Episode 22 of Borderlines features host Professor Katerina Linos talking with three international law scholars on sanctions and their role in comparative perspective. Berkeley Law Professor Elena Chachko joins Professor Luis M. Hinojosa-Martínez and Professor Carmela Pérez-Bernárdez from the Department of Public International Law and International Relations at the University of Granada, Spain, for a frank look at international sanctions as a legal tool used by self-governing states via bodies like the UN Security Council, European Union, and the U.S. Treasury’s Office of Foreign Assets Control (OFAC).
Listeners will come away understanding sanctions, and their intended goal to pressure change from countries – as well as individuals, companies, or organizations – causing violent wars, implementing harmful policies, or disregarding international laws. In the 21st century, recommendations have shifted toward restrictive measures, or so-called “smart sanctions,” targeting regimes rather than people. Discussion covers current and historic implementations of sanctions with an incisive review of successes and critiques.
This episode’s expert guests have written and taught extensively on the topic. For further study, see, e.g., Enhancing the Rule of Law in the European Union’s External Action, Luis M. Hinojosa-Martínez and Carmela Pérez-Bernárdez (eds.), Edward Elgar, 2023 (Part III.A includes chapters dealing with “sanctions and the rule of law”); and “A Watershed Moment for Sanctions? Russia, Ukraine, and the Economic Battlefield,” Elena Chachko and J. Benton Heath, pp.135-139, and “Ukraine and the Emergency Powers of International Institutions,” Elena Chachko and Katerina Linos, pp. 775–87, in American Journal of International Law 116(4): Symposium on Ukraine and the International Order, AJIL Unbound, 2022; Elena Chachko and Katerina Linos (eds.), published as Open Access articles by Cambridge University Press on behalf of The American Society of International Law.
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Episode Transcript
Katerina Linos: [00:00:00] Welcome to Borderlines. I’m your host, Katerina Linos, Tragen Professor of Comparative and International Law at the University of California, Berkeley. And with me today, I have three guests. We will discuss sanctions in comparative perspective. I have Elena Chachko, Professor of Law at UC Berkeley, Luis Hinojosa-Martínez, the former president of the European Society of International Law and Chair of International and European Law at the University of Granada. And, Carmela Pérez Bernárdez, Senior Professor of International and European Law at the University of Granada.
Let me start by asking Elena Chachko to tell me about the current debate surrounding Russian sanctions. Who has sanctioned Russia and why?
Elena Chachko: Thanks, Katerina. It’s a pleasure to be here, to talk about a subject that until very recently was the [00:01:00] province of experts and people who are following this issue closely. But Russia’s invasion of Ukraine really revolutionized the field in attracting a broad interest to sanctions: the way they are imposed, their implications, their utility, and their governance.
So just to make sure our listeners are on the same page with us, when we talk about sanctions, we talk about basically every kind of economic restriction levied in furtherance of a national security or geopolitical interest. And this could include anything from freezing the assets of targets in foreign states, through tariffs, limitations on exports and imports of anything from weapons to technology to commodities. So a vast variety of economic measures that could be imposed under the framework of sanctions programs. All of the sanctions that got imposed against Russia after its invasion of Ukraine have precedents in previous sanctions regimes, at least American and European ones, imposed on countries like Iran, Venezuela, [00:02:00] Cuba, Syria — many, many other examples in the past. But what’s interesting and revolutionary about the Russia sanctions regime is that this was the first time this level of economic restriction was imposed so fast against a G20 economy that’s deeply integrated into the global economic system.
And I think that was the turning point. Now, in terms of the specific measures that were imposed, a coalition of countries led by the United States and the European Union, but joined by other members of the G7 as well as other allies imposed a vast spectrum of measures, from restrictions on Russia’s financial system, restrictions on transactions with the Central Bank of Russia, and assets of various individuals and companies that are connected to Putin and his government and had something to do with the decision making process that led to the invasion — broad restrictions on the energy [00:03:00] market in Russia, on transportation, on the supply of sensitive technologies to Russia, on Russia’s access to military products and technologies. So really, an incredibly broad sanctions regime, incredibly diverse sanctions regime that truly aimed to curb Russia’s access to the global financial system.
