Ukraine Symposium – The Impact of Sanctions on Humanitarian Aid

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| Jan 27, 2023

Humanitarian aid

The war in Ukraine highlights how humanitarian need and restrictive trade measures typically emerge simultaneously in times of conflict—and how the latter can interfere with the ability of humanitarian organizations to provide principled humanitarian assistance. This post addresses the complex legal framework of US trade restrictions and financial sanctions that have the greatest impact on humanitarian action in Ukraine. It concludes with several recommendations to reduce the impact of humanitarian activities in situations of armed conflict.

Sanctions: A Tool of First Resort

Over recent decades, restrictive economic measures have become a “tool of first resort” in US foreign policy. In part, this is the result of broad congressional delegation to the president to declare national emergencies and subsequently impose trade restrictions and economic sanctions to achieve foreign policy aims. The United States has deployed such measures to achieve foreign policy goals related to counterterrorism, non-proliferation, human rights, anti-corruption, and other aims. Critically, these restrictive economic measures have also become key US foreign policy tools to dissuade acts of aggression, such as the Russian invasion of Ukraine.

The United States leverages a variety of restrictive economic measures to achieve its policy goals. These tools include financial sanctions, arms embargoes, and restrictions on the export and import of certain items. Financial sanctions are particularly impactful. The United States leverages its position in the global economy by limiting economic activity in two ways: by restricting virtually all financial and trade activity in a territory (known as comprehensive sanctions) or by freezing the assets of and restricting dealings with specific entities and individuals (known as targeted sanctions).

Comprehensive sanctions and targeted sanctions that restrict financial and other transactions with governing entities or critical service providers (i.e., banks) typically have the greatest impact on humanitarian action. In addition to financial sanctions, certain export controls administered by the Department of Commerce can negatively impact humanitarian assistance by prohibiting the export of US-controlled items essential to humanitarian activities. When deployed in the context of armed conflict, as in Ukraine, these trade restrictions can produce negative collateral consequences for humanitarian operations.

The US government is committed to mitigating the impact of restrictive measures on humanitarian efforts. One effective method deployed by the US government is to issue humanitarian authorizations permitting activities that would otherwise be prohibited by US sanctions and export control laws and regulations.

The Office of Foreign Assets Control (“OFAC”) within the Department of the Treasury administers two types of authorizations: “general licenses” and “specific licenses.” General licenses are public authorizations available to all persons or entities meeting the conditions in OFAC-administered regulations. Specific licenses are authorizations issued on a case-by-case basis to a specific person or entity in response to a written application. The Bureau of Industry and Security (“BIS”) within the Department of Commerce administers license exceptions within the Export Administration Regulations (“EAR”). BIS also has the authority to issue licenses to specific parties. These authorizations allow for activities that align with U.S. foreign policy to be carried out in regions subject to restrictive measures, including certain legitimate humanitarian activities.

Certain Trade Restrictions and Economic Sanctions in Ukraine

The United States enacts restrictive economic measures to “disrupt, deter, and prevent actions that undermine U.S. national security.” In Ukraine, the United States seeks to disrupt the invasion by isolating the Russian economy; to deter additional threats, such as the appropriation of Ukrainian assets and territory, by restricting targeted parties from accessing funds and equipment; and to prevent war financing by prohibiting dealings with certain Russian banking sector assets. These restrictions can have profound collateral impacts on humanitarian action. Below, this piece sets out recent measures related to the Ukraine-Russia conflict that have the greatest impacts.

Donetsk People’s Republic & Luhansk People’s Republic

In 2014, separatist groups mobilized against the Ukrainian government and sought to control areas in two industrial oblasts: Luhansk and Donetsk. The United States responded by issuing E.O. 13660, which declared a national emergency arising from the US foreign policy and national security threat posed, in part, by persons who “undermine democratic processes and institutions in Ukraine; threaten its peace, security, stability, sovereignty, and territorial integrity; and contribute to the misappropriation of its assets.”

In a series of Executive Orders, the United States enacted a framework to impose targeted sanctions on certain individuals and entities engaged in these activities (see E.O. 13660,  E.O. 13661, and E.O. 13662). Among the targeted Specially Designated Nationals (“SDN”) were two Russian-backed political entities: the so-called Donetsk People’s Republic (“DNR”) and Luhansk People’s Republic (“LNR”). Pursuant to E.O. 13660, the assets of these entities were blocked and US persons were prohibited from dealing with them unless authorized by OFAC. At this point, the political entities themselves were targeted, but not the regions they sought to control.

