Current Export Controls, Sanctions Not 'Enough,' Former BIS Head Says
The U.S. may need to create new, stronger tools other than its current sanctions and export controls to penalize foreign countries that violate international laws, said Nazak Nikakhtar, former acting undersecretary of the Bureau of Industry and Security. While Nikakhtar cautioned the U.S. against overusing trade restrictions, she also said they need to be bolstered because some foreign governments and companies are “easily” circumventing them.
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“I just don't think any administration has done enough,” Nikakhtar, now a trade lawyer at Wiley, said during a July 28 event hosted by the Federalist Society. She added that “I certainly don't think we did enough” during the Trump administration when she headed BIS in 2019. “We went heavy on the entity listings, but as everybody knows, it's easily circumventable, right?” she said. “You set up some new sort of supply-chain scheme, and you can get around this. So we don't have great tools.”
She said the U.S. often relies on sanctions authorities to punish human rights violations and other international crimes “because our [other] international tools fall short. We either don't have international laws that deal with really important, catastrophic things that are happening, or our trading partners are just defying the international rules and are not adhering to the international rules that have been established.” Nikakhtar said the U.S. “certainly” doesn’t want to overuse its sanctions tools but may need new options. “What else do we have? Do we need to create new tools?” she said. “That’s something that we should all be thinking about.”
The Biden administration is still undergoing a review of both its export controls and China policies within BIS (see 2105070017) and its sanctions regimes administered by the Treasury Department's Office of Foreign Assets Control. Adam Szubin, a lawyer and former senior Treasury official, said he participated in the Treasury’s recent roundtable with former sanctions officials (see 2107200024) and believes the agency’s review will result in a set of guiding principles rather than concrete changes to sanctions regimes.
“What I believe they're aiming at is not a review of U.S. foreign policy with respect to any of the countries we've sanctioned, [such as] Russia, China, Iran or Cuba,” he said. “I think this is a review of the instrument itself, the economic toolkit, and what would a doctrine look like to use it wisely, to use it effectively and to preserve its power for future administrations and for generations to come.”
He said the administration may commit to being more “strategic” in how it uses sanctions and will likely continue to lean heavily toward multilateralism. “We can't sanction everything we don't like in the world. We can't sanction every foreign government that is upsetting us over a failure to uphold civil or human rights,” Szubin said during the event. “We have to be judicious, and we have to be prioritized.”
Szubin said the sanctions review was likely spurred by concerns from industry and allies that the U.S. has been overusing its sanctions toolkit and other restrictions, including export controls and reviews by the Committee on Foreign Investment in the U.S. He specifically pointed to the Trump administration’s decision to pull out of the Iranian nuclear deal in 2018 and reimpose a host of sanctions against Iran, which caused some European countries to establish INSTEX, a payment system designed to legally circumvent U.S. sanctions and the U.S. dollar to trade with Iran (see 2002280029).
“Whatever your views are on the Iran nuclear deal,” Szubin said, “it is not a good thing when France and Germany, at the highest levels, are designing financial instruments to work around the dependency on the dollar.” But he also said the U.S.’s overuse of sanctions didn’t start with Trump. “This goes back to my years in government in the Bush and Obama administrations,” he said. “It’s been a steadily mounting level of concern that the U.S. is overusing these instruments.”