Katerina Linos: Thank you, Elena.
I wanted to ask, are sanctions on Russia working? Some say that Russia has not only managed to avoid the collapse of its economy, but has also found a way to avoid the main effects of sanctions by using neutral countries as intermediaries for its foreign trade and financial transactions. Luis, what do you think?
Are these sanctions targeting Russia effective, and should they continue?
Luis Miguel Hinojosa Martínez: Thank you, Katerina. If what you’re asking me is whether the sanctions are putting pressure on the Russian [00:04:00] government and damaging the Russian economy, my answer is yes. The sanctions are functioning and doing their part of the work.
But if what you’re asking me is whether the economic sanctions can by themselves end the war or oblige the Russian government to withdraw from Ukraine? My answer would be no. The economic sanctions alone cannot achieve such objective without other complementary actions, such as the provision of weapons to Ukraine, the financial support of the Ukrainian administration, the diplomatic pressure on those states that can help Russia to maintain its aggression, the support of democratic groups inside Russia that question imperialistic policies of the Russian government, et cetera, et cetera.
It is this whole group of measures, of which sanctions are an important component, that will allow Western democracies to influence the outcome of the war in Ukraine. But let me give you some data that show the important effects [00:05:00] of economic sanctions, because as you have said, some people say that Russia has managed to avoid the damage from the sanctions, diverting its trade towards countries that do not apply sanctions.
For example, they say that it’s selling to India and China the petrol that it used to sell to Western countries. That’s true, but Russia is selling to these countries at a 50 percent discount, which means that its revenue from petrol export has dropped by half. The official Russian news agency has recognized a 46 percent decrease in state income from oil and gas exports, if we compare January 2022 and the same month of 2023.
And, some sectors of the Russian economy have been strongly impacted by the sanctions. The Russian automobile production, for example, in 2022 decreased by 67 percent. Foreign investment has fled Russia. And that is generating a significant loss of competitiveness in the [00:06:00] Russian economy. But having said that, there are many countries, as you have also mentioned, that do not implement sanctions against Russia.
And that allows the Russian economy to breathe, to partially offset the effect of the sanctions. This is the weakest link in the sanctioning strategy because in the last months, Russia has been relatively successful in building alternative trade and financial circuits to improve its external economic relations.
And how are Western countries reacting to that? The G7 countries, including the U.S. and the European Union, have limited themselves to adopting restrictive measures against companies from third countries that collaborate with the Russian army, but have not sanctioned foreign companies or countries that continue to maintain commercial relations with Russia.
Nevertheless, this anti countervailing effort has resulted in the inclusion on the [00:07:00] sanctions list of many companies from China, from Iran, Uzbekistan, United Arab Emirates, Armenia, et cetera, et cetera, for their businesses with the Russian army. And this is discouraging other companies from doing the same. So, the imposition of sanctions should not be understood as a static act, but as a dynamic process, constantly evolving, and a process that must be adapted to the initiatives undertaken by Russia to avoid sanctions.
Katerina Linos: So, I wanted to turn to Carmela to ask a bit about sanctions against other countries. Who else is the EU sanctioning today? Who else meets the standard of a serious human rights violator? And how effective is European Union sanctions policy?
Carmela Pérez Bernárdez: Thank you, Katerina. It’s a pleasure to join this Borderlines episode.[00:08:00]
One of the objectives of the European Union is to become a global actor. The European Union is not a state and it is much harder to develop its foreign policy as making compatible the interests of member states requires a permanent dialogue. On the one hand, the adoption and implementation of sanctions clearly shows this complexity, since the European Union has the competence to adopt restrictive measures on behalf of the Member States.
However, it needs the unanimity of these 27 Member States in the Council to adopt them, and this is a very demanding threshold. The European External Action Service and the European Union High Representative for Foreign Affairs, a kind of EU Secretary of State, also have a key role in the preparation, maintenance and review of sanctions in permanent contact with the European Commission, the Council, and the Member [00:09:00] States. On the other hand, the EU has a mandate to uphold and promote the universality of human rights and fundamental freedoms in the wider world. Human rights are in the European Union’s DNA. This is why the EU has included restrictive measures for serious human rights violation in its sanctions against the states.
