U.S. Sanctions Legislation Targets Iran, North Korea and Russia

Russia-Related Sanctions

Title II of H.R. 3364, known as the “Countering Russian Influence in Europe and Eurasia Act of 2017” (CRIEEA), enacts wide-ranging and significant changes to U.S. sanctions related to Russia. The changes reflect the Congress’s determination to take a more active role in monitoring waivers of Russian sanctions. CRIEEA codifies six executive orders including those that imposed Ukraine-Russia-Related Sanctions and Cyber-Related Sanctions, thereby barring the president from altering those executive orders without further Congressional action.²

Congressional Review Procedure

Most significantly, CRIEEA imposes a robust congressional review procedure that significantly restricts the president’s authority to lift or waive Russia-related sanctions. This move reflects bipartisan and bicameral skepticism that the current president will exercise his discretionary waiver authority appropriately with respect to Russia, but it also ties the hands of future presidents. Once in place, the congressional review process could make it more difficult for the United States to respond promptly if positive steps are taken by Russia.

The president must submit a report for congressional review and satisfy a certification requirement before taking any action to (i) terminate the application of sanctions, (ii) waive sanctions with respect to a person (such as a Specially Designated National (SDN)), or (iii) take a licensing action that “significantly alters the United States’ foreign policy with regard to the Russian Federation.”³ The bill explicitly provides that this requirement does not apply to the routine issuance of a license that does not significantly alter U.S. foreign policy.⁴

CRIEEA provides Congress with 30 or 60 calendar days, beginning on the date of submission of the president’s report, to conduct a review of a proposed waiver.⁵ After the review, Congress may pass a joint resolution of approval or disapproval of the action.⁶ During the congressional review period, the president may not take the action unless a joint resolution of approval is enacted.⁷ If a joint resolution of disapproval passes both Houses of Congress, the president may not take the action for a period of 12 calendar days.⁸ If the president vetoes the joint resolution of disapproval, the president may not take that action for a period of 10 calendar days after the date of the president’s veto.⁹ If the joint resolution of disapproval is enacted nonetheless, the president “may not take that action.”¹⁰ This process ultimately may face a constitutional challenge.

Changes to Existing Sanctions Programs

Section 223 of CRIEEA expands the reach of existing sectoral sanctions enforced by the Department of the Treasury’s Office of Foreign Assets Control (OFAC):

• The scope of sanctions authority under E.O. 13662 is expanded to authorize determinations with respect to any state-owned entity operating in the railway or metals and mining sector of the Russian economy.¹⁰
• OFAC must modify Directive 1 to prohibit U.S. persons from transacting in new debt longer than 14 days maturity (in place of the current 30 days) or new equity of persons named under the directive or their property, effective 60 days after enactment of H.R. 3364.¹¹
• OFAC must modify Directive 2 to prohibit U.S. persons from transacting in new debt longer than 60 days maturity (in place of the current 90 days) of persons named under the directive or their property, effective 60 days after enactment of H.R. 3364.¹² 
• OFAC must modify Directive 4 to prohibit the provision of goods, services, or technology in support of new deepwater, Arctic offshore, or shale products that have the potential to produce oil anywhere (rather than only within the Russian Federation) and that involve any person subject to the directive, provided that person has an interest in the project of not less than 33 percent (thereby expanding the definition of a “controlling interest or a substantial non-controlling ownership interest”), effective 90 days after enactment of H.R. 3364.¹³

New Sanctions Authorized and Mandated

Finally, CRIEEA mandates or authorizes a broad new sanctions regime, including a number of new secondary sanctions, which enable the president to target non-U.S. persons who engage in activity outside the United States that undermines U.S. foreign policy objectives. Specifically:

