STATE DEPARTMENT ON USE OF SANCTIONS

FROM:  U.S. STATE DEPARTMENT
Remarks to the ACIEP Sanctions Subcommittee
Remarks Jose W. Fernandez
Assistant Secretary, Bureau of Economic and Business Affairs Washington, DC
April 11, 2012
INTRODUCTION
You know, I spend a lot of time doing very positive work in a number of areas at the State Department. One area we focus on in the Bureau of Economic and Business affairs is economic sanctions, which I know can sometimes be viewed as “the dark side” of our work. We have many carrots at our disposal, but sanctions work is our big stick. But the message that I want all of you to walk away with today is that sanctions regimes can be an effective way to promote some very positive changes around the world.
I will begin my remarks with a brief description of some of the goals and work of our sanctions team, some of whom are here to help answer your more difficult questions, before I present you with a few case studies on sanctions, and I will conclude with how we see our work going forward.

However, I am particularly interested in hearing from you. I’d like to hear your thoughts on the role you envision for U.S. sanctions regimes in our overall economic tradecraft and our message to the business community, so I encourage you to present any ideas or questions you may have at the end of my comments.

THE WORK OF THE SANCTIONS TEAM AT STATE
Sanctions are a foreign policy tool somewhere between hard and soft power, which can play a significant role in encouraging bad actors to change their behavior. Under the Obama Administration, sanctions have proven to be one of our most effective means of increasing pressure on rogue actors and regimes without resorting to force.

Secretary Clinton has noted that one of our country’s great challenges is advancing our global leadership at a time when power is often measured and exercised in economic terms. Our sanctions regimes are a critical part of our economic outreach, and we envision an economic foreign policy in which promotion of business development meshes seamlessly with sanctions that simultaneously encourage our global partners to focus on responsible, innovative markets and isolate the world’s worst human rights abusers and weapons proliferators.

Additionally, the Department has been ramping up its focus on making our sanctions regimes as strong and effective as possible. Given the horrific events occurring in Iran and Syria over the past couple years, these improvements to our sanctions protocol are timely, and in sync with the Administration’s commitment to using sanctions in the most effective manner possible.

In light of this new focus, we have been expanding our sanctions team, adding six more people and bringing in a new Deputy assistant Secretary to focus wholly on our sanctions programs. We are aiming for a re-vamped sanctions Deputate by mid-summer.

Already, our economic sanctions experts are in constant contact with others at the State Department who also play a key role in sanctions policy, including our colleagues focused on non-proliferation, counter-terrorism, and human rights, and those on our country desks who coordinate our overall relationship with a country. Through this interaction, we ensure that our sanctions policies are focused in the right way so as to maximize their impact.

We hope that these changes will allow the State Department to coordinate more effectively with other agencies to wield targeted sanctions and other economic pressure against our adversaries.
Wherever possible, we have attempted to target our sanctions on individuals and entities within a country directly engaged in the activities that we seek to change. These targeted sanctions are sometimes referred to as “smart sanctions.” In doing so, we seek to make it clear that we are not targeting the population of a country but rather those in control who can stop the bad behavior of a particular regime.

CASE STUDY: LIBYA
Libya is an example of when sanctions can be most effective: in environments of international cooperation. When the international community cooperates on sanctions, targeted entities have a harder time avoiding them and the likelihood of success in effecting desired changes increases. These sanctions, in combination with an effective military pressure and support for Libyan rebel forces provided by the international coalition, helped isolate the Qadhafi regime, resulting in the regime’s ultimate downfall.
I will be traveling to Libya in a week’s time, and I will get a better sense of lessons learned from our sanctions regime while I am there.

As you all know, both the Administration and the international community have now passed measures that significantly ease sanctions on Libya. Though final winding down of the Libyan sanctions programs may take some additional time, this is a good example of how sanctions regimes can change over time based on the goals of each sanctions program and the situation on the ground.

CASE STUDY: BURMA
Although challenges remain, the Burmese Government has taken some positive steps toward democratization and civic openness since Than Sein became President in 2011. During her trip to Burma in December 2011, Secretary Clinton announced an “action-for-action” strategy to encourage reformers to take further steps.
As a result of Burma’s successful by-elections on April 1, Secretary Clinton announced on April 4 a series of steps that the United States is prepared to take as part of our action-for-action strategy.
Among steps on the sanctions front, these include a broad exemption from our Burma sanctions for a wide spectrum of non-profit activities. This will make it much easier for U.S
. entities and individuals to build schools, clinics, libraries, and other institutions in Burma. U.S. citizens will also be authorized to set up university exchange programs, public health initiatives, conservation projects and a host of other activities that will benefit the Burmese people.
This step is in line with the Secretary’s commitment during her visit to Burma to increase exchanges with the people, civil society organizations, and government.

We will also begin the process of a targeted easing of our ban on the export of U.S. financial services and investment, as part of a broader effort to help accelerate economic and political reform.
Our aim will be to recognize the reforms underway and take actions that assist the country's development and reform process. We will work closely with our allies and counterparts, including within our own government, to coordinate these changes.

CASE STUDY: SYRIA
Syria presents another example of international coordination. As it became clear that President Assad was not going to lead a democratic transition, and as the violence against the Syrian people increased, we felt it necessary to coordinate a strong international response.

We have worked systematically to increase our own pressures, including tough targeted sanctions against the Assad regime. At the same time, in literally hundreds of meetings and conversations, President Obama, Secretary Clinton, senior officials, our ambassadors, and others have steadily and systematically worked to build concerted international pressure.
Our aim was to build a strong international effort in support of the universal rights of the Syrian people, and to condemn and isolate the Assad regime. We recognized from the start that American leadership was crucial to this effort, but to have maximum impact in Syria, we wanted to lead the chorus of voices and pressures, not just make this a solo act.
This coordination led to similar actions by our partners and allies around the world, such as the EU and Canada, to isolate the Government of Syria from the international financial system and deprive it access to significant revenue streams that are generated by its petroleum sector.

Syria continues to pose challenges, and we continue to look at ways in coordination with our international partners to increase pressure on the Syrian regime. Again, this dire situation requires a chorus, not a solo.

CASE STUDY: IRAN
Iran remains one of our greatest foreign policy challenges, and our Iran sanctions regimes are one of our greatest tools in pressuring Iran to comply with its international obligations.
The United States and our international partners are determined to prevent Iran from acquiring a nuclear weapon. We remain committed to a dual-track policy that combines the use of pressure with engagement.

In response to Iran’s actions, which point to an Iranian nuclear weapons program, as well as to last fall’s Iranian plot to assassinate the Saudi ambassador to the United States, the United States and its international partners have continued a steady drumbeat of new sanctions measures. Let me review a few of the most recent developments.
First is Executive Order (E.O.) 13590, which President Obama issued in November. This Order targets the provision of goods and services to Iran’s upstream oil and gas industry and to Iran’s petrochemical sector. This order expands on existing sanctions, and authorizes sanctions on persons who knowingly support Iran in a way that could directly and significantly contribute to Iran’s ability to develop its petroleum and petrochemical sector.

These new measures will make it more difficult for Iran to circumvent existing sanctions by obtaining foreign expertise to assist in the development of its petroleum resources or dual-use items to refine petroleum in its petrochemical facilities. They will also help accelerate the decline of Iran’s already-deteriorating crude oil production.
In December, President Obama signed into law the National Defense authorization act (NDAA) for fiscal year 2012. This law provides for sanctions on foreign financial institutions for significant transactions, both petroleum and non-petroleum related, with the Central Bank of Iran (CBI) and designated Iranian financial institutions. These new sanctions are designed to target both the CBI and Iran’s crude oil revenues, while avoiding disruptions to international oil markets. We are reaching out to oil-consuming countries to help them respond to the new legislation and find alternatives to energy supplies from Iran.

These efforts have been successful. Most recently, the Secretary announced that 11 countries have qualified for an exception under the NDAA because they significantly reduced their imports of Iranian crude oil. These actions will reduce demand for Iranian crude and the revenues it needs to continue pursuing its nuclear aspirations.
In January, the European Union followed our lead and imposed strong sanctions of its own, imposing an embargo on Iranian crude and sanctioning the CBI. This multilateral approach has brought an unprecedented amount of pressure on Iran.

We also continue to enforce existing laws. For example, in January we imposed sanctions under the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA) on three companies for conducting business with Iran’s energy sector, specifically the provision of refined petroleum products to Iran. The firms are Zhuhai Zhenrong Corporation (China), Kuo Oil Pte. Ltd. (Singapore), and Fal Oil Company Ltd (UAE). These firms were among the biggest remaining suppliers of refined petroleum to Iran.

Ironically, though, we have been most effective when we haven’t imposed sanctions under these laws. In many cases, we have used the law as leverage to convince firms to discontinue their business with Iran. The Department does extensive outreach to foreign companies at risk of violating these regulations, and works with them and their governments to deter sanctionable activity in Iran. In this manner, we have prevented many companies across the world from doing business in Iran’s energy sector, and have cut off billions of dollars in potential investments in Iran.

These efforts, combined with our demonstrated resolve to impose sanctions when necessary, sends a clear message to our international partners in the business community: Although we are eager and enthusiastic to work with you to find alternate sources of energy, businesses that continue to support Iran’s energy sector and help facilitate Iran’s continued unwillingness to comply with its international nuclear obligations will face serious consequences.

We are committed to engagement, and we are hopeful that Iran's recent willingness to meet in the P5+1 Framework will lead to serious negotiations about its nuclear program. We believe that the united international front and increasing global pressure have been critical in getting Iran to return to the negotiating table. For that reason, we must continue to impose pressure through sanctions and other means until Iran addresses the international community's concerns over its nuclear program.

LOOKING FORWARD
We and others in the Administration and in Congress are always looking at new ways to further increase pressure on the worst regimes. We are especially focused now on additional measures to take against Iran and Syria. In any deliberations, we look to leverage the best possible outcome in line with U.S. foreign policy goals.

Our multifaceted approach to Economic Statecraft presents many opportunities for businesses around the world to grow and prosper working with the United States, while simultaneously staking a strong position, along with our global partners, that it cannot be business-as-usual with states that ignore the international community, flaunt illicit nuclear development, and commit terrible abuses on their own people. On sanctions, the United States is dedicated to a leadership role in developing a responsible and innovative global economic policy.
I welcome any questions or comments you may have, and my team is here to assist when things get very technical.