The Russian invasion of Ukraine has clearly highlighted the European Union’s external sanctioning potential, including sectoral restricted measures and almost 1,800 individuals and entities blacklisted during different packages of sanctions, eleven so far. Other relevant examples are Belarus, but also Iran, each including approximately 250 listed persons.
This last one due to the brutal repression of the demonstrations that followed the death in police custody of [00:10:00] 22-year-old Jina Mahsa Amini, or Myanmar, with more than 100 individuals listed. Additionally, the European Union has established a framework for targeted sanctions known as the European Union Global Human Rights Sanctions Regime, a thematic instrument clearly inspired by the U.S. domestic legislation, the Magnitsky Rule of Law Accountability Act. It has been very dynamic during the first year of implementation in 2021 after the Alexei Navalny opposition dissident case and in 2023. With eight rounds of sanctions packages. Its main characteristic is that it contains the so called “smart sanctions” against human rights violations targeting individuals and entities, so avoiding the negative or collateral effects of the whole population of the country, as it does not include embargoes.
And I think this is good news. [00:11:00] This includes basically, as Elena said, travel bans for individuals and asset freezes for natural and legal person. I will be happy to give you examples of this implementation.
Katerina Linos: Thank you, Carmela. I wanted to talk a little bit more about sanctions against blacklisted individuals because I know Luis has written about jurisprudence by the European Court of Justice and by other courts that limits the ability of EU Member States to sanction individuals. What is the legal framework in which the Security Council and other key bodies
can put in place the smart sanctioning strategy?
Luis Miguel Hinojosa Martínez: Thank you, Katerina. Let me begin by pointing out the great progress that this case law brings about in the protection of human [00:12:00] rights in the context of foreign policy. What the Court of Justice of the European Union says is that the executive power is competent to decide who constitutes a threat to international peace or which entities or which countries violate international law. However, when the European Union adopts sanctions against individuals, it has to respect their basic human rights and namely the right of defense and their right to effective judicial protection. In practice this means that you have to communicate to the blacklisted person in a sufficiently clear and precise way the reasons why he or she has been blacklisted and the evidence that supports these allegations.
This must allow that person to defend herself and to lodge a claim before the competent court if they think that the sanctions are misguided or are illegal. So this case law has been applauded by many people, but let me say that it is very [00:13:00] controversial because it involves a huge challenge for the European institutions, which is difficult to achieve in practice considering the large number of persons included in the European sanctions lists and the difficulties to obtain evidence that can be presented before a court in very problematic circumstances, in zones of war, in countries where they would kill the informant if they knew who is that person. However, from my perspective, the Court of Justice of the European Union has managed to articulate a case law that enables the European Union to defend its interests and values forcefully while keeping a discourse that reiterates the need to respect fundamental rights.
And this has been achieved through several jurisdictional techniques. First declaring the rule of law compatible with the establishment of general sectoral sanctions in the targeted country, regardless of the personal [00:14:00] conduct of each specific company. For example, you can sanction all the financial entities of a country, even if some of them have not contributed to finance nuclear proliferation, for example, but the measure as a whole contributes to deter the financing of nuclear proliferation.
A second instrument that makes it possible to include specific individuals in the sanctions list without having to provide evidence of their behavior is the establishment of legal presumptions. If you are a leading business person, for example, in a certain country, you can be sanctioned because it’s presumed that you benefit from the regime.
But you can rebut the presumption.
However, if you prove that your conduct does not match the criteria established by the Council for blacklisting, or that it has made a mistake, the sanctions will be annulled. That was the case, for example, of Mrs. [00:15:00] Prigozhina, the mother of Mr. Prigozhin, the founder of the Wagner Group, recently deceased. What happened in this case was that in a judgment of March 2023, March this year, the General Court annulled the sanctions adopted against her by the Council of the European Union because this institution did not provide updated evidence to prove that she was being used as a figurehead in companies effectively controlled by her son.
Some will say that this case law has not always been perfectly coherent, and I think it’s true. Some will say that it has not gone far enough. But I think that this jurisprudence shows that it is possible to implement a coherent foreign policy that aims to respect human rights in a way that is compatible with the defense of geostrategic interests and international peace.
Elena Chachko: If I may [00:16:00] interject just two comments on what Luis just said. It’s true that the EU Court of Justice is probably the court that’s been most aggressive and most vigorous in reviewing individual sanctions globally. If you compare it to the situation in the U.S., you can hardly find cases in which U.S. courts have really engaged and reviewed on the merits, individual sanctions that the U.S. government has imposed. That being said, if you look behind the hood, this whole rhetoric of human rights and aggressive decisions on the merits may look more impressive than they actually are. I’ve studied this empirically, admittedly a few years ago, so it’s possible that things have changed.
But from what I remember, the courts in the EU agreed to take very flimsy justifications, that the EU came up with, as sufficient evidence or sufficient justification for individual sanctions. So even just one paragraph, one generic paragraph that may have well have been based on open [00:17:00] sources, was often deemed sufficient.
And the second thing is that at least in my study, the Council many times turned around and reimposed sanctions that the courts hadn’t validated based on due process — reasons like failure to provide evidence and reasons. And so I do think judicial review has an important contribution in making policymakers really evaluate their decisions and make sure that they’re checking the right procedural boxes, but substantively
I’m not sure it’s been successful in dissuading EU decision makers from imposing sanctions that they thought were really important for their policy goals.
Katerina Linos: Thank you to both of you for going into comparative mode and to giving us specific examples. I do want to talk about specific examples to make this more concrete. Mr. Prigozhin might be familiar to many of us. Interpol has been widely criticized for the process by which he was blacklisted and then taken off the blacklists. The decision [00:18:00] by European courts that perhaps the evidence for sanctioning his mother was not sufficient has also been criticized. Can I turn back to Carmela to get some more concrete examples of how sanctions are being implemented, for what purpose, and against which individuals and entities?
Carmela Pérez Bernárdez: Mm hmm. Of course. Russia is the most prominent example in the implementation of the European Union human rights sanctions regime from the perspective of the number of individuals from this nationality blacklisted so far. I refer not only to activist coercion — the Navalny case, Kara-Murza, or the journalist Yesypenko, using against them the judiciary of the country as a widespread tool in numerous serious human rights violations — but also to the measures targeting, as my colleagues have mentioned, Wagner Group, the private military company, [00:19:00] and also the use of facial recognition as a tool of repression. Nevertheless, in this sanction regime, we can also find individuals from a total of twelve states. China, regarding the repression against the Uyghur minority of the Xinjiang region; Afghanistan, with the Taliban policies of inequality between men and women; the Central African Republic, North Korea, Libya, Syria, Myanmar, or Iran, all with systematic sexual and gender-based violence included in the reasons for listing, amongst others. Finally, one thing I would like to mention, it’s that it’s really relevant to highlight that smart sanctions effectiveness is reinforced by international cooperation. The U.S., UK after Brexit, Canada, Australia, Japan, et cetera, have similar domestic sanctions regime against gross human rights violations, [00:20:00] and also EU candidate states and EFTA countries often align themselves with EU sanctions, although a better coordination in this matter is necessary for the successful implementation.
Katerina Linos: Great. So I’ll echo some themes I’m picking up from this conversation. One is that the European Union has some difficulty in coming together and unanimously sanctioning individuals, sectors, and countries. But once it happens in conjunction with the U.S. and with other Western states, it can be moderately effective or very effective.
We’ll come back to this question. Also, a comparative theme I’m picking up on is that the European judiciary is perhaps most protective, is the best court to go to if you believe that your assets have been frozen for no good reason. You wouldn’t bring a case before U.S. courts but instead you would go to European jurisdictions.[00:21:00]
Let me turn to Elena because you’re working on an article in which you critique sanctions. You outline three common views, and then after presenting these criticisms, you rebut them. Could you start by talking about some widespread criticisms of sanctions regimes?
Elena Chachko: Sure, Katerina. Just before I do, I wanted to touch on something you said in your comments.
If you’re sanctioned by the U.S., there’s nothing for you to do other than try to go to a U.S. court, or better yet to the Office of Foreign Asset Control, which is the organ within the Treasury Department that administers the vast variety of sanctions regimes in the U.S. You can get yourself unsanctioned in the EU, but that won’t do much for your dollar accounts that are dollar denominated that would still be subject to U.S. sanctions.
But, coming back to the bigger picture of the kind of debate that the Russia sanctions have [00:22:00] stirred and the types of criticisms against sanctions that we’ve been seeing. So in this article that you mentioned, I offer a typology of those criticisms because I think they can be roughly divided into three major lines.
So the first line I call the rule of law critique, and that’s not entirely new. It’s been around for a long time, and the argument here is that sanctions are very poorly governed under both domestic and international law. There’s very little restriction, substantive restriction, on the resort of the powerful sanctions imposing jurisdictions to this tool, which they have been doing increasingly and more aggressively over time.
And the thrust of that critique is that it’s about time to start thinking beyond due process, and go to really thinking about substantive constraints on the resort to sanctions so that next time the U.S. thinks about sanctioning a country like Russia or Syria or Iran, it will have to follow some sort of legal criteria, and nobody can [00:23:00] agree on what the content of those criteria should be.
The second line of critique I call the unintended consequences critique, and here I think it’s a product of Russia being so deeply integrated into the global economy. And what we’ve seen is that the Russia sanctions have led to spillover effects and global shocks in the energy markets and the commodity markets, disrupting supply chains, reorienting important markets.
And as Luis mentioned, Russia started looking for buyers for its energy products in Asia and in Africa and in China, and that has had global repercussions. And the argument is sanctions, the way they’re practiced today, have unintended consequences that are significant to the global economy.
And we must be very, very careful in imposing systemic sanctions, like taking Russia out of the global financial system, or stopping the importation of Russian oil and commodities, because that has serious global economic implications. And [00:24:00] another unintended consequence is the compliance costs.
I just spent some time at a symposium about sanctions where a bunch of private lawyers, lawyers from the private sector in the U. S., were present, and they were saying that work in the area of sanctions is exponentially growing. The amount of rules and updates and licenses and engagement with agencies that apply sanctions has grown exponentially.
And that creates compliance costs for private businesses trying to operate in this world. And it creates over compliance because in a system that’s so saturated by sanctions, if you are a bank that has assets that could potentially be Russian or Iranian or other sanctioned assets, you need to be very worried about any interaction with something that can expose you to potential risk of violating the law.
And so sanctions have chilled much more behavior than they should have. So that’s another form of unintended consequence. And finally, we have a [00:25:00] revived line of criticism from the political economy quarters and there the argument is that sanctions are fundamentally illegitimate because they’re imposed by powerful Western countries, traditionally against the Global South.
Russia is an exception, but normally the targets of sanctions are countries in the Global South. And the argument is that they’re profoundly selective, profoundly unequal, that they shift wealth from the Global South to the Global North and therefore should be rejected outright. So not even a willingness to engage with the proper ways to govern sanctions.
I do not share that, this latter critique, and I’m happy to say more about that later, but I’m just curious what my colleagues here have to say about the state of our current debate.
Luis Miguel Hinojosa Martínez: Well, I think that in the case of Russia, we really have a different issue. I mean, the use of sanctions against Russia pose threats that were not seen before, in the, in the context of blind [00:26:00] sanctions to rogue states, because you need to take extraordinary measures when you fight extraordinary challenges.
I think it’s the first time that we see since the Second World War that nuclear power is fighting a war against the state supported in some sense by another nuclear power to take territory from that state to conquer territory, as we did in the Middle Ages. I think that this is damaging the structural principles, the foundations of the present legitimacy system based on the UN Charter, and therefore this justifies the adoption of unprecedented measures, which is like, expulsing from SWIFT, all the Russian banking system or most of the Russian banking system, because there are still Russian banks that can have access so that to, to SWIFT so that European states can pay the gas that [00:27:00] they are still buying from Russia. So, I agree that some kind of order and regulation of the imposition of sanctions would be desirable, but for the time being, it’s not realistic to expect that the great powers would agree to a common set of rules in order to regulate.
