October 16, 2019 – On October 14, 2019, the Trump Administration imposed broad sanctions on a number of Turkish individuals and entities in response to Turkey’s recent military incursions into Syria. The Administration further announced that it would increase tariffs on imports of steel from Turkey to 50%, and stated that it was suspending ongoing trade negotiations with Turkey in light of the military operations. Although the sanctions have the potential for broad application, the initial response by the Trump Administration has been criticized by Congressional Republicans and Democrats as not going far enough.
Background and Context
On October 6, 2019, President Trump announced that he had informed Turkish President Recep Tayyip Erdogan that Turkey could proceed with planned military operations in northeast Syria, where U.S. troops previously were stationed, without U.S. military interference. President Trump also confirmed that he had ordered the U.S. military to withdraw approximately 1,000 U.S. troops from northeast Syria, where they had previously partnered with Kurdish military forces that had established a presence in the region to fight the rise of the Islamic State of Iraq and Syria (“ISIS”).
In the days following the announcement, Turkish military forces moved into northeast Syria, where they have reportedly began attacking Kurdish forces in the region. Turkey rejects the claims that the operation targets Kurds and claims that “Turkey is fighting terrorism, ensuring the territorial integrity of Syria, liberating local Syrians from the oppression of terrorists and creating conditions for the safe and voluntary return of displaced Syrians to their homeland.” President Trump faced swift bipartisan condemnation for his perceived abandonment of the U.S.-allied Kurdish forces. Responding to this pressure, President Trump called for a cease-fire, and the White House announced that Vice President Mike Pence would travel to Ankara to negotiate an end to the Turkish invasion. As reports of Turkey’s military actions continued, the White House imposed the economic sanctions described below in order to pressure Turkey into curtailing its offensive.
Executive Order Overview
On October 14, 2019, President Trump issued an Executive Order that authorized blocking sanctions in response to Turkey’s invasion of Syria. Under the Order, President Trump declared that Turkish military actions in northeast Syria “undermine the campaign to defeat the Islamic State of Iraq and Syria.” The Order also asserted that the Turkish military advances threaten peace, security, and stability in the region.
Specifically, the Order authorizes the U.S. Department of the Treasury, Office of Foreign Assets Control (“OFAC”) to impose asset-blocking sanctions on the following categories of persons:
The Order also authorizes the U.S. Department of State to impose additional penalties on persons that are responsible for or complicit in military actions that have obstructed, disrupted, or prevented a ceasefire in northern Syria and those responsible for human rights abuses toward displaced persons or refugees. The State Department penalties include both asset blocking provisions and exclusion from entry into the United States. If the State Department designates a person based on the criteria in the Order, OFAC is authorized to extend its blocking sanctions to those persons, which include broad prohibitions on transactions with U.S. persons.
The asset blocking authorities primarily affect the actions of U.S. persons, who are prohibited from dealing with individuals and entities designated pursuant to the Order. The Order also allows for extraterritorial application, as Section 3 authorizes OFAC to impose sanctions on any foreign financial institutions that have facilitated a “significant financial transaction” on behalf of a person designated under the Order. Likewise, Section 1 of the Order allows OFAC to designate persons who have “materially assisted” or provided goods or services for any person blocked under the Order. OFAC, therefore, has the authority to designate non-U.S. persons who have materially supported those responsible for the Turkish invasion of Syria, including Turkish government agencies and officials, which could pose designation risks to anyone, including non-U.S. persons, engaged in business with the Turkish government.
Finally, all persons designated under the Order, either by OFAC or the State Department, will be denied entry into the United States absent approval from the Secretary of State.
In a presidential statement accompanying the Order, President Trump also announced that the U.S. government would increase steel tariffs on Turkey to 50%, after having decreased steel tariffs in May 2019. Additionally, the statement indicated that ongoing U.S. trade talks with Turkey would be suspended.
Concurrently with issuance of the Order, OFAC designated five individuals and entities, including Turkey’s Ministry of National Defense and Ministry of Energy and Natural resources, as specially designated nationals (“SDNs”) subject to asset blocking pursuant to the Order. Also subject to the blocking sanctions are entities directly or indirectly owned 50% or more by either Ministry. In addition, OFAC designated Turkey’s Minister of National Defense, Minister of Energy and Natural Resources, and Minister of the Interior in their individual capacities. Because of the SDN label, all of the U.S. assets of these parties are blocked, and U.S. persons and persons subject to U.S. jurisdiction will be broadly prohibited from engaging in transactions with these entities unless separately authorized by OFAC.
OFAC also issued three general licenses (“GLs”) with its announcement, which carve out from the application of the sanctions the activities described in the licenses.
These GLs could potentially authorize some transactions that would otherwise be prohibited under the sanctions. While existing commercial arms sales from U.S. companies to the Turkish government can continue for now under GL 2, this could change if the term of the GL is not extended. Similarly, U.S. energy sector companies would find their ability to contract with the Turkish government cut off. Any expansion of the sanctions to other sectors of the Turkish economy would also adversely affect U.S. businesses operating in those sectors.
Despite the imposition of sanctions, Turkey’s military has continued its operations in Syria. Meanwhile, the Kurdish forces in northeast Syria have announced an agreement with Syrian President Bashar al-Assad and his Russian-backed forces to fight against the Turkish forces, and reports indicate that Russian and Syrian forces have already begun moving into areas vacated by U.S. troops. As instability grows in the region, some warn that ISIS, which had been largely defeated, may begin a resurgence in the absence of U.S. and Kurdish forces that had previously been combatting the remnants of the group. In response to the U.S. sanctions, Turkey declared that a ceasefire is not possible in Syria until the People’s Protection Units (YPG) evacuates the border area, and President Erdogan said that he is not concerned by the sanctions.
Critics of President Trump’s withdrawal of U.S. forces from Syria (including congressional Republicans) argue that the sanctions in the Order do not go far enough to actually deter the Turkish advance into Syria, and world financial markets initially have shown little change at the news of sanctions. Some members of Congress have indicated that they are considering imposing harsher sanctions through legislation, and congressional Democrats are urging Republicans to support a resolution reversing President Trump’s decision to withdraw U.S. troops from northeast Syria.
The situation in northeast Syria will likely continue to change rapidly in the coming days and weeks, but if U.S. sanctions fail to deter further military action by the Turkish military, it is possible that OFAC will impose more sweeping sanctions on entities pursuant to the broad authority it has under the Order. The sanctions are not self-executing, and OFAC must affirmatively designate persons as SDNs who are deemed to have participated in the ongoing Turkish military operations in Syria. Therefore, while the sanctions are relatively narrow at present, OFAC can broaden these sanctions significantly under the terms of the Order with little or no advance warning. This could include designating additional Turkish government ministries and high-ranking Turkish officials as SDNs, along with blacklisting major players in key sectors of the Turkish economy. If that does not occur, Congress may step up efforts to mandate its own, more far-reaching sanctions.