On 14 October, the United States and European Union each adopted sanctions measures targeting Turkey, in response to Turkey’s military offensive in northern Syria. Subject to certain exceptions discussed further below, the US measures under a new Syria-related Executive Order (“New Syria EO“) took effect immediately and authorize sanctions targeting parties engaging in certain Syria-related activities, the Government of Turkey and Turkish Government officials, and certain sectors of the Turkish economy.
The EU measures are expected to come into effect shortly.
Blocking Authorities Under the New Syria EO
The New Syria EO authorizes the US Government to “block,” or designate as a Specially Designated National (“SDN”) any person determined to:
- Be responsible for or complicit in, or to have attempted to engage in: (i) certain destabilizing actions or policies vis-à-vis Syria, or (ii) the commission of serious human rights abuses;
- Be a current or former official of the Government of Turkey (“GOT”);
- Be any subdivision, agency, or instrumentality of the GOT;
- Operate in certain sectors of the Turkish economy as determined by the US Treasury and State Departments;
- Have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, any SDNs designated pursuant to the New Syria EO; or
- Be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any SDNs designated pursuant to the New Syria EO.
Secondary Sanctions Authorities Under the New Syria EO
- Secondary Sanctions Targeting Activities of Non-US Persons.
The New Syria EO also authorizes the imposition of secondary sanctions, including designation as an SDN or other less severe menu-based sanctions, on non-US persons determined to be:
- Involved in certain military and political activities in northern Syria, including activities targeting Syrian refugees; or
- Directly or indirectly involved in the expropriation of property in Syria.
- Secondary Sanctions Targeting Activities of Foreign Financial Institutions.
Foreign financial institutions determined to have knowingly facilitated significant financial transactions for or on behalf of SDNs designated pursuant to the New Syria EO can be restricted from maintaining correspondent or payable-through accounts in the United States.
- The US Government has not imposed any secondary sanctions to date.
Designations Pursuant to the New Syria EO
Simultaneously with the issuance of the New Syria EO, the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) designated as SDNs the following Turkish entities and individuals:
- The Turkish Ministry of Energy and Natural Resources
- The Turkish Ministry of National Defense
- The Turkish Minister of Defense Hulusi Akar
- The Turkish Minister of Interior Suleyman Soylu
- The Turkish Minister of Energy Fatih Donmez
US Persons (i.e., US companies and their non-US branches, US citizens and permanent resident aliens, and any person physically located in the United States) are now prohibited from doing any business with such persons and any entities they own 50% or more. At this stage, it is not yet clear which entities may be owned 50% or more by the Turkish Ministries of Defense and Energy, nor has OFAC issued any authorizations for transactions or activities that may involve certain regulatory functions of these newly-sanctioned entities.
Non-US persons may be subject to the imposition of “secondary” sanctions if they provide material support to or act for or on behalf of these newly-designated parties. This collateral designation risk is separate and in addition to the secondary sanctions authorized under the New Syria EO, as described above. As of today, no secondary sanctions have been imposed on non-US persons.
General Licenses Issued in Connection with the New Syria EO
Concurrently, OFAC issued three General Licenses (“GLs”) authorizing certain activities by US Persons that are otherwise prohibited under the New Syria EO. The New Syria EO GLs are summarized below:
- Wind Down of Transactions with the Turkish Defense and Energy Ministries.
- General License 2 authorizes all transactions and activities that are ordinarily incident and necessary to the wind down of operations, contracts, or other agreements involving the Turkish Ministry of National Defense or the Turkish Ministry of Energy and Natural Resources, or entities in which these ministries own a 50% or greater interest, that were in effect prior to October 14, 2019. All wind down transactions must be completed by November 13, 2019.
- Official Business of the US Government and United Nations.
- General License 1 authorizes all transactions and activities that are for the conduct of official US Government business by employees, grantees, or contractors thereof.
- General License 3 authorizes all transactions and activities involving the Turkish Ministry of National Defense or the Turkish Ministry of Energy and Natural Resources, or entities in which these ministries own a 50% or greater interest, that are for the official business of the United Nations, its Programmes and Funds, and its Specialized Agencies and Related Organizations.
Although the General Licenses apply as a legal matter only to US Persons, OFAC has previously advised in the context of other sanctions programs that if a transaction is authorized as to US Persons, a non-US person would not face secondary sanctions risks for engaging in the same transaction. Thus, to the extent non-US persons are involved in a transaction or activity covered by one of the General Licenses described above, there would be no secondary sanctions risks so long as the relevant GL remains in effect.
The New Syria EO, General Licenses, and additional information about the newly-sanctioned SDNs are available here.
At a meeting of the EU’s Foreign Affairs Council on 14 October, the Council adopted conclusions intended to target both: (i) Turkey’s activities in northern Syria, and (ii) Turkish drilling activities in the eastern Mediterranean.
The EU’s Member States agreed to “commit to strong national positions regarding their arms export policy“. A further meeting has been scheduled for later this week in order to co-ordinate Member States’ arms licensing policies.
While the EU’s position falls short of a full arms embargo, a number of EU Member States, including France, and Germany and Sweden, have imposed national arms embargoes against Turkey. The UK has announced that it is reviewing all export licences to Turkey, and that it will not grant further export licences “for items which might be used in military operations in Syria” while that review is ongoing.
Other Member States may either impose embargoes themselves, or take a significantly stricter approach toward approving export licences concerning military items, and for other items intended for a military end-use.
The relevant Council conclusions are available here.
The Council also adopted measures in response to Turkish hydrocarbon drilling activities in the Eastern Mediterranean. As its initial response, the EU suspended high-level intergovernmental contacts (including negotiations on an air transport agreement) in July 2019.
The EU has now agreed to adopt a sanctions framework, comprising asset freezes and travel bans targeting “natural and legal persons responsible for or involved in the illegal drilling activity of hydrocarbons in the Eastern Mediterranean“. Neither the legislation nor the prospective list of restricted parties has been published. We expect these to be made available soon.
The relevant Council conclusions are available here.