- Donald J Trump, as the president of United States has issued an executive order on 14.10.2019 (the “Executive Order”) in response to Turkish government’s recent actions in Syria.
- The Executive Order sets out the framework of the sanctions while authorizing the US Secretary of the Treasury and the US Secretary of State to determine the type of sanctions to be imposed and the individuals and entities to be sanctioned in accordance with the Executive Order.
- Section 1 of the Executive Order, provides for freezing assets of those persons to be determined by the US Secretary of Treasury in consultation with US Secretary of State, to be falling under any of the criteria set out thereunder, that are in or will come within the US or that are or will come within the possession or control of any US person. Persons that might be sanctioned pursuant to this Section, if and as determined by the US Secretary of Treasury, in consultation with the US Secretary of State include, among others, current or former officials of Turkey, any subdivision, agency or instrumentality of the Turkish Government, or persons operating in such sectors of Turkey to be determined by the US Secretary of Treasury.
- Under Section 2 of the Executive Order, the US Secretary of State, in consultation with US Secretary of Treasury and other officials of the U.S., is authorized to impose one or more of the sanctions listed thereunder, to those persons or entities falling under any of the criteria set out in Section 2. The sanctions include but are not limited to: (i) prohibiting agencies from procuring goods or services from sanctioned persons; (ii) denial of US visa to a corporate officer or principal of, or a shareholder with a controlling interest in a sanctioned person; (iii) subject to certain exceptions, prohibiting US persons from making loans or providing credits to a sanctioned person in an amount higher than USD 10,000,000 in any 12-month period; (iv) prohibiting foreign exchange transactions that are subject to US jurisdiction and in which the sanctioned person has any interest; (v) freezing assets and interests in assets of the sanctioned person that are in or will come within US or that are in or will come in the possession or control of any US person; and (vi) prohibiting any US person from investing or purchasing significant amount of equity or debt instruments of any sanctioned person. Persons that might be sanctioned upon determination by the US Secretary of State, in consultation with the US Secretary of Treasury, include, among others, persons being responsible for or complicit in, has directly or indirectly engaged in, or attempted to engage in or financed the obstruction, disruption, or prevention of a ceasefire in northern Syria, the forcible repatriation of persons or refugees to Syria or who is an adult family member of a person designated under the relevant subsection.
- As a secondary sanction, pursuant to Section 3 of the Executive Order, the US Secretary of Treasury, in consultation with the US Secretary of State, is authorized to prohibit a foreign financial institution from opening, and prohibit or impose strict conditions on the maintaining, in the US a correspondent account or a payable-trough account, upon determining that such institution knowingly conducted or facilitated any significant financial transaction for or on behalf of any person whose assets or interests in assets are blocked.
- The sanctions described above will apply notwithstanding any contract entered into or license or permit issued before the date of the Executive Order but exceptions to the application of these sanctions can be provided by regulations, orders, directives or licences that may be issued in accordance with the Executive Order.
- Subject to certain exceptions, entry of such persons meeting the criteria set out under subsections 1(a)(see our explanations re Section 1 above) or 2(a) (see our explanations re Section 2 above) or who become subject to the sanction set out under subsection 2(b)(ii)(i.e. denial of visa) into US, are suspended with the Executive Order.
- Making donations (specified in section 203 (b) (2) of IEEPA 50 U.S.C. 1702 (b) (2)) by, to, or for the benefit of any person whose assets or interests in assets are blocked pursuant to Section 1 of the Executive Order is prohibited. In addition, any transaction that evades, avoids or violates the prohibitions introduced under the Executive Order or has the purpose of doing so, as well as any conspiracy formed to violate the prohibitions introduced under the Executive Order are prohibited.
- Upon issuance of the Executive Order, the Office of Foreign Assets Control (“OFAC”) included the following ministers and ministries to the Specially Designated Nationals and Blocked Persons List (“SDN”) who will be subject to the sanctions under the Executive Order 1
- Minister of Defence
- Minister of Energy and Natural Resources
- Minister of Internal Affairs
- Ministry of Energy and Natural Resources
- Ministry of National Defence
*As per the general licenses (explained below), sanctioned parties also include any entity in which one or more of such ministries own, directly or indirectly, a 50 percent or greater interest.
- OFAC also issued three general licences providing for exceptions in respect of the application of the sanctions and, in its press release dated 14.10.2019, the US Secretary of Treasury stated that OFAC is prepared to issue authorizations to ensure that the taken actions do not disrupt Turkey’s ability to meet its energy need:
- General License 1: conduct of the official business of the US Government by employees, grantees, or contractors thereof are authorized.
- General License 2: except for those provided in the General License 2, all transactions and activities prohibited by the Executive Order that are ordinarily incident and necessary to the wind down of operations, contracts, or other agreements involving the Ministry of National Defence or the Ministry of Energy and Natural Resources of the Government of Turkey, or any entity in which one or more of such ministries own, directly or indirectly, a 50 percent or greater interest, that were in effect prior to 12:01 eastern daylight time October 14, 2019, are authorized through 12:01 a.m. eastern standard time November 13, 2019.
- General License 3: transactions and activities prohibited pursuant to the Executive Order involving the Ministry of National Defence or the Ministry of Energy and Natural Resources of the Government of Turkey, or any entity in which one or more of such ministries own, directly or indirectly, a 50 percent or greater interest, that are for the official business of the United Nations, including its Programmes and Funds, and its Specialized Agencies and Related Organizations, including those entities listed in General License 3 are authorized.
US person in terms of the sanctions under the Executive Order, include US citizens, permanent resident alien, entities organized under U.S. law including the branches organized under US law of foreign entities organized in different jurisdictions.