US SANCTIONS: HOW DO THEY WORK?

The United States has imposed “unprecedented” sanctions on Russia in response to the country’s invasion of Ukraine.[1]Sanctions are a coercive foreign policy tool that can take the form of “trade embargoes; restrictions on particular exports or imports; denial of foreign assistance, loans, and investments; blocking of foreign assets under U.S. jurisdiction; and prohibition on economic transactions that involve U.S. citizens or businesses” and more.[2]

Many of the current sanctions on Russia stem from an executive order (“E.O.”) issued by President Biden in April of 2021. This E.O. specifies that the enumerated sanctions apply “except to the extent provided by statutes . . . directives, or licenses that may be issued pursuant to this order. . . .”[3] Thus, since April 2021, federal agencies have issued various directives and licenses pursuant to the E.O., amending the sanctions as Russia ramped up hostilities towards neighboring Ukraine. While directives generally impose affirmative duties (e.g., “Do not do business with sanctioned parties.”), general licenses permit certain activities “for set periods of time or for specific purposes, such as humanitarian activities.”[4]

Notably, General License No. 8A, which authorized some energy transactions with Russia and was signed into effect on February 28, 2022,[5] has since been trumped by a new E.O. announced about a week later. [6] This new E.O., announced March 8, prohibits anyone in the U.S. from importing Russian oil, natural gas, or coal products.[7] However, to accommodate this rapid policy change, the Treasury Department issued yet another license, General License No. 16, which authorizes the importation of otherwise prohibited resources, so long as they were contracted for prior to March 8, 2022 and will be delivered before April 22, 2022.[8]

WHAT GIVES THE PRESIDENT SUCH BROAD POWER TO IMPOSE SANCTIONS?

The president’s authority to set foreign policy is rooted in Article II of the Constitution.[9] Article II lays out, among other things, the president’s role as “commander in chief,” authority to make treaties, and power to appoint ambassadors.[10]The International Emergency Economic Powers Act (“IEEPA”), the Act that expressly empowers the president to impose sanctions, draws from these Article II powers.[11]

To impose sanctions pursuant to IEEPA, the president does not need permission from Congress.[12] The justifications frequently cited for this unilateral authority include national security and foreign policy interests.[13] In the words of the Supreme Court, in the “international field,” the president has “a degree of discretion and freedom from statutory restriction which would not be admissible were domestic affairs alone involved.”[14] 

Procedurally, to unilaterally impose sanctions, the president must first declare that there is a national emergency that poses an “unusual and extraordinary threat, which has its source in whole or substantial part outside the United States. . . .”[15]The president must then submit the emergency declaration to Congress and publish it in the Federal Register.[16] Next, the president chooses which of the specific actions enumerated in the IEEPA to take.[17] The president may “investigate, regulate, or prohibit . . . any transactions in foreign exchange, transfers of credit or payments between, by, through, or to any banking institution . . . [and] the importing or exporting of currency or securities . . . ”[18] In addition, the president may “. . . nullify, void, prevent or prohibit, any acquisition  . . . use, transfer, withdrawal, transportation, importation or exportation” of a foreign country or foreign national’s property, among other things.[19]

WHAT ABOUT CONGRESS?

Congress has some ability to limit the president’s unilateral imposition of sanctions. Foreign policy is, at its heart, the realm of the “political” branches of the federal government (the executive and legislative branches).[20] Through legislation, Congress has specified when the president may declare a national emergency and what kinds of sanctions the president may impose.[21] Further, Congress may choose to take the lead and ask – “or in some instances to require” – the president to take certain foreign policy action.[22] For example, “Congress has directed the president on numerous occasions to use IEEPA authorities to impose sanctions.”[23] However, “Congress has never attempted to terminate a national emergency invoking IEEPA,”[24] and it seems unlikely that Congress, faced with Russia’s aggression, would do so now.

Finally, Congress also has the power to initiate sanctions on its own, through the legislative process.[25] When Congress successfully passes legislation imposing sanctions, the president “is to follow the requirements of the relevant legislation.”[26] However, the current sanctions on Russia have been imposed by the executive branch unilaterally, as “Congress tried and failed to put together a sanctions bill. It fell apart after weeks of negotiations . . . .”[27] Instead, the Senate has merely managed to pass a resolution reaffirming U.S. support for a “secure, democratic, and independent Ukraine.”[28]

FUNCTIONALLY, HOW DO U.S. SANCTIONS WORK?

Once announced, executive agencies implement and administer sanctions.[29] For example, the Treasury has frozen the assets of some Russian oligarchs.[30] These sanctions disconnect oligarchs from the U.S. financial system.[31] Freezing assets via the Treasury Department is an efficient way to immediately impact listed parties.[32] In the alternative, the U.S. could seize an oligarch’s U.S. assets. However, the path to seizure is much bumpier than imposing sanctions.[33] The Department of Justice has the authority to seize assets, but before doing so, the government must prove that assets are connected to an illegal action.[34] (E.g., The oligarch purchased the yacht with the proceeds of corruption.[35])

PROS AND CONS OF HOW U.S. SANCTIONS OPERATE

When the president or Congress impose sanctions, they do not have to prove that the asset owner did anything illegal.[36]For this reason, the sanctions process is clearly lacking in due process.[37] Sanctioned parties can appeal, but the appeal happens after sanctions are in place.[38] Put plainly, “Sanctions are not an instrument of the court system. They’re extrajudicial. They’re a blunt political tool.”[39] However, the upside of sanctions is that the president has the authority to impose and lift them quickly, allowing U.S. foreign policy to keep time with world events.[40] While Congress’s efforts to sanction Russia stagnated, President Biden acted swiftly – albeit unilaterally – to address a foreign policy crisis.

[1] Press Release, United States Treasury Department, U.S. Treasury Announces Unprecedented & Expansive Sanctions Against Russia, Imposing Swift and Severe Economic Costs (Feb. 24, 2022), https://home.treasury.gov/news/press-releases/jy0608.

[2] Dianne E. Rennack & Rebecca M. Nelson, Cong. Rsch. Serv., IF11730, Economic Sanctions: Overview for the 117th Congress (Jan. 15, 2021), https://sgp.fas.org/crs/row/IF11730.pdf.

[3] Exec. Order No. 14,024, 86 Fed. Reg. 20250 § 1(d) (Apr. 15, 2021).

[4] Giovanna M. Cinelli et al., Update: United States Expands Sanctions, Export Controls in Response to Russian Operations in Ukraine, Morgan Lewis (Feb. 28, 2022), https://www.morganlewis.com/pubs/2022/02/update-united-states-expands-sanctions-export-controls-in-response-to-russian-operations-in-ukraine.

[5] Treas.: Off. Foreign Assets Control, Gen. License No. 8a, Authorizing Transactions Related to Energy, Pursuant to Executive Order 14024 (Feb. 28, 2022), https://home.treasury.gov/system/files/126/russia_gl8a_1.pdf.

[6] Michael D. Shear, Biden Bans Oil Imports From Russia, Calling It a ‘Blow to Putin’s War Machine,’ N.Y. Times (Mar. 8, 2022), https://www.nytimes.com/2022/03/08/us/politics/biden-oil-ban-russia-ukraine-putin.html?campaign_id=9&emc=edit_nn_20220309&instance_id=55226&nl=the-morning&regi_id=96984354&segment_id=85016&te=1&user_id=5ab655414b9d119322bf8d5a352b2cb7; see also The White House, Fact Sheet: United States Bans Imports of Russian Oil, Liquefied Natural Gas, and Coal (Mar. 8, 2022), https://www.whitehouse.gov/briefing-room/statements-releases/2022/03/08/fact-sheet-united-states-bans-imports-of-russian-oil-liquefied-natural-gas-and-coal/.

[7] Shear, supra note 6.

[8] Treas.: Off. Foreign Assets Control, Gen. License No. 16, Authorizing Transactions Related to Certain Imports Prohibited by Executive Order of March 8, 2022 Prohibiting Certain Imports and New Investments With Respect to Continued Russian Federation Efforts to Undermine the Sovereignty and Territorial Integrity of Ukraine (Mar. 8, 2022) (to be codified at 31 C.F.R. pt. 587), https://home.treasury.gov/system/files/126/russia_gl16.pdf.

[9] Jonathan Masters, U.S. Foreign Policy Powers: Congress and the President, Council on Foreign Rel. (Mar. 2, 2017), https://www.cfr.org/backgrounder/us-foreign-policy-powers-congress-and-president.

[10] U.S. Const. art. II, § 2.

[11] Andrew Boyle & Tim Lau, The President’s Extraordinary Sanctions Powers, Brennan Ctr. for Just. (July 20, 2021), https://www.brennancenter.org/our-work/research-reports/presidents-extraordinary-sanctions-powers.

[12] Dianne E. Rennack & Rebecca M. Nelson, supra note 2.

[13] Erika Beras, Sarah Gonzalez & Mary Childs, Planet Money: Of Oligarchs, Oil and Rubles, NPR, at 16:55 (Mar. 4, 2022).

[14] United States v. Curtiss–Wright Export Corp., 299 U.S. 304, 320 (1936).

[15] Dianne E. Rennack & Rebecca M. Nelson, supra note 2 (quoting International Emergency Economic Powers Act, 50 U.S.C. § 1701(a) (2018)).

[16] National Emergencies Act, 50 U.S.C. § 1621(a) (2018); see also Dianne E. Rennack & Rebecca M. Nelson, supra note 2.

[17] International Emergency Economic Powers Act, 50 U.S.C. § 1701 et seq. (2018).

[18] Id. § 1702(a)(1)(A).

[19] Id. § 1702(a)(1)(B).

[20] Chicago & S. Air Lines v. Waterman S.S. Corp., 333 U.S. 103, 111 (1948) (“. . . foreign policy is political, not judicial. Such decisions are wholly confided by our Constitution to the political departments of the government, Executive and Legislative.”).

[21] Dianne E. Rennack & Rebecca M. Nelson, supra note 2.

[22] Id.

[23] Christopher A. Casey et al., Cong. Rsch. Serv., R45618, The International Emergency Economic

Powers Act: Origins, Evolution, and Use (updated July 14, 2020), https://sgp.fas.org/crs/natsec/R45618.pdf.  

[24] Id.

[25] Dianne E. Rennack & Rebecca M. Nelson, supra note 2.

[26] Id.

[27] Amber Phillips, How U.S. Sanctions Against Russia Work, Wash. Post (Feb. 22, 2022), https://www.washingtonpost.com/politics/2022/02/22/how-us-sanctions-against-russia-work/.

[28] A Resolution Supporting an Independent and Democratic Ukraine Against Any Further Russian Military Invasion, and for Other Purposes, S. Res.519, 117th Cong. (2022), https://www.congress.gov/bill/117th-congress/senate-resolution/519?q=%7B%22search%22%3A%5B%22russia+and+sanctions%22%2C%22russia%22%2C%22and%22%2C%22sanctions%22%5D%7D&s=8&r=1.

[29] Dianne E. Rennack & Rebecca M. Nelson, supra note 2.

[30] Erika Beras, Sarah Gonzalez & Mary Childs, supra note 13, at 15:55.

[31] Id. at 16:07.

[32] Id. at 16:15.

[33] Id.

[34] Id. at 14:55.

[35] Id.

[36] Id. at 17:10.

[37] See id. at 17:05.

[38] Id. at 18:15.

[39] Id. at 16:40.

[40] Phillips, supra note 27.