The Era of Sanctions Warfare (III)

BERLIN/WASHINGTON | | usa

BERLIN/WASHINGTON (Own report) - In Berlin and other capitals of the EU, political advisors are appealing for a speedy course of action to be taken against US extraterritorial sanctions. The sanctions, unilaterally imposed by Washington, which obligate, in principle, all enterprises doing business in the USA to abide by, are not only causing billions in losses in Europe, but are also thwarting Germany and the EU from pursuing their own global policy, independently from that of the USA. In the meantime, experts at several European think tanks are appealing for direct countermeasures to be initiated against the USA. Some suggest, for example, that extraterritorial sanctions could be imposed also on US companies. As an alternative, "asymmetrical countermeasures" could be considered, such as the freezing of the assets of US enterprises. Time is of the essence. Should Washington, in the future, impose extraterritorial sanctions on China, the damages for the EU economy would hardly be surmountable. The Trump administration is currently expanding its extraterritorial sanctions to Latin American countries.

Expand INSTEX

Strengthening the Instrument in Support of Trade Exchanges (INSTEX) is among the measures being recommended by political advisors in Berlin and other capitals of the EU, to avert, in the long run, the increasingly frequent imposition of US extraterritorial sanctions. INSTEX - the financial vehicle, conceived to facilitate trade with Iran, without having to rely on the US dollar in any way - is currently considered a failure. (german-foreign-policy.com reported.[1]) However, that does not have to remain the case. On the one hand, INSTEX, which currently allows for facilitating trade in humanitarian supplies, could be expanded to handle trade in general. On the other, the instrument could be activated by involving other interested countries. For example, as was confirmed in the current edition of the journal "Internationale Politik," Russia and Turkey have shown interest in participating. China, the journal continues, has "expressed strong support."[2] Since some time, observers have been warning that the world is not asleep. Also in non-EU capitals, particularly Beijing, the creation of instruments for counteracting US extraterritorial sanctions is intensively being contemplated. If Brussels does not soon take the lead, it will sooner or later be confronted with the choice of either using the instruments of other countries - possibly China's - or submit to the USA.

No Alternative Yet to the Dollar

Of course, technical solutions, such as the expansion of INSTEX cannot hide the fact that permanent remedies are only possible, if the EU is able "to strengthen the global role of the euro," predicts the European Council on Foreign Relations (ECFR).[3] After all, the strength of US extraterritorial sanctions resides, primarily, in the global dominance of the US dollar. The ECFR experts acknowledge that the EU currency is struggling with diverse intrinsic difficulties. The euro zone, on the one hand, lacks cohesiveness, and on the other, its development is regularly blocked by differences among the member states. In fact, so far, it was the Federal Republic of Germany that has primarily been the main hindrance to the consolidation of an economic union, as France had demanded. Germany fears losing a bit more of its wealth, if it must increase its contribution to economically weaker countries and regions.[4] Berlin is, thereby, standing in the way of its own ambitions for global power. Yet, already in 2016, the US Secretary of Finances at the time, Jack Lew, had warned of "the risk" that, because of the constantly expanding US sanctions, an increasing number of globally active companies could "drive business activity from the U.S. financial system" as soon as there are "alternatives to the United States as a center of financial activity, and to the U.S. dollar as the world's preeminent reserve currency."[5]

Asymmetric Countermeasures

To be able to defend the EU against US extraterritorial sanctions in the short and intermediate term, experts are proposing various countermeasures. For example, the Paris-based Jacques Delors Institute suggests that, for its part, the EU could impose extraterritorial sanctions on US companies. Therefore - mimicking the US Office of Foreign Assets Control (OFAC), which is in charge of enforcing the sanctions - a European Office of Foreign Assets Control should be established.[6] Of course, the EU's extraterritorial sanctions must be strictly limited to defending against US measures. On the other hand, the ECFR argues in favor of "asymmetric countermeasures." For example, where the US threatens to fine a European company or cut it off from its markets, the EU could respond by targeting US companies’ access to specific European markets. Or it could freeze the assets of US firms in proportion to the penalties imposed by the US Treasury, or the EU could, for example, require foreign banks operating in Europe to apply for licences that it could revoke if they comply with secondary sanctions on European entities.[7] These and similar measures would raise the costs of enforcing the extraterritorial sanctions for the USA, and possibly force Washington to back down. In addition, Europe could lead the way in calling for a transatlantic dialogue on sanctions. Of course, one can only expect US participation, once the Trump administration has left office.

