CAATSA Sanctions: Definition, the List and Cases

CAATSA Sanctions: Definition, the list and cases

CAATSA Background

Russia, Iran, and North Korea are subject to economic sanctions under the U.S. federal law known as the Countering America’s Adversaries Through Sanctions Act (CAATSA). The Act came into effect on August 2, 2017, to counter foreign countries’ perceived aggression against the U.S. government. It accomplishes the purpose by preventing U.S. companies from doing business with sanctioned entities under this Bill. 

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 What Are the Sanctions Under CAATSA?

Companies will violate trade sanctions under CAATSA if it is discovered that they are involved in specific actions that materially benefit listed entities. This covers businesses that export commodities, services, and intellectual property as well as those that import items into the United States.

It is necessary to maintain vehemently denied parties screening systems and general due diligence regarding activities with sanctioned companies in order to ensure that the sanctions are broken. This involves evaluating and reducing the risks of supply chain corruption, forced labor, and cybersecurity violations.

Violating the terms of any provided provision can result in additional penalties specific to that provision. For example, violations of the North Korean Forced Labor Sanction can include financial penalties at either double the value of the product transaction or USD 295,141 per violation, with the possible option of recommending criminal prosecution.

Probable Causes of CAATSA Violations

  • Denial or prohibition of bank financing or transfer of credit;
  • Prohibition of individuals violating sanctions from acquiring any property that is subject to U.S. jurisdiction;
  • Procurement sanctions, prohibiting individuals violating sanctions from entering into any contract with the U.S. government;
  • Prohibition of individuals violating sanctions from foreign exchange transactions;
  • Real-time visibility into declaration response.

CAATSA sanctions list

On August 2, 2017, President Trump signed CAATSA, which at some point expanded U.S. sanctions on Russia. In particular, CAATSA permitted several secondary measures to deter businesses and people residing outside the United States from conducting specific business with Russia. Sanctions against non-Americans who deal with Russia’s government-affiliated defense sectors are expressly threatened under Section 231. According to Section 231, any person who knowingly enters into a “significant” transaction with a person who is a member of, or performs services for, the “intelligence or defense sectors” of the Government of the Russian Federation is subject to at least five of the twelve sanctions listed in Section 235 of CAATSA.

The “Section 231 List” lists more than 80 people, businesses, and government agencies that the State Department believes are affiliated with or work for Russia’s defense and intelligence industries.

Many of these entities are also included on OFAC’s SDN List. The State Department indicated in 2017 guidance (the “2017 Guidance”) that it will “examine the whole facts and circumstances of the transaction and analyze many considerations on a case-by-case basis” in order to determine whether a transaction is “significant.” The connection and significance of the transaction to the Russian government’s defense or intelligence sector, its importance to U.S. national security and foreign policy interests, and whether it has a significant impact on such interests may be among the factors considered in the determination.

Additionally, the 2017 Guidance stated that it will “work with” companies considering doing business with the listed parties: “when we have a good analysis, we’re going to start that robust engagement and talk to partners and friends about where we find transactions that may be problematic.”

CAATSA Sanctions – Turkey

On December 14, 2020, the U.S. enforced sanctions on the Republic of Turkey’s Presidency of Defense Industries (“SSB”) according to Section 231 of the Countering America’s Adversaries Through Sanctions Act (“CAATSA”), which authorizes the imposition of sanctions against non-U.S. individuals who have “significant” transactions with Russia’s defense or intelligence sectors. The U.S. State Department has determined that SSB’s acquisition of a Russian S-400 surface-to-air missile from Rosoboronexport (ROE) can be qualified as a significant transaction according to Section 231. 

This records the first time the United States has imposed CAATSA sanctions against an alloy country of the North Atlantic Treaty Organization (“NATO”). For engaging in “substantial” transactions with ROE, the Chinese firm Equipment Development Department and its director were subject to Section 231 sanctions by the State Department in September 2018.

Press reports state that in December 2017, SSB engaged in action with ROE, Russia’s leading arms exporter, to procure the S-400 surface-to-air missile (the “S-400 System”). ROE was designated as an SDN on April 6, 2018, and is listed on the Section 231 List as a person who works for or on behalf of the Russian Federation’s government’s defense sector.

The U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) added four more individual SSB officers to its Specially Designated Nationals and Blocked Persons List (the “SDN List”) at the same time as the sanctions against SSB. 

At the highest levels and on numerous occasions, the State Department made it clear to Turkey that buying the S-400 System would “threaten the security of U.S. military technology and personnel and provide substantial funds to Russia’s defense sector, as well as Russian access to the Turkish armed forces and defense industry” and expose Turkey to Section 231 sanctions. The MIM-104 Patriot, a surface-to-air missile system deployed by the US and other NATO allies, was offered to Turkey as an incentive not to complete the agreement, but Turkey completed the deal and, according to media reports, received its first shipment from ROE in July 2019.