And if you allow me to come back to your criticism of the Court of Justice of the European Union, I agree with what you have said to a great extent, but I have a somewhat more positive attitude towards the Court, because when people whose sanctions have been annulled, keep on being on the blacklist is because there is a new piece of legislation that reintroduces their name on the list, but it’s always done because additional evidence is provided or because the reasons for listing are modified.
And therefore, that person has the opportunity to challenge these new issues [00:28:00] against before court. And therefore there is right to effective judicial protection. You might say yes, but then that person may spend eight years fighting — even if it’s winning all the proceedings — fighting against the imposition of sanctions.
And it’s a long time. It’s true, but you can always ask for a non contractual liability action against the Council and get an indemnization for all the time that you’ve been suffering for this misbehavior by the European institutions. So that’s always a chance. And at the same time, that allows the European Union to implement Security Council resolutions, which is compulsory from the international law perspective. So when one has to understand why these things are done and at the end of the day, people are deleted from the list if they keep on winning the cases against the Council. So, at the end of the day, there is the sun, and the rule of law prevails in the [00:29:00] European Union.
Katerina Linos: And, again, I should say that the Court of Justice of the European Union was a breakthrough in the world of foreign relations, where most national courts, even the European Court of Human Rights, have not gone so far.
So I want to ask one final set of hard questions to all of the participants today, and that’s about the future of sanctions. We started by talking about sanctions against Russia and the problems caused when China and India could in fact benefit from cheaper gas. Now that we’ve had a war in the Middle East for about a month, now that Russia and China seem to be questioning core parts of the global architecture and the variety of UN rules put in place, what are some hopes and some worries you have about sanctions? So for each of [00:30:00] you, what I’d like to hear is something that makes you optimistic, some success of sanctions, of judicial process, of human rights improvements, of cooperation between states that we previously thought were unable to agree on anything, but have agreed on sanctions.
And also a question about what you think we should worry about when it comes to using sanctions as a tool in an increasingly divided world going forward. Carmela, let me start with you.
Carmela Pérez Bernárdez: Thank you. I think that sanctions, the issue that sanctions are applying in this international turbulent scenario is really not good news.
But on the other hand we have to think that sanctions pressure states and that’s a good thing. So we don’t get to the use of force. As Elena mentioned [00:31:00] before, I think also one thing we have to take account is the illegality, possibly, possibly illegality of sanctions, because maybe when we talk about sanctions we really are talking about countermeasures as they are not Security Council sanctions or are not institutional sanctions from one international organization like the European Union to their Member States. But for example, regarding the European Union implementation of sanctions, we see that they are not extraterritorial and that’s I think a key issue. And also, for example, regarding human rights, there are countries where that’s a breach of the principle of non intervention in internal affairs. Nevertheless, the, the sanctions [00:32:00] regime regarding human rights is intended to ensure the protection of human rights under customary international law and treaties. And both have legal binding effects in the international legal order. So I see that the future of sanctions, the implementation of sanctions will be increasingly.
Elena Chachko: Well, it sounds a little naïve to be talking about sanctions governance and reform and all of those nice, lovely legal things that we like to talk about as law professors when we have two major conflicts raging on the ground, and if anything, there’s evidence that sanctions are not working because sanctions, as Carmen said, are, were designed and supposed to be a peaceful, as it were, manner of settling conflict and recent experience has shown that in that core function they have failed.
But I have two reasons to be cautiously optimistic about [00:33:00] moderate reforms that we might see in the future. And they think one of the main reasons for that optimism is that the private sector is starting to feel the heat. And you’re hearing more and more from both private companies for the factual enforcers of sanctions, as well as tech companies that have been a huge part of the Russia sanctions, they have to conform and comply with a variety of restrictions on the things they are allowed to export and the kinds of safeguards they need to put in place in order to make sure that their technology does not end up in Russian hands, et cetera.
So those actors are starting to push for more clarity from regulators, for greater access to regulators, for greater clarity in how regulators communicate what sanctions actually require of the private sector. And I think we can see some reform coming out of there, especially if we’ll continue seeing more and more systemic sanctions, [00:34:00] like taking countries out of SWIFT, which Luis mentioned, and SWIFT is a global transaction clearance system that’s based in Belgium, and is a core artery of global financial activity. So when we’re talking about things like that or imposing broad restrictions on any interaction with a financial banking system in a country, then the private sector gets engaged and there is pressure for legal reform.
So that’s one reason for optimism. The second reason for optimism, where it comes to potential reforms and sanctions governance, is that many commentators and some practitioners are starting to say that some of the new sanctions techniques are a bridge too far. And by new sanctions techniques, I’m talking about secondary sanctions, sanctions that target third parties that transact with sanctioned entities, and this is something the U.S. has done and created a lot of tension with the EU that actually even revived this thing called a blocking regulation to protect EU actors from being [00:35:00] exposed to those secondary sanctions. And the other thing is the idea of seizing frozen assets under U.S. jurisdiction for purposes like funding the recovery of Ukraine or paying for the reconstruction of Afghanistan, things that even those who support the idea of sanctions in theory have said are in tension with international law. So maybe around those novel practices that are in tension with principles of territoriality and jurisdiction and create precedents that even the United States should worry about because other countries can do to its assets what it’s doing to other countries’ assets.
Those are areas where we might see specific reforms. But I couldn’t agree more that in this political moment, and given the area of interests at play here, it is very unlikely that we will see a fundamental reform of the ways in which sanctions are governed and the balance of power in terms of who imposes sanctions and who leads this effort,[00:36:00] in the international system.
Luis Miguel Hinojosa Martínez: I think I will come in a little bit more with what Elena and Carmela have just talked about. There’s the problem of extraterritoriality, which is the one that could cause more troubles in the relations between those countries imposing sanctions and third countries that do not want to impose sanctions because the U.S. has been accused in the past of imposing extraterritorial sanctions, obliging third countries to impose sanctions when they did not want to because they were sanctioning the companies of those countries for trading from these other countries with the sanction country. But now, even the European Union is considering secondary sanctions.
And there is a huge debate, both in the U.S. and in the European Union, how far the secondary sanctions could go, not to damage the relations with third countries that condemn what Russia is doing, but do not want to impose sanctions on Russia. They want to remain [00:37:00] neutral from an economic point of view.
And the European Union has appointed a special envoy on sanctions, David O’Sullivan, to promote dialogue. That’s what they say. And technical cooperation with the third countries more concerned to prevent the circumvention operations. But even from the legal point of view, in the last package of sanctions adopted by the European Union in June 2023, there is an anti-circumvention mechanism that has been included and that allows restricting exports of certain products and technologies to certain companies in third countries and, as a last resort, to a third country, if that country does not adopt measures to prevent systematic violation or systematic evasion of the sanctions. The OFAC in the United States is doing the same. The OFAC is sanctioning many more individuals and more than 100 entities with [00:38:00] activity in more than 20 countries for attempting to circumvent or evade sanctions, or other economic measures against Russia, facilitating technology, energy extraction capabilities, financial services, et cetera, to that country. So, for the time being, the secondary sanctions have been applied to those companies that helped the military business to go on. So that helped the Russian army, but not the trade with Russia.
The discussion is, should those countries imposing sanctions, the G7 countries, also apply secondary sanctions for other economic measures of collaboration with Russia? The huge discussion is difficult because this is one of the reasons why countries from the Global South criticize the U.S., the European Union, and the rest of the G7 countries.
Because they do not want to be used [00:39:00] in the sanctions against Russia, if they do not want to implement sanctions. And therefore I don’t see secondary sanctions for the time being and in the near future. And this is one of the weakest links of the sanctions regime against Russia.
Katerina Linos: So my favorite part of the podcast, it’s when it ends and I ask people, what have I missed?
Why did I not ask you about? Do you want to have a final moment to talk about a person or a theme or a country or a technique or a development that we didn’t quite get to? Elena, let’s talk about yachts.
Elena Chachko: Let’s talk about yachts. And you wonder, what, what in the world do yachts have to do with the discussion about sanctions?
But one of the problems where it comes to sanctions implementation is actually getting to the assets that belong to sanctioned individuals. And nowhere was it more difficult than when it came to Russian oligarchs, for example, who have assets all over the world and who are very, very skilled at camouflaging those assets and [00:40:00] making them very, very hard to detect.
So, Treasury created a thing called the Multilateral Russian Elites Proxies and Oligarchs Task Force that is designed to deal with just this problem, to hunt down assets all over the world and to make sure that sanctions are effective in the narrow sense of actually being enforced and reaching all the assets that they should reach.
And one of the prime targets of this effort has been various yachts that are docked around the world that belong to Russian sanctions targets and it’s been a fascinating thing to watch in terms of the forensics and the coordination that goes into putting sanctions into effect. So I think that’s another innovation, as far as I’m aware, of this sanctions regime, this commitment to actually getting to those assets and not just leaving the sanctions on the books.
Carmela Pérez Bernárdez: Also regarding the sanctions implementation and [00:41:00] targeted measures, I think the apparent limited effects of these sanctions, travel ban and asset freeze should not be underestimated. As the state of designated nationals, for example, in relation to human rights is singled out as a violator of human rights before the international society and their publicity and resolution, social networks and media produces a mobilization for shame.
And we have, for example, in the Chinese case, a boomerang effect when the European Union targeted some Chinese nationals and entities. China sanctions, for example, some European parliamentaries and directors or think tanks. So this is a rebound effect. And finally, I would like to, to point out from a European Union perspective that adoption of sanctions [00:42:00] is only one of a set of initiatives that allow the EU to strengthen its role as a global actor. I could mention the human rights clauses in trade agreements or other economic incentives such as Global Europe, but these instruments are part of an open strategic autonomy, but linked to the U.S. and other like-minded states seeking to promote respect for human rights in the world, even with sanctions.
Luis Miguel Hinojosa Martínez: I think I could make last comment in relation to the position of the dollar in the international monetary system, because it has been said that it will be severely damaged if you use financial sanctions against a country such as Russia, because other countries will look for alternative payment methods, and this will damage the preeminence of the dollar in the international monetary system.
Of course, I think that’s true,[00:43:00] in some sense, but it will be a very slow movement towards a multipolar monetary world. It will take many years before we arrive there. And this is so because at present, there is no real alternative to SWIFT for worldwide financial transactions. It’s a financial messaging system that allows any financial operator in the world to know that the transaction has been completed and safely and there is nothing else similar to SWIFT. So, using alternative methods is like having recourse to telephone and go to the times of fax in order to communicate things.
If Ecuador cannot give back a loan to China that has received in dollars, it will ask for a loan to the International Monetary Fund, as it has done, to repay China. So, an alternative multipolar currency system is still far away. This doesn’t [00:44:00] mean that we will arrive there and that financial sanctions foster the search for alternative methods of payment, alternative clearinghouses, and Russia is working hard and China are working hard also, in finding this kind of solutions, but it will take time and it will not affect to the effectiveness of the sanctions against Russia in this war against Ukraine.
Katerina Linos: Thank you so much for this great conversation. I learned a lot and I’ll just highlight three facts. One is that we have a real reason to worry about the system in the medium term when China and Russia are not only involved in conflicts, but also perhaps in building alternatives to the dominance of the U.S. financial system, which is one key tool through which sanctions operate. On a more positive note, I learned how important sanctions [00:45:00] are to the building of a unified European Union foreign policy. And they’re one among many tools in that direction, and there’s increasing coordination between the EU and the U.S. on some of the thornier issues of secondary sanctions, smart sanctions, extraterritoriality. And finally, there will be lots of work for lawyers specializing in this area as sanctions become more comprehensive and also more targeted and smarter. If you enjoyed this episode, please subscribe to Borderlines.