with parties that are subject to U.S. sanctions even when there is no U.S. nexus;

  • The Executive Order provides authority to impose sanctions on non-U.S. persons for providing goods and services to parties blocked under the Order, as well as parties involved in disapproved activities in Syria.

Detailed Description

The Order has the following effects:

A. It designates as Specially Designated Nationals (SDNs), thereby blocking the property and interests in property of, and effectively prohibiting U.S. persons from any dealings with or for the benefit of: 

  • the Turkish Ministry of National Defense and the Minister of Defense Hulusi Akar;

  • the Turkish Ministry of Energy and Natural Resources, and the Turkish Minister of Energy Fatih Dönmez; and

  • the Turkish Minister of the Interior, Süleyman Soylu.

    • Note - pursuant to the 50 Percent Rule, blocking sanctions also apply to any entity in which these parties (or other parties subject to sanctions) own a 50% or greater stake, whether directly or indirectly, individually or in the aggregate

B. It authorizes future imposition of (does not immediately impose) blocking (SDN) sanctions on:

  • any current or former official of the Government of Turkey, and any subdivision, agency, or instrumentality of the Government of Turkey

    • Note, Government of Turkey is broadly defined to include not only any political subdivision, agency, or instrumentality of the government, but also any person owned or controlled by or acting for or on behalf of the Government of Turkey

  • any person deemed to be responsible for or complicit in, or to have directly or indirectly engaged in, or attempted to engage in, serious human rights abuse in relation to Syria, or actions or policies threatening the peace, security, stability, or territorial integrity of Syria;

  • parties that operate in sectors of the Turkish economy identified in the future by the U.S. Secretaries of Treasury and State (no affected sectors have been identified at this time, but defense, energy and finance seem likely candidates); and

  • any party that materially assists, sponsors, or provides goods or services or financial, material, or technological support to or in support of, or that is owned or controlled or purports to act on behalf of, parties designated pursuant to the Order.

    • Note – non-US businesses should be aware that the material assistance provision permits designation as SDNs of foreign persons for activities involving the designated parties, even if those activities occur entirely outside the United States and do not involve any US persons, or goods, or the U.S. financial system.

C. It authorizes menu-based sanctions (see description below) on any foreign person, and any of adult family member of a foreign person, who is deemed responsible for or complicit in, or has directly or indirectly engaged in, or attempted to engage in, or financed:

  • obstruction, disruption, or prevention of a ceasefire in northern Syria;intimidation or prevention of displaced persons from voluntarily returning to their places of residence in Syria;

  • forcible repatriation of persons or refugees to Syria;

  • obstruction, disruption, or prevention of efforts to promote a political solution to the conflict in Syria, such as (i) convening and conducting a credible and inclusive Syrian-led constitutional process under the auspices of the United Nations (UN); (ii) preparing and conducting free, fair, transparent and accountable UN-supervised elections pursuant to the new Syrian constitution; or (iii) development of a new Syrian government that is representative and reflects the will of the Syrian people; or expropriation of property in Syria, including real property, for personal gain or political purposes.

The available menu-based sanctions are:

  • blocking property and interests in property;

  • prohibiting any United States financial institution that is a U.S. person from making loans or providing credits totaling more than $10,000,000 in any 12-month period (except with respect to activities to relieve human suffering);

  • prohibiting any transactions in foreign exchange that are subject to the jurisdiction of the United States;

  • prohibiting any transfers of credit or payments between banking institutions or by, through, or to any banking institution, to the extent that there is U.S. jurisdiction;

  • prohibiting any United States person from investing in or purchasing significant amounts of equity or debt of the sanctioned person; or

  • restricting or prohibiting imports of goods, technology, or services, directly or indirectly, from the sanctioned person into the United States

    • Note - upon imposition of one or more of the menu-based sanctions, where necessary to effectuate the sanctions, the Secretary of State may also deny visas to any foreign person who is corporate officer , principal, or controlling-interest shareholder of a sanctioned person, and/or  direct U.S. government agencies not to procure, or enter into a contract for the procurement of, any goods or services from the sanctioned person.

D. It authorizes the prohibition or restriction of the U.S. correspondent or payable-through accounts of foreign financial institutions that knowingly conduct or facilitate a significant financial transaction for or on behalf of a party blocked pursuant to the Order   

General Licenses

The SDN designations of the Turkish ministries and ministers are effective immediately.  However, the government has issued three General Licenses (GLs) that permit certain activity that would otherwise be prohibited by the Order:

  • GL1: authorizing official business of the United States, including by its employees, grantees, and contractors;

  • GL2: creating a 30-day wind-down period (through 12:01 a.m. Eastern Standard Time on November 13) for existing activities with the with the Turkish Ministry of National Defense and the Ministry of Energy and Natural Resources, and entities in which they have a 50% or greater interest

  • GL3: authorizing official business of the United Nations with the Turkish Ministry of National Defense and the Ministry of Energy and Natural Resources, and entities in which they have a 50% or greater interest

    • Note - the U.N. authorization extends to activities of U.N. Programmes, Funds, Specialized Agencies, and Related Organizations, including the World Bank, IMF (International Monetary Fund), FAO (UN Food and Agriculture Organization), OCHA (UN Office for the Coordination of Humanitarian Affairs), OHCHR (UN Office of the United Nations High Commissioner for Human Rights), UN Habitat, UNDP (UN Development Program), UNFPA (UN Population Fund), UNHCR (Office of the UN High Commissioner for Refugees), UNICEF (UN Children's Fund), WFP (World Food Program), and World Health Organization (WHO), including the Pan-American Health Organization (PAHO)

Resources

The Order and GLs can be found at the following links:

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Tahlia Townsend International trade lawyer Wiggin Dana
Partner

Co-chair of the International Trade Compliance Practice Group, Tahlia is trusted by Fortune 50 multinationals, leading universities, international law firms, emerging companies, and small businesses to provide prompt, practical, effective guidance and thought leadership on trade sanctions administered by the Office of Foreign Assets Controls (OFAC) and on U.S. export controls under the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations (EAR), and to develop tailored, risk-based programs for compliance with, obtain licenses for...

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