Further stating that the sanctions against SSB “are not designed to weaken the military capabilities or battle readiness of Turkey or any other U.S. ally or partner, but rather to impose costs on Russia in response to its broad range of harmful activities,”

Therefore, Section 231 prescribed the imposition of at least five of the twelve sanctions described in Section 235 for violations of Section 231. The following sanctions were decided upon and chosen by the Secretaries of State to be applied against SSB in collaboration with the Secretary of the Treasury:

  • A ban on SSB receiving any goods or technology that requires particular U.S. export permits or authorizations;
  • A prohibition of U.S. financial institutions making loans or providing credits to SSB totaling more than $10 million in any 12 months;
  • The imposition of full blocking sanctions and visa restrictions on Dr. Ismail Demir, president of SSB, Faruk Yigit, vice president, Serhat Gencoglu, head of SSB’s Department of Air Defense and Space, and Mustafa Alper Deniz, program manager for SSB’s Regional Air Defense Systems Directorate. The requirement that the United States oppose loans benefiting SSB by international financial institutions.

Along with adding SSB officers to the SDN List, OFAC also revealed the NS-MBS List, a new non-SDN List that identifies individuals susceptible to non-blocking menu-based sanctions, such as Section 231.

 CAATSA Sanctions – India

In the past, the United States has imposed sanctions on India in response to that country’s nuclear program. Examples include the suspension of uranium supplies to India following Pokhran-I and the end of foreign aid and military sales following Pokhran-II. The bilateral 2+2 discussions in 2018 marked the beginning of a new era of military-to-military cooperation, and the 2008 123 Agreement permitted the United States to accept India as a de facto nuclear weapons state.

Later, the Trump administration warned nations, including India, urging them to abandon defense initiatives associated with the acquisition of the Russian S-400 air defense system. Since its inception in response to Russia’s annexation of Crimea in 2014 and intelligence reports of Russian meddling in the 2016 U.S. Presidential elections, CAATSA has sought to “counter aggression” by placing economic and financial obligations on nations that continue to engage in significant trade and business with Iran, the Russian Federation, and North Korea, rather than by undermining U.S. strategic alliances.

The potential CAATSA sanctions toward India threaten New Delhi’s foreign policy pillar that emerged from India’s colonial struggle against U.K. rule. Indeed, the CAATSA sanctions push India closer to Moscow and, in the long term, could worsen India’s historical issue of trusting the Western alliances.

The collaboration between Moscow and New Delhi, formed during India’s policy of non-alignment with either camp during the Cold War, has been maintained consistently for decades since the 1971 Treaty of Peace, Friendship, and Cooperation. Therefore, it is unsurprising that even after Russia annexed Crimea in 2014, almost half the surveyed Indian populace held a favorable opinion of Putin in 2019. Furthermore, India still has a neutral position regarding the recent events related to the invasion of Ukraine from the Russian Federation. 

The idea that the West was tying down India’s global ambitions after the 123 Agreement between India and the United States in 2005 sparked a heated internal discussion in the Indian Parliament about whether India had given the United States too much of its strategic autonomy. If CAATSA sanctions were to be implemented, it might lead to a fresh round of public discussion regarding the strategic importance of Indo-US cooperation in India. This could result in India being under intense domestic political pressure to choose between its historically and ideologically based non-alignment policy and a foreign policy based on deeper defense cooperation with Washington that would largely deter China.

As a result, India will gradually reduce its reliance on Russia for its military if Washington adopts a more gradual strategy. Given that New Delhi is cognizant of the risks associated with being unduly reliant on Moscow, it should come as no surprise that it is actively seeking out new defence relationships.

Instead of being under CAATSA sanctions, New Delhi has to be allowed the opportunity to gradually sever connections with Russia over the defense problem.

 In past years, India has diversified and raised arms imports from Brazil, France, Israel, South Africa, South Africa, and the United States. Also, with Russia constantly being pushed to economic and global isolation and sanctions as result of the invasion of Ukraine, irrespective of whether CAATSA sanctions are implemented on India, it will impose New Delhi to invest more in seeking alternate partners and complicate executing its bilateral defense agreements with Moscow. India is currently under pressure from Western nations to assist in containing Russia; as a result, it must strike a delicate diplomatic balance. In response to recent discussions, India stated that it “favored peaceful resolutions of conflicts” but did not specifically criticize the Russian Federation’s actions.

To Sum up

The implementation of numerous legal authorities is represented by the CAATSA-Related Sanctions. Some of these powers come in the form of presidential executive orders. Public laws (statutes) passed by Congress are additional authority. OFAC has further codified these powers in its regulations, which are available in the Code of Federal Regulations (CFR). These regulations’ amendments are published in the Federal Register. Different sanctions have been imposed on India and Turkey according to what was explained above.

For further information regarding sanctions, check this article:
Primary and Secondary Sanctions

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