Trump’s Embrace of Sanctions Irks Allies and Prompts Efforts to Evade Measures
18 Nov 2019

President Trump’s increasing reliance on economic sanctions to solve foreign policy problems is fueling concern that the United States is abusing its financial power and prompting some governments to seek ways to evade American measures.

In recent months, the United States has increased pressure on Iran and Venezuela, dangled the removal of North Korean sanctions and, in only a few days, imposed, then reversed, sanctions against Turkey.

Now, American allies and adversaries alike are stepping up efforts to protect themselves in ways that could, over time, erode American power by undermining a key national security tool and diminishing the world’s reliance on the dollar as the global reserve currency.

In October, Turkey and Russia agreed to a new system for international transactions that would use their local currencies instead of the dollar, which President Vladimir V. Putin of Russia said in October is being employed by the Trump administration as a “political weapon.”

Russia has been holding similar talks with Iran and China about an alternative system that, according to Russian state media, could allow the countries to engage in transactions while evading the arm of United States sanctions. And the European Union moved ahead this year with developing an alternative system that would allow countries to bypass the existing infrastructure for international financial transactions.

Mr. Trump’s scattershot approach to sanctions was on display this week with the visit of President Recep Tayyip Erdogan of Turkey to the White House. In October, Mr. Trump threatened to “destroy” Turkey’s economy after its military incursion into Syria. He then withdrew the sanctions after brokering a cease-fire. Now, officials are considering new measures because of Turkey’s purchase of a missile defense system from Russia.

“They are throwing sanctions at everybody for everything,” said Richard Nephew, a scholar at Columbia University’s Center on Global Energy Policy and the author of “The Art of Sanctions.” “The administration seems to think that sanctions are a surrogate for foreign policy.”

Mr. Trump’s use of sanctions has far exceeded those of his predecessors’, both in scale and the scope of his targets. In 2018, the Trump administration added about 1,500 individuals and entities to its sanctions list, a total that is 50 percent more than in any prior year, according to a tally from the law firm Gibson Dunn. Through late October of this year, another 606 sanctions designations had been added.

The United States has steadily broadened its use of sanctions since the Sept. 11, 2001, attacks, using its place at the center of the global financial system to stifle the economies of adversaries and disrupt the flow of illicit funds to terrorist organizations. Mr. Trump has expanded the punitive measures, targeting them at NATO allies like Turkey and expanding the use of secondary sanctions against countries and companies that continue to do business with adversaries like Iran.

Experts warn that the administration’s haphazard use of tools that freeze assets and cut people and countries off from the world’s banking system could undermine the entire program by spawning new workarounds.

“Sanctions alone will never solve your problem unless they are used in tandem with other tools,” said Matthew Levitt, a fellow at the Washington Institute for Near East Policy. “We tend now to be seeing sanctions as the nonkinetic, nonmilitary tool for everything.”

Mr. Levitt, who served as deputy assistant secretary for intelligence and analysis at the Treasury Department during the George W. Bush administration, added, “I do worry about a time when overreliance on sanctions, absent the use of complementary diplomatic and other tools, could undermine the U.S. position in the world economy.”

There have been early signs of such a shift.

Over the past year, the European Union has rolled out the Instrument in Support of Trade Exchanges, or INSTEX, as an alternative to the Swift financial messaging service, which facilitates the majority of international financial transactions. It would allow European countries to complete transactions with Iran through what is essentially a bartering system. While Europe has said that it would use this only for sales of humanitarian goods, which are acceptable, the United States has expressed concern that the payments vehicle could be used to evade sanctions.

Venezuela and North Korea have also increased their interest in cryptocurrencies, which could be used to circumvent the traditional banking system, according Peter Harrell, a sanctions expert at the Center for a New American Security. And Russia has shifted billions of dollars’ worth of sovereign reserves, which are held in American banks, into gold as a way to reduce the potential effect of additional sanctions.

“The question is are we now reaching the point where both adversaries and allies will invest in the kinds of tools that will let them fundamentally get out from under our leverage,” Mr. Harrell said. “We are seeing signs that they are pursuing these investments.”

By Alan Rappeport and Katie Rogers, The New York Times, 15 November 2019

Read more at The New York Times

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