• Sanctions provided for under the Ukraine Freedom Support Act of 2014, 22 U.S.C. § 8921 et seq., are converted from optional to mandatory.¹⁴   These sanctions apply to (i) foreign persons who are determined to have knowingly made a significant investment in a special Russian crude oil project; and (ii) foreign financial institutions that are determined to have knowingly facilitated certain defense- and energy-related transactions or a significant financial transaction on behalf of any Russian person included on the list of specially designated nationals and blocked persons.
• Sanctions are required in the event of determinations involving “acts of significant corruption in the Russian Federation or elsewhere.” Those sanctions were previously only “authorized and encouraged” for acts “in the Russian Federation” under the Support for the Sovereignty, Integrity, Democracy, and Economic Stability of Ukraine Act of 2014, 22 U.S.C. § 8901 et seq.¹⁵
• Section 224 imposes new sanctions on persons who are determined to have knowingly engaged in significant activities undermining cyber security against any person or government on behalf of Russian Government. It also mandates that the president impose certain secondary sanctions on any person who is determined to knowingly support such activities.¹⁶
• The Support for the Sovereignty, Integrity, Democracy, and Economic Stability of Ukraine Act of 2014 is amended to impose mandatory sanctions on any person who is determined to have (1) violated or attempted to violate any of the Russia-related sanctions, (2) facilitated a transaction to aid others seeking to violate the sanctions, or (3) been responsible for or materially assisted in commission of “serious human rights abuses.”¹⁷
• Section 231 requires the president to impose certain sanctions with respect to persons who are determined to have engaged in “significant transactions” with any person who is part of the defense or intelligence sector of the Government of the Russian Federation.¹⁸
• Section 232 authorizes the president, in coordination with allies of the United States, to impose certain sanctions on any person determined to have knowingly made an investment or provided significant support over certain designated amounts to the Russian Federation for the construction of Russian energy export pipelines. An investment that would trigger Section 232 is one that “directly and significantly contributes to the enhancement of the ability of the Russian Federation to construct energy export pipelines.¹⁹
• Section 233 requires the president to impose certain sanctions on any person who makes an investment of US $10 million or more, if the investment is determined to directly and significantly contribute to the ability of the Russian Federation to privatize state-owned assets in an “unjust” manner.²⁰
• Section 234 imposes new mandatory sanctions on any person determined to have knowingly provided “significant financial, material, or technological support” to Syria if the support contributes materially to the ability of the Government of Syria to acquire or develop certain weapons.²¹   
  
  

Iran-Related Sanctions

Congress is expanding non-nuclear related sanctions on Iran. Specifically, H.R. 3364 establishes three new types of Iran-related sanctions:

• Mandatory sanctions on any person determined (by the president or OFAC) to have knowingly engaged in “any activity that materially contributes to the activities of the Government of Iran with respect to its ballistic missile program” or any other program “for developing, deploying, or maintaining systems capable of delivering weapons of mass destruction.” These sanctions include the blocking of property and exclusion from the United States.²²
• Mandatory blocking of property and prohibitions on transactions with persons who are determined to have committed or supported terrorism with respect to the Islamic Revolutionary Guard Corps (IRGC) and foreign persons that are officials, agents, or affiliates of the IRGC.²³
• The president is authorized to name as SDNs persons determined to be responsible for “extrajudicial killings, torture, or other gross violations of internationally recognized human rights” committed against individuals seeking to expose illegal activity or to defend human rights in Iran.²⁴ 

North Korea-Related Sanctions

New secondary sanctions are established with respect to North Korea under Title III of H.R. 3364, titled the “Korean Interdiction and Modernization of Sanction Act” (KIMSA), modifying the North Korea Sanctions and Policy Enhancement Act of 2016, 22 U.S.C. 9214(a). As revised, the president is required to designate as SDNs persons who are determined to have knowingly engaged in the following activities:²⁵

• purchasing or acquiring significant amounts of gold, titanium ore, vanadium ore, copper, silver, nickel, zinc, or rare earth minerals from North Korea;
• selling or transferring rocket, aviation, or jet fuel to North Korea;
• providing significant amounts of fuel or supplies for vessels or aircraft designated under an applicable E.O. or U.N. Security Council resolution;
• providing insurance services for a vessel owned or controlled by the Government of North Korea; and
• maintaining a correspondent account with any North Korean financial institution.