In February 2022, the Russia-Ukraine conflict escalated dramatically when Russia recognized the so-called LNR and DNR as independent States and shortly thereafter launched a full-scale invasion of Ukraine. In response to the “purported recognition” of these two regions, the United States enacted E.O. 14065, which prohibited virtually all activities and transactions in the so-called LNR and DNR. These comprehensive sanctions prohibit persons subject to US jurisdiction from engaging in virtually all activities and transactions in these two regions. This measure was similar to the comprehensive sanctions previously imposed on Crimea in response to the Russian annexation of the peninsula in 2014 (see E.O. 13685).

OFAC administers general licenses that authorize certain humanitarian action in the so-called LNR and DNR regions. These general licenses include authorizations for the official business of certain international organizations and entities, including the United Nations and the International Committee of the Red Cross (General License 20; E.O. 14065); certain transactions in support of nongovernmental organizations’ activities (General License 23; E.O. 14065); and the export or reexport of certain agricultural commodities, medicine, and medical devices and supplies (General License 18; E.O. 14065).

The Department of Commerce implemented these sanctions by enacting an embargo on the so-called LNR and DNR regions, which is administered by BIS through the EAR (15 CFR § 746.6). The embargo prohibits all exports, reexports, or transfers of items subject to US jurisdiction under the EAR to or within the so-called LNR and DNR regions, other than certain food and medicine or “software necessary to enable the exchange of personal communications over the internet.” With respect to the so-called LNR and DNR regions, BIS administers a license exception for certain humanitarian donations made by U.S. charitable organizations (see 15 CFR § 746.6(c)(3); 15 CFR § 740.12(b)).

Additional Measures

Also in response to the full-scale Russian invasion, the United States imposed targeted sanctions on entities and persons involved in Russian “harmful foreign activities” pursuant to E.O. 14024. Despite the adoption of E.O. 14024 before the invasion of Ukraine, most new designations related to the Russia-Ukraine conflict in 2022 were imposed using this authority.

Over 1,000 persons and entities were targeted for sanctions pursuant to E.O. 14024 in 2022. Unless authorized by OFAC, humanitarian organizations must take care to avoid dealing with sanctioned individuals or entities (and in certain cases those entities owned 50 percent or more by blocked parties), including when providing aid. This can be particularly burdensome for humanitarian organizations operating in areas with many sanctioned individuals, such as in Russia and the so-called LNR and DNR regions of Ukraine.

Key Russian financial institutions and private banks were among the parties targeted under E.O. 14024. (See e.g., designations targeting Sberbank and Alfa-Bank pursuant to E.O. 14024; see also Directive 4 of E.O. 14024, prohibiting virtually all transactions “involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation”). Such restrictions on financial institutions can interfere with humanitarian operations by leaving organizations with limited options for transferring money into regions that require humanitarian assistance or preventing their staff from engaging in normal business transactions.

To address these concerns, OFAC administers exceptions and general licenses that facilitate certain legitimate humanitarian activities. For example, E.O. 14024 contains a carveout for “transactions for the conduct of the official business of the Federal Government or the United Nations” (see Section 9, E.O. 14024). Likewise, among other helpful authorizations, General License 5 authorizes all transactions that would otherwise be prohibited by E.O. 14024 for the official business of certain international organizations and entities, including the International Committee of the Red Cross and the International Federation of Red Cross and Red Crescent Societies.

Humanitarian Impact of Restrictive Measures

As illustrated above, certain regions of Ukraine are subject to comprehensive territorial-based sanctions and export embargoes. Two governing entities that control territory—the LNR and DNR—are targeted as SDNs. Moreover, certain Russian financial institutions and service providers important to reaching regions in need of humanitarian action are also subject to economic sanctions. Even where authorizations for humanitarian activities exist, these restrictions can still have a profound adverse impact on principled humanitarian action in a number of ways.

International humanitarian law (“IHL”) seeks to ensure humanitarian action and medical care for civilians caught in armed conflict. However, sanctions and other restrictive measures can make it impossible for humanitarian organizations to operate in certain jurisdictions, such as Ukraine, in accordance with the principles of impartiality, neutrality, and independence.

Humanitarian operations in heavily-sanctioned regions can require navigating complex and overlapping regulatory regimes, which can interfere with the ability of organizations to swiftly address pressing humanitarian needs. In Ukraine, humanitarian organizations must understand and comply with regulations administered by both OFAC and BIS. They also must take care to comply with laws and regulations enacted by other countries. Often, