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What to Do with Extraterritorial Sanctions? EU Responses

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One of the important decisions of the new US administration was its revision of the sanctions policy inherited from President Donald Trump. The “toxic” assets of the departed team include deterioriated relations with the European Union. The divisions between Washington and Brussels have existed since long before Trump’s arrival in the White House. The EU categorically does not accept US extraterritorial sanctions. Back in 1996, the EU Council approved the so-called “Blocking Statute”, designed to protect European businesses from restrictive US measures targeting Cuba, Iran and Libya. For a long time, Washington avoided aggravating relations with the EU, although European companies were subject to hefty fines for violating US sanctions regimes.

The situation deteriorated significantly during the Trump presidency. At least three events served as a cold shower for the EU with respect to the bloc’s relationship with the US. The first was the unilateral withdrawal of the United States from the JCPOA—the “Iranian nuclear deal”. Trump renewed American restrictions on Iran in full, and then significantly expanded them. His demarche forced dozens of large companies from the EU to leave Iran; they were threated by the American authorities with fines and other coercive measures. Brussels was powerless to convince Washington to return to the JCPOA. The EU authorities were also unable to offer their businesses guarantees of reliable protection against punitive measures being taken by the US Treasury and other departments. The second event was Washington’s powerful attack on the Nord Stream 2 pipeline project. Trump has openly opposed the pipeline, although the Obama administration was also against the pipeline. Congress has passed two sanctions laws targeting Russian pipeline projects. The US Congress and the State Department directly warned European business about the threat of sanctions for participating in the project. In addition to Iran and Russia, concern in the EU was also caused by the aggravation of US-Chinese tensions. Brussels distanced itself from Trump’s cavalry attack on China. So far, US restrictions against “Chinese communist military companies”, telecoms and officials have minimally affected the EU. However, Washington aggressively pushed its allies to oust Chinese technology companies. It cannot be ruled out that in the future, US foreign policy towards China will become a problem for Brussels.

For the EU, all these events have become a reason to think about protection from extraterritorial US sanctions. The work on them was carried out by both European expert centres and the European Commission. Currently, we can talk about the formation of a number of strategic goals, the achievement of which should allow the European Union to increase its stability in relation to extraterritorial sanctions of the United States and other countries.

Such goals include the following:

Strengthening the role of the euro in international settlements. Already today, the euro ranks second after the dollar in international payments and reserves. However, unlike the United States, the EU does not use this advantage for political purposes. Many transactions between European businesses and their foreign partners are carried out in US dollars, which makes them more vulnerable to subsequent coercive measures. Calculations in euros could reduce the risk of transactions with those partners against whom the sanctions of the United States or other countries are in effect, but the sanctions of the UN Security Council or the EU itself do not apply. Here the EU authorities have laid serious groundwork and have a good chance of achieving their goal.

1.Creation of payment mechanisms, which cannot be stopped from the outside. INSTEX, a payment channel for humanitarian deals with Iran, is often cited as an example of such mechanisms. In 2020, the first transactions were made. However, success in this area raises questions. INSTEX has been widely advertised by EU politicians, but initial expectations were too high. The mechanism has not yet justified itself, even for humanitarian purposes. The Treasury Department can impose blocking sanctions against INSTEX at any time if it considers that the mechanism is being used to deliberately circumvent US restrictions against Iran. Switzerland’s SHTA mechanism, which is used for humanitarian deals with Iran, looks much better. It was created jointly with the Americans and it should not have any problems with functionality. However, regarding payment mechanisms in the EU, there are not only humanitarian transactions. There’s also the matter of plans to create secure transaction mechanisms in the trade of energy or raw materials; the question of what prospects these have for implementation remains.

2.Ensuring the possibility of unhindered settlements and access to other services for individuals and legal entities in the EU that have come under extraterritorial sanctions. In other words, we are talking about the fact that a citizen or a company from the EU, which fell, for example, under the blocking sanctions of the US Treasury, could make payments within the EU. Now European banks will simply refuse such transactions, and the courts are likely to side with them. In fact, the European Union wants to create infrastructure that has already been created, for example, in Russia. Moscow was considering the establishment of a national payment system even before the large-scale sanctions of 2014. Despite the limited weight of Russia in the global financial system, the country has its own sovereign payment system, which allows its own citizens to carry out transactions on its own territory.

3.Updating the 1996 Blocking Statute. In particular, we are talking about the development of an instrument of compensation for companies that have suffered from extraterritorial sanctions.

4.Creation of information databases in the interests of European companies under the risks of extraterritorial sanctions, as well as the provision of systematic legal assistance to companies that have come under foreign restrictions. In particular, we are talking about assisting European companies and citizens of the EU countries in defending their interests in US courts, as well as using other legal mechanisms, for example, within the WTO.

If necessary—balancing the extraterritorial measures of the United States or other countries with restrictive counter-measures.

However, the EU sanctions agenda is far from limited to the threat of extraterritorial sanctions. Ultimately, the United States is an ally and partner of the EU, which means that the opportunities for smoothing out crisis situations remain broad. Collaboration at the agency level is also highlighted as a recommendation. Moreover, after Trump’s departure, the United States may be more attentive to the concerns of the European Union.

The main priority remains the development of the EU’s own sanctions policy. Here many problems and tasks arise. The main ones include the low speed of decision-making and poor coordination in the implementation of sanctions. The centralisation of sanctions mechanisms in the hands of Brussels is becoming an important task for the European Commission.

The article is published as part of the Valdai Club’s Think Tank project, continuing the collaboration between Valdai and Observer Research Foundation (New Delhi).

From our partner RIAC

RIAC Director of Programs, RIAC Member, Head of "Contemporary State" program at Valdai Discussion Club, RIAC member.

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NATO’s Cypriot Trick

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UN Photo/Eskinder Debebe

When the Soviet Union collapsed and the Warsaw Pact died, there was much speculation that NATO would consider itself redundant and either disappear or at least transmogrify into a less aggressive body.

Failing that, Moscow at least felt assured that NATO would not include Germany, let alone expand eastwards. Even the NATO Review, NATO’s PR organ, wrote self-apologetically twenty-five years after the fall of the Berlin wall: “Thus, the debate about the enlargement of NATO evolved solely in the context of German reunification. In these negotiations Bonn and Washington managed to allay Soviet reservations about a reunited Germany remaining in NATO. This was achieved by generous financial aid, and by the ‘2+4 Treaty’ ruling out the stationing of foreign NATO forces on the territory of the former East Germany. However, it was also achieved through countless personal conversations in which Gorbachev and other Soviet leaders were assured that the West would not take advantage of the Soviet Union’s weakness and willingness to withdraw militarily from Central and Eastern Europe.”

Whatever the polemics about Russia’s claim that NATO broke its promises, the facts of what happened following the fall of the Berlin wall and the negotiations about German re-unification strongly demonstrate that Moscow felt cheated and that the NATO business and military machine, driven by a jingoistic Cold War Britain, a selfish U.S. military-industrial-congressional complex and an atavistic Russia-hating Poland, saw an opportunity to become a world policeman.

This helps to explain why, in contrast to Berlin, NATO decided to keep Nicosia as the world’s last divided city. For Cyprus is in fact NATO’s southernmost point, de facto. And to have resolved Cyprus’ problem by heeding UN resolutions and getting rid of all foreign forces and re-unifying the country would have meant that NATO would have ‘lost’ Cyprus: hardly helpful to the idea of making NATO the world policeman. Let us look a little more closely at the history behind this.

Following the Suez debacle in 1956, Britain had already moved its Middle East Headquarters from Aden to Cyprus, while the U.S. was taking over from the UK and France in the Middle East. Although, to some extent under U.S. pressure, Britain was forced to bring Makarios out of exile and begin negotiating with Greece and Turkey to give up its colony, the U.S. opted for a NATO solution. It would not do to have a truly sovereign Cyprus, but only one which accepted the existence of the Sovereign Base Areas (SBAs) as part and parcel of any settlement; and so it has remained, whatever the sophistic semantics about a bizonal settlement and a double-headed government. The set of twisted and oft-contradictory treaties that have bedevilled the island since 1960 are still afflicting the part-occupied island which has been a de facto NATO base since 1949. Let us look at some more history.

When Cyprus obtained its qualified independence in 1960, Greece and Turkey had already signed, on 11 February 1959, a so called ‘Gentlemen’s Agreement’, agreeing that they would support Cyprus’ entry into NATO.1 This was, however, mere posture diplomacy, since Britain—and the U.S. for that matter—did not trust Cyprus, given the strength of the Progressive Party of Working People (AKEL) and the latter’s links to Moscow. The Ministry of Defence (MOD) wrote: ‘Membership of NATO might make it easier for the Republic of Cyprus and possibly for the Greeks and Turks to cause political embarrassment should the United Kingdom wish to use the bases […] for national ends outside Cyprus […] The access of the Cypriot Government to NATO plans and documents would present a serious security risk, particularly in view of the strength of the Cypriot Communist Party. […] The Chiefs of Staff, therefore, feel most strongly that, from the military point of view, it would be a grave disadvantage to admit Cyprus to NATO.’2 In short, Cyprus was considered unreliable.

As is well known, the unworkable constitution (described as such by the Foreign Office and even by David Hannay, the Annan reunification plan’s PR man), resulted in chaos and civil strife: in January 1964, during the chaos caused by the Foreign Office’s help and encouragement to President Makarios to introduce a ‘thirteen point plan’ to solve Cyprus’ problems, British Prime Minister Douglas-Home told the Cabinet: ‘If the Turks invade or if we are seriously prevented from fulfilling our political role, we have made it quite clear that we will retire into base.’3 Put more simply, Britain had never had any intention of upholding the Treaty of Guarantee.

In July of the same year, the Foreign Office wrote: ‘The Americans have made it quite clear that there would be no question of using the 6th Fleet to prevent any possible Turkish invasion […] We have all along made it clear to the United Nations that we could not agree to UNFICYP’s being used for the purpose of repelling external intervention, and the standing orders to our troops outside UNFYCYP are to withdraw to the sovereign base areas immediately any such intervention takes place.’4

It was mainly thanks to Moscow and President Makarios that in 1964 a Turkish invasion and/or the island being divided between Greece and Turkey was prevented. Such a solution would have strengthened NATO, since Cyprus would no longer exist other than as a part of NATO members Greece and Turkey. Moscow had issued the following statement: ‘The Soviet Government hereby states that if there is an armed foreign invasion of Cypriot territory, the Soviet Union will help the Republic of Cyprus to defend its freedom and independence against foreign intervention.’5

Privately, Britain, realising the unworkability of the 1960 treaties, was embarrassed, and wished to relieve itself of the whole problem. The following gives us the backstage truth: ‘The bases and retained sites, and their usefulness to us, depend in large measure on Greek Cypriot co-operation and at least acquiescence. A ‘Guantanamo’6 position is out of the question. Their future therefore must depend on the extent to which we can retain Greek and/or Cypriot goodwill and counter USSR and UAR pressures. There seems little doubt, however, that in the long term, our sovereign rights in the SBA’s will be considered increasingly irksome by the Greek Cypriots and will be regarded as increasingly anachronistic by world public opinion.7

Following the Turkish invasion ten years later, Britain tried to give up its bases: ‘British strategic interests in Cyprus are now minimal. Cyprus has never figured in NATO strategy and our bases there have no direct NATO role. The strategic value of Cyprus to us has declined sharply since our virtual withdrawal from east of Suez. This will remain the case when the Suez Canal has reopened.8

A Cabinet paper concluded: ‘Our policy should continue to be one of complete withdrawal of our military presence on Cyprus as soon as feasible. […] In the circumstances I think that we should make the Americans aware of our growing difficulty in continuing to provide a military presence in Cyprus while sustaining our main contribution to NATO. […]9

Britain kept trying to give up the bases, but the enabler of the Turkish invasion, Henry Kissinger, did not allow Britain to give up its bases and listening posts, since that would have weakened NATO, and since Kissinger needed the bases because of the Arab-Israel dispute.10

Thus, by the end of 1980, in a private about-turn, Britain had completely succumbed to American pressure: ‘The benefits which we derive from the SBAs are of major significance and virtually irreplaceable. They are an essential contribution to the Anglo-American relationship. The Department have regularly considered with those concerned which circumstances in Cyprus are most conducive to our retaining unfettered use of our SBA facilities. On balance, the conclusion is that an early ‘solution’ might not help (since pressures against the SBAs might then build up), just as breakdown and return to strife would not, and that our interests are best served by continuing movement towards a solution – without the early prospect of arrival [author’s italics]11.

And so it is today: Cyprus is a de facto NATO territory. A truly independent, sovereign and united Cyprus is an anathema to the U.S. and Britain, since such a scenario would afford Russia the hypothetical opportunity to increase its influence in the Eastern Mediterranean.

From our partner RIAC

[1] Ministry of Defence paper JP (59) 163, I January 1960, BNA DEFE 13/99/MO/5/1/5, in Mallinson, William, Cyprus, a Modern History, I.B. Tauris (now Bloomsbury), London and New York, 2005, 2009, 2012, p.49.

[2] Ibid.

[3] Memorandum by Prime Minister, 2 January 1964, BNA CAB/129/116, in ibid, Mallinson, William, p.37.

[4] British Embassy, Washington, to Foreign Office, 7 July 1964, telegram 8541, BNA FO 371/174766, file C1205/2/G, in ibid.’, Mallinson, William, p. 37.

[5] Joseph, Joseph S., Cyprus, Ethnic Conflict and International Politics, St Martin’s Press, London and New York, 1997, p. 66.

[6] In 1964, Cuba cut off supplies to the American base at Guantanamo Bay, since the US refused to return it to Cuba, as a result of which the US took measures to make it self-sufficient.

[7] Briefing paper, 18 June 1964, BNA-DO/220/170, file MED 193/105/2, part A. Mallinson,William, Kissinger and the Invasion of Cyprus, p. 127.

[8] ‘British Interests in the Eastern Mediterranean’, draft paper, 11 April 1975, BNA-FCO 46/1248, file DPI/515/1.

[9] Cabinet paper, 29 September 1976, in op. cit. Mallinson, William, Kissinger and the Invasion of Cyprus, p.134.

[10] Mallinson, William, Britain and Cyprus: Key Themes and Documents, I.B. Tauris, London and New York, 2011, and Bloomsbury, London and New York, 2020, pp. 87-121.

[11] Fergusson to Foreign Minister’s Private Secretary, minute, 8 December 1980, BNA-FCO 9/2949, file WSC/023/1, part C.

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Belarus divorces from the Eastern Partnership: A new challenge for the EU Neighborhood Policy

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The Eastern Partnership (EaP) is the Eastern dimension of the EU Neighborhood Policy adopted back in 2009 aimed at deepening relations between Brussels and six Eastern European partners – Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine. The EaP has been regarded as a strategic initiative based on mutual interests and common values with a goal of strengthening political and economic relations with those countries, helping them enhance their institutional capacity through sustainable reforms. While increasing stability and paving the way for the sustainable development of those societies, the EU’s overall goal has been to secure its Eastern borders.

Since the very beginning the EaP has been suspiciously viewed by Russia as an attempt of expansion of the sphere of influence and as a first step of EU membership of these countries. Russians point to the EU and NATO ambitious expansion eastward as the main reason for complicated relations and in this context the EaP has been regarded with traditional fears and paranoic perceptions. The Russian hard power approach causes serious problems for the EaP which fails to mitigate security concerns of partner countries and to come up with serious initiatives for conflict settlement. Being a laggard in terms of soft power, the Russian ruling elite has continuously used all hard power foreign policy instruments at its disposal trying to undermine the coherence of the initiative. And the very recent démarche of Belarus to withdraw from the EaP should be seen in this context of confrontation.

On 28th of June, the ministry of foreign affairs of Belarus announced a decision to halt its membership in the EaP as a response to the EU sanctions imposed on Minsk accompanied by the recalling ambassadors from both sides. Actually, this isn’t the first case of the EaP walkout blackmailed by Lukashenko. The first escape was attempted in September-October 2011, but the difficulties were soon resolved and Lukashenko revised his decision. This time situation seems very complicated and these far-reaching tensions may have tough consequences for Lukashenko’s regime. This new group of sectoral sanctions which target banking, oil, telecommunication spheres and also ban the export of potash, is a harsh response from the EU against Lukashneko’s scandalous hijacking activity in May to detain a Belarusian opposition journalist and blogger Roman Protasevich.

Lukashenko’s administration not only challenges the EU Neighborhood Policy and shows no retreat, but also goes forward escalating the situation. Minsk takes high risks freezing the Readmission Agreement signed by the EU. This document is a legal basis for bilateral cooperation aimed at struggling against irregular migration flows. It’s not a secret that the territory of Belarus has been used for illegal migration for the groups from the Middle East to penetrate into neighboring EU member states such as Poland, Lithuania and Latvia. Moreover, Belarus territory has served as a transit route for smuggling circles going from East to West and vice versa.  And now closing eyes on all these channels, Minsk hopes to increase the bargaining power vis-à-vis Brussels. However, given the Western reactions, it seems that this time the EU is resolute.

Despite the fact that Charles Michel, the President of the EU Council, described this withdrawal as “another step backwards” and even threatened that “this will escalate tensions having clear negative impacts”, the EU wants to continue working with the Belarusian society  as Josep Borrel stated. The EU’s determination to keep the bridges alive with the Belarusian people, in spite of Lukashneko’s radical stance, is aimed at preventing further isolationism of Minsk which would benefit only Russia.

In contrast to the increasing level of tensions with the EU, the Russian authorities continue to support Lukasheno’s administration, thus trying to deepen the gap and to bring Belarus under their total influence. Russia uses Belarus in its chessboard with the EU and the USA in Eastern Europe. Last year’s fraud elections and brutal crackdown by Lukashenko left him alone with the only source of power stemming from the Kremlin. Thus the withdrawal from the EaP should be understood not only as a convulsion of the Belarusian authorities in response to the sanctions, but also Russia’s employment of the Belarus card to respond to the recent joint statement of the EU-US summit in Brussels, when both parties declared their intention to stand with the people of Belarus, supporting their demands for human rights and democracy simultaneously criticising Lukashenko’s regime and his reckless political behavior and also criticising Russian’s unacceptable behavior.

So, Lukashenko’s step to quit the EaP can be seen as a well-calculated adulatory sign towards Moscow sacrificing the last remnants of sovereignty in order to receive financial and political lifebuoy amid the increasing crisis in the result of sanctions.  And the recent visit of N. Patrushev, the Secretary of the Security Council of Russia, to Minsk right after the withdrawal decision shows Russian inclination to strike while the iron is hot and to abuse the vulnerable situation of Belarus. Patrushev stated that the ultimate goal of foreign powers is to change the power in Belarus and he suggested instead of focusing on internal issues, to bring their forces together against external threats as their influence affects internal developments. For this reason, deeper integration of security and military services of both countries are on the table.

The reaction of opposition leader S. Tikhanovskaya was very rough, stating that this suspension will cut the opportunities of ordinary citizens who benefit from the political and economic outcomes of the EaP. Moreover, she claims that Lukashenko doesn’t have a right to represent Belarus since August 2020 and his decisions don’t have legal consequences for Belarus. This kind of approach is shared by the leadership of Lithuania too, whose president and minister of foreign affairs not only refuse to recognize Lukashenko as a legitimate president, but also highlight the role of the Kremlin in supporting the dictatorial power of Lukashenko in exchange for decreasing sovereignty.

The blackmail of Lukashenko to challenge the EU Eastern Neighborhood Policy  in order to have the sanctions lifted may bring about such kind of precedents with other partnering countries as well. First of all, this concerns Azerbaijan which continues to face serious problems related with human rights, freedom of expression, the problem of Prisoners of War and other traits of authoritarian power. It’s well-known that  human rights issues have been the underwater stones in the EU and Azerbaijan relations and they continue to pose new challenges for Aliyev’s non-democratice regime. Another weak ring of the EaP chain is Armenia. Even though reelected N. Pashinyan is eager to pursue a balanced foreign policy, post-war Armenia still faces serious limitations given its vulnerable dependence on Russia. Besides, Pashinyan’s main rival and the former President R. Kocharyan, whose alliance will be the second largest faction in the newly elected Parliament has recently stated that this new parliament can last up to one and half years and nobody can exclude the possibility of new snap elections. His pro-Russian attitude and anti-Western stance are well-known and in case he becomes a prime-minister, there is no guarantee that he will follow the path of Lukashenko. 

Therefore  the statement of the Austrian MFA, that ”we cannot leave South Caucasus to others” during the  recent official visit of the Austrian, Romanian and Latvian MFA under the mandate of the EU High Representative to the South Caucasus, reminds  about the EU presence in the region and also the fact that the ‘normative power’ can be a source of balance and a status quo changer.

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Anti-Macron protests underline classism, as corona protesters and gilets jaune join forces

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photo: Alaattin Doğru - Anadolu Agency

I get it. People in France are fed up with the Covid lockdowns and that’s why they are protesting against the new tightening of the Covid rules. But there is much more to the story.

The new anti-Covid rules by French President Macron came in the middle of the Cannes Film Festival where the rich and famous come out to play for 10 days at the French Reviera. I was there, too, in fact when the new set of rules angered so many ordinary French people. But guess what — the rules didn’t apply to us, those gathered for the Cannes red carpets and parties. Celebrities did not have to wear masks on the red carpet. I did not have to put on a mask at the red carpets. I was not checked even once on the mandatory Covid tests which we took every 2 days anyways. No one at the Cannes red carpets, parties or fashion shows was looking at Covid tests at the entrance, and I attended not one or two things. That’s at the time when the rest of France was boiling. Yes, we were treated differently as the Cannes crowd. That was obvious.

Don’t get me wrong — spending tens of thousands of euros to drink champaigne, walk red carpets and hang out with actors, models, designers and influencers is great. But I couldn’t help but notice that the Cannes elite was being held to a very different standard in comparisson to the ordinary French public. Macron exempted the Cannes crowd from the new rules and that smells of classism and elitism. I can see why the gillets gaune, which I wrote about in my book Trump, European security and Turkey (2020), are angry and want to resume their protests which were put an end to with the Covid lockdowns.

In fact, as soon as you move one or two streets away from the craze and snobbery of the Cannes Festival, you see a very different French picture. Actually, the most pleasant conversations I had in Cannes were with the guy that made my pizza at 2am, a couple of gillets jaune on the street, and the taxi driver who lives in Cannes. These were the pleasant, hard-working French people that represent France so much better than the snotty Cannes Film Festival organizers, the French police or the so-overrated snobbery at the Chopard events. 

From the pizza guy in Mozarella Street I learned that he works two jobs and sleeps 3 hours per night. That’s the reality for many normal French people. Yet, he was the nicest and coolest person I met in Cannes. Somehow I wished that he could trade places with some of the rest I met in Cannes who probably don’t deserve to have an easy life and should be taught a lesson. So I get it. I get the struggle of the gillets gaune and all those that are opposed to Macron’s policies. He is increasingly playing with the far right and that might as well mean that he is looking at his sunset. 

I also get the classism that persists in French society — it’s important to be aware of it even if you’re on the receiving end of a lot of glamor, bemefits and good things. All I can tell you is that next time I am in France, I am joining the gillet jaune protests. Now I really get it. 

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