The President and U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) recently announced new sanctions against Turkey related to its actions in Syria. On October 14, 2019, the President issued a new Executive Order titled “Blocking Property and Suspending Entry of Certain Persons Contributing to the Situation in Syria” and three related General Licenses.
New Turkey Sanctions
The new Executive Order confers on OFAC and the U.S. Department of State robust authority to sanction those undermining U.S. foreign policy objectives in Syria. In fact, OFAC has already added several individuals and entities affiliated with the Government of Turkey to the Specially Designated Nationals (“SDN”) List, including the Turkish Ministry of Energy and Natural Resources and the Ministry of National Defence.
Authority to Designate
As mentioned, the EO provides OFAC with broad authority to sanction individuals and entities, including subdivisions, agencies, or instrumentalities of the Government of Turkey and current or former officials of the Turkish government, among others.
In addition, the U.S. Department of State, in consultation with OFAC (and other U.S. Government officials, as appropriate), is authorized to impose certain sanctions on foreign persons, after determining such foreign person is responsible for, complicit in, or otherwise engaged in obstruction, disruption, or prevention of a ceasefire in Syria, intimidation or prevention of displaced persons from voluntarily returning to their place of residence in Syria, the forcible repatriation of persons or refugees to Syria, or obstructing efforts to promote a political solution to the conflict in Syria.
Restrictions and Other Consequences
As discussed, the consequences of the new Turkey sanctions are fairly broad. For example, sanctioned individuals and entities could be prohibited from contracting with U.S. Government agencies, and corporate officers, principals, and shareholders with a controlling interest in a sanctioned entity could be denied visas for entry into the U.S.
In addition, sanctioned individuals and entities could be denied access to the U.S. credit and capital markets, including:
- prohibiting U.S. financial institutions from making loans or providing credit to such sanctioned persons totaling more than $10,000,000 in any 12-month period;
- prohibiting any transactions in foreign exchange that are subject to the jurisdiction of the U.S. that the sanctioned person has an interest in;
- prohibiting transfers of credit or payments that the sanctioned person has an interest in between banking institutions to the extent such transfers or payments are subject to the jurisdiction of the U.S.;
- blocking all property and interests in property in the U.S. or within the control of a U.S. person;
- prohibiting a U.S. person from investing in or purchasing significant amounts of equity or debt instruments of the sanctioned person;
- restricting or prohibiting imports of goods, technology, or services into the U.S. from the sanctioned person; and
- imposing any such sanctions on the principal executive officer, other officers, or person performing similar functions.
Finally, OFAC is permitted to impose sanctions on foreign financial institutions after a determination that the foreign financial institution knowingly conducted or facilitated any significant financial transaction for or on behalf of any person whose property and interests in property were blocked.
General Licenses
OFAC has issued three general licenses exempting certain conduct from sanctions. General License 1 permits all transactions and activities that are otherwise prohibited by the EO that are for the conduct of the official business of the U.S. Government by employees, grantees, or contractors. General License 2 permits all transactions and activities that are otherwise prohibited by the EO that are ordinarily incident and necessary to the wind down of operations, contracts, or other agreements involving the Turkish Ministry of National Defence or the Ministry of Energy and Natural Resources, or any entity that such ministries own 50 percent or more. Such wind down will be permitted through 12:01 a.m. EST on November 13, 2019. General License 3 authorizes all transactions and activities that are otherwise prohibited by the EO that are for the official business of the United Nations and certain other organizations, including the World Bank, IMF, and others.
Concluding Thoughts
The sanctions against Turkey are in the early stages and U.S. businesses and individuals in Turkey should exercise caution to ensure they are not contracting with sanctioned entities and individuals, especially those with connections to the Government of Turkey. The political landscape is developing quickly, which could mean additional OFAC sanctions in the future. We will continue to closely follow events in this space and will report on any further developments.
If you have any questions or concerns about U.S. sanctions, please contact Bruce G. Paulsen (212-574-1533), Andrew S. Jacobson (212-574-1477), Noah S. Czarny (212-574-1642), or Paul B. Koepp (212-574-1613) at Seward & Kissel’s Sanctions Practice Group.
