The Biden Administration has frozen new regulatory action for the time being, which will naturally limit the flow of regulations in the coming weeks until the new team gets up and running. We also are now looking at a coup in Myanmar as of late last night, so it might be worthwhile to dust off your old copy of the Burmese Sanctions Regulations soon. President Biden was scheduled to make a speech on his major foreign policy priorities today but DC weather has postponed that for a bit.
The main stories this week, however, deal with the big three in the trade and security space: China, Iran, and Russia.
China Sanctions: Continuity from Biden Team Alongside Ongoing Developments with Huawei and Others
The overall relationship with China was the basis of a variety of activities and analyses this week. Although key personnel are not yet in place, the outlines of a Biden China policy are emerging – basic continuity with less drama might be one way to describe it.
For example, Commerce Secretary designate Gina Raimondo made a bit of news during her Senate confirmation hearing when she was somewhat vague as to whether she would maintain sanctions on Huawei and its affiliates. She committed to consultation with interested parties in government and industry but would not state outright the restrictions would remain in place. White House Press Secretary Jen Psaki was similarly noncommittal, while emphasizing that the administration would continue to prevent “untrusted vendors” from threatening US national security.
GOP Senator Ben Sasse – not actually on the committee, but weighing in anyway – objected to this hesitance by claiming “Huawei is still the Chinese Communist Party’s tech puppet and a serious threat to national security.”
Gratuitous tech puppet reference for people who remember the 1990s version of the Internet:
Dispassionate analysts on both sides of the aisle seem to be giving the Biden team credit and some space to fully develop its posture toward the PRC. WH Spokesperson Psaki announced that the White House would be reviewing the prior administration’s “Phase 1” trade deal and would be, as Raimondo also stated, consulting broadly on where things are going.
As always, personnel decisions are viewed as communicating policy intent and China hawks are pleased by the addition of Kurt Campbell as Asia czar for the NSC. People will be interested to see who gets appointed to top Commerce Department positions as well, such as Undersecretary for Industry and Security.
For a longer review of US-China competition, a reader alerted me to this piece from a leading analyst of Chinese commercial espionage efforts. He accurately describes how the “Western sphere” and “Chinese sphere” of information and communications technology are in basic tension with each other, and that the “edges where these two spheres meet are now a persistent site of conflict, with the demands of global interconnectivity and supply chains chafing against a range of trade and export security concerns.” Although I don’t view the conflict as all-embracing as the author does, the piece is definitely worth a think as the British say.
Specifically on Huawei, the New York Times published an article describing how Huawei itself may be using social media covertly in Belgium to influence legislation relating to 5G technology, where Huawei would like to still play a role despite US sanctions. Although the effort doesn’t seem to have worked in any meaningful way and Huawei’s corporate headquarters has distanced itself from it, it would be surprising if Huawei and others didn’t bring their influence to bear wherever possible.
And last but not least from the China desk here at “Last Week in International Trade” – OFAC issued General License 1A in an attempt to clean up some of the madness associated with all the last-minute actions by the prior administration to limit US persons from owning shares in certain companies allegedly affiliated with the Chinese military. In essence, the license allows transactions with companies that do not actually appear on the lists of restricted companies but whose names closely match the name of a listed company.
The license expires on May 27, so time is limited, but at least the license eliminates most of the risk in trying to determine whether a Chinese company’s name is too close to a restricted company’s name. One hopes all these sanctions issues around China will be rationalized once the Biden team gets a handle on things.
Iran Sanctions: Analysis of Biden Administration Options
Now that Biden’s national security team is taking shape and taking office, questions on how and on what terms to reengage with Iran are moving front and center. As mentioned above, Biden postponed his first major foreign policy speech originally scheduled for today, but commentators are starting to evaluate the different available options and associated pressure points.
For a good ‘scene-setting’ article, the Washington Post published a piece this week describing how the administration will likely move back toward multilateralism generally while keeping pressure on Iran to take the first step.
