Late in the evening of August 1, 2019, President Trump signed an executive order (the Executive Order) re-delegating implementation of certain sanctions under the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (CBW Act) to the Secretary of the Treasury. According to press reports, the Administration may be preparing for a second round of CBW Act sanctions against Russia as a result of the Skripal poisoning.
- The Executive Order signed late last night does not actually impose any sanctions, on Russia or anyone else. It merely delegates authority to implement some of the sanctions available under the CBW Act to Treasury, updating a delegation from the Clinton Administration by shifting administrative responsibility for financial sanctions from State to Treasury.
- There are no new sanctions authorities created by the Executive Order. It quotes verbatim two of the statutory second-stage sanctions under the CBW Act, upon which we previously reported. Russia was designated in August 2018 for first-stage sanctions under the CBW Act after the Skripal poisonings. The CBW Act mandates additional sanctions unless a number of remedial conditions are met (which has not occurred); nevertheless, to date the Trump administration has not imposed second-stage sanctions.
- Based on press reports (and in light of recent congressional pressure to implement the additional sanctions), the Administration may be preparing to designate Russia for second-stage sanctions. However, it is not yet clear exactly what the additional sanctions would be. As further explained in our earlier post, the CBW Act calls for at the imposition of least three sanctions from a menu of six, unless waived by the President. It is not yet clear which three sanctions would be imposed or whether the Trump administration will grant a waiver with respect to any of them.
- If we assume that the Trump administration will impose second-stage CBW Act sanctions on Russia shortly and that these sanctions will include both financial sanctions for which responsibility was reassigned to Treasury in the Executive Order (a significant assumption), those provisions would do two things, subject to any additional steps in the implementing order:
- Instruct U.S. delegates to any multilateral development bank to which the United States belongs (specifically, the International Bank for Reconstruction and Development, the International Development Association, the International Finance Corporation, the Inter-American Development Bank, the African Development Fund, the Asian Development Bank, the African Development Bank, the European Bank for Reconstruction and Development, and the International Monetary Fund) to oppose any new loans or technical assistance to Russia, “unless such assistance is directed specifically to programs which serve the basic human needs of the citizens of such country.”
- Prohibit any “United States bank” from “making any loan or providing any credit” to the government of Russia or any of its agencies or instrumentalities (not yet defined, but typically would include any entity majority-owned or controlled by the state), except “loans or credits for the purpose of purchasing food or other agricultural commodities or products.” “United States banks” includes any banks organized in the United States, including their foreign branches (but not subsidiaries), and the U.S. branches of foreign banks (but not their non-U.S. operations). Again, this is only loans or extensions of credit by those banks, not all loans in USD or payments clearing through the United States.
Even if imposed, neither financial sanction described above will apply to existing contracts. Under the requirements of the CBW Act, at least one additional sanction would also need to be imposed or waived.
We will continue to monitor the situation and will report on further developments. Please feel free to contact the authors above or your regular contacts at the firm with any questions.