Escalation not Ruled Out

The ECFR attaches great urgency to this theme. As the think tank reports, US officials have suggested that they could enforce the secondary sanctions in a draconian manner, noting that “it’s possible” the US will target European companies with the measures.[8] ECFR also warns that the Trump administration could impose strenuous extraterritorial sanctions on Russia and China. With Russia, this is already the case, to a certain extent, to which an expansion of the measures is being elaborated. (german-foreign-policy.com reported.[9]) Particularly extraterritorial sanctions on China, Germany's main commercial partner, would probably have a devastating effect on the German economy. On top of this, for the first time, the People's Republic of China is using sanctions to defend itself against US aggression. Last week, Beijing announced it would no longer allow imports from US companies, which had recently chosen to participate in the export of around US $2 billion worth of arms to Taiwan. This shows that the completely unbridled imposition of sanctions can, in the future, have serious consequences for the West.

Against Cuba and Venezuela

Washington is steadily exacerbating the situation. For example, last week, with the implementation of Section III of the of the "Helms-Burton Act" on May 2, (german-foreign-policy.com reported.[10]) another lawsuit became possible against a European company. Heirs of a Cuban bank have sued the major French bank Société Générale because of its business relations with the Cuban National Bank - which outside the USA, are completely legal.[11] They are suing for an amazing US $792 million. Simultaneously, the Trump administration is expanding its anti-Cuban sanctions to prohibit any dealings with Cubametales,[12] the company, carrying out that Caribbean nation's oil commerce. The Trump administration seeks to extraterritorially enforce the sanctions it has imposed on Venezuela. It has put India under massive pressure to not expand its imports of Venezuelan oil [13] - at a time when India's waiver allowing Iranian oil imports was revoked. Therefore, India had to massively increase its importation of oil from the United States.[14]

Global Redistribution

Extraterritorial sanctions are proving not only to be an instrument for speeding up redistribution of wealth toward the United States, it is also dramatically aggravating the damage inflicted directly, as well as indirectly, on the states affected - usually at the expense of the impoverished population. german-foreign-policy.com will soon report.

 

See also The Era of Sanctions Warfare (II).

 

[1] See also War of Sanctions against Iran (II) and War of Sanctions against Iran (IV).

[2] David Jalilvand: Sperriger Testballon. In: Internationale Politik Nr. 4, Juli/August 2019. S. 88-92.

[3] Ellie Geranmayeh, Manuel Lafont Rapnouil: Meeting the challenge of secondary sanctions. ECFR Policy Brief. 25.06.2019.

[4] See also Hegemonie nach deutscher Art and New Confrontations.

[5] Remarks of Secretary Lew on the Evolution of Sanctions and Lessons for the Future at the Carnegie Endowment for International Peace. treasury.gov 30.03.2016.

[6] L'Europe face aux sanctions américaines, quelle souveraineté? Institut Jacques Delors, Policy Paper No. 232. 23.10.2018.

[7], [8] Ellie Geranmayeh, Manuel Lafont Rapnouil: Meeting the challenge of secondary sanctions. ECFR Policy Brief. 25.06.2019.

[9] See also Die Ära der Sanktionskriege (I).

[10] See also The Era of Sanctions Warfare (II).

[11] Edgar Göll: Helms-Burton-Gesetz gegen Kuba: Französische Großbank Société Générale verklagt. amerika21.de 15.07.2019.

[12] Edgar Göll: USA sanktionieren kubanische Ölfirma. amerika21.de 09.07.2019.

[13] Ariana Pérez, Marta Andujo: Indien als zweitgrößter Abnehmer von Öl aus Venezuela unter Druck der USA. amerika21.de 15.03.2019.

[14] Nidhi Verma: Filling Iran oil gap in India: U.S. supplies outshine Middle East crude. reuters.com 24.06.2019.