Of course, the Iranian government believes Biden should take the first step; Iran’s UN ambassador published a New York Times op-ed writing that, among other things, Iran has remained “prudent and patient” despite ongoing provocations from the prior administration. He continued:
Iran, for its part, has declared on numerous occasions that it is ready to return to the obligations initially agreed under the nuclear deal and expeditiously reverse the measures we have taken since, if all of the sanctions are withdrawn that were imposed and reimposed by the Trump administration after its illegal withdrawal from the accord.
A unilateral reversal by Biden is very unlikely, but I do expect some tension-reducing steps in the near future, including perhaps confidence building measures related to coronavirus vaccine availability. The US and Iran have a decades-long history of talking behind the scenes while public statements keep up the pressure.
Russia Sanctions: Proposed New Sanctions Targets, Courtesy of Alexei Navalny
In case dealing with China and Iran aren’t enough for the Biden team, relations with Russia continue to be troubling as the Putin government continues to crack down on Alexei Navalny specifically and government protestors generally. The Russian Anti-Corruption Foundation, founded by Navalny, sent a letter to President Biden nominating thirty-five individuals for sanctions stemming from their involvement in corruption or the prosecution of Navalny.
Some of the names will be familiar to sanctions experts as already being on the SDN list (for example, Gennady Timchenko who was one of the first oligarchs sanctioned back in 2014). It also includes new names, like Roman Abramovich, owner of the Chelsea Football Club in London. Personally, as a Chelsea fan I hope that Comrade Abramovich doesn’t get sanctioned any time soon – I don’t want to have to freeze my Stamford the Lion mascot!
More seriously, the Biden Administration will have to figure out what to do about its sanctions policy vis-à-vis Russia. The basic structure of US sanctions has been in place since 2014 and there’s been absolutely zero movement on a return of Crimea to Ukrainian jurisdiction or any of the other significant issues causing tension in US-Russia relations. Creative policy actions besides simply piling on new and likely ineffective sanctions would certainly be welcome.
Russia Sanctions: BIS Administrative Penalty for Electronic Export Information Violations
BIS announced this week a $540,000 settlement agreement with Mr. Julian Demurjian of San Francisco for violations of the EAR. I admit to being puzzled as to why BIS put out a press release about this settlement considering the rather low stakes involved. The actual violations involve undervaluing electronic export information for some exports to Russia of controlled items. The items do not seem to have required licensing or, more likely, were eligible for License Exception ENC, because there is no allegation of export licensing violations for the affected 5A002, 5D002, and 5A991 items.
Even more puzzling is that the $540,000 penalty number isn’t quite the real number; the real number he owes is $60,000, and the $480,000 balance is suspended as long as Demurjian doesn’t violate export laws for two years going forward. This will be pretty easy to do, because (a) the entity he controlled that was involved in the violations was dissolved in 2018, and (b) BIS also put Demurjian on the Denied Party List, thereby losing his export privileges, a la Marsellus Wallace terminating Butch Coolidge’s LA privileges in Pulp Fiction.
So basically, Demurjian is fined $60,000 for seven violations that took place more than five years ago and only involved underreporting of transaction value. People should certainly pay the price for export violations, but this doesn’t seem like press release material to me.
Commerce Department: Report on FY 2020 Activities
For those who love year end summaries and statistical reviews – and you know who you are – BIS published its annual report on what it’s been up to all year.
BIS made 279 additions to the Entity List, bringing the total to more than 1500. Chinese companies unsurprisingly make up a plurality of listed entities, representing about 23% of the total. Russia is close behind at 20%. On the export licensing front, BIS received 37,895 applications representing a total export value of about $174 billion. Just over 86% of applications were approved, 12.5% were returned without action, and only 1.2% were denied – good news for companies considering the export of products requiring licensing but concerned about denial. All else equal your chances of outright denial are pretty low, as long as you do the work of reviewing the regulations and preparing a good application.
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