KIMSA also modifies existing law to grant the president discretionary authority to designate as SDNs persons who are determined to knowingly engage in the following activities:²⁶

• purchasing or acquiring significant quantities of coal, iron, or iron ore;
• acquiring textiles from the Government of North Korea;
• facilitating a significant transfer of funds or property of the Government of North Korea materially contributing to a violation of an applicable U.N. Security Council resolution;
• facilitating a significant transfer of bulk cash, precious metals, gemstones, or other stores of value to or from the Government of North Korea;
• selling or otherwise providing significant amounts of oil or gas products to the Government of North Korea;
• engaging in online commercial activities of the Government of North Korea, including online gambling;
• purchasing or acquiring fishing rights from the Government of North Korea;
• purchasing or acquiring significant types or amounts of food or agricultural products from the Government of North Korea;
• engaging in or facilitating exportation of workers from North Korea in a manner intended to generate significant revenue for use by the Government of Korea or the Workers’ Party of Korea;
• conducting a significant transaction in North Korea’s transportation, mining, energy, or financial services industries; or
• knowingly facilitating the operation of any branch, subsidiary, or office of a North Korean financial institution.

Finally, KIMSA enhances existing measures targeting North Korean indirect correspondent accounts,²⁷  North Korea’s shipping sector,²⁸ and North Korean use of forced labor.²⁹ 

Conclusion

Initially, whether President Trump would sign H.R. 3364 or veto it was an open question. In light of the nearly unanimous support for the bill in the two houses of Congress and the second launch of an intercontinental ballistic missile by North Korea in a single month, however, the president decided to sign, although with significant constitutional and foreign policy reservations, as outlined in today’s signing statements. As a general rule, the sanctions newly authorized under H.R. 3364 depend on factual determinations by the president, coordinated in practice by OFAC or the State Department. Nevertheless, the enactment of H.R. 3364 will create new challenges for global companies and heightened tensions in U.S. relations with the targeted countries and with allies, as well as between the White House and the Congress.

¹ Statements by President Donald J. Trump on Signing the H.R. 3364 available at: https://www.whitehouse.gov/the-press-office/2017/08/02/statement-president-donald-j-trump-signing-countering-americas and https://www.whitehouse.gov/the-press-office/2017/08/02/statement-president-donald-j-trump-signing-hr-3364

² H.R. 3364 § 222(a).

³ H.R. 3364 § 216(a)(2)(A).

⁴ H.R. 3364 § 216(a)(6).

⁵ The period of congressional review is extended to 60 calendar days if the report is submitted on or after July 10 and on or before September 7. H.R. 3364 § 216(b)(1)-(2).

⁶ H.R. 3364 § 216(c).

7 H.R. 3364  § 216(b)(3).

8 H.R. 3364 § 216(b)(4).

⁹ H.R. 3364 § 216(b)(5).

¹⁰ H.R. 3364 § 216(b)(6).  

¹¹ H.R. 3364 § 223(a).  

¹² H.R. 3364 § 223(b).  

¹³ H.R. 3364 § 223(c).  

¹⁴ H.R. 3364 § 223(d).  

¹⁵ H.R. 3364 §§ 225-226.  

¹⁶ H.R. 3364 § 227.

¹⁷ H.R. 3364 § 224.

¹⁸ H.R. 3364 § 228.

¹⁹ H.R. 3364 § 231.

²⁰ H.R. 3364 § 232.

²¹ H.R. 3364 § 233.

²² H.R. 3364 § 234.

²³ H.R. 3364 § 104.

²⁴ H.R. 3364 § 105.

²⁵ H.R. 3364 § 106.

²⁶ H.R. 3364 § 311(a)(3).

²⁷ H.R. 3364 § 311(b)(1)(D).

²⁸ H.R. 3364 § 312.

²⁹ H.R. 3364 § 315.

³⁰ H.R. 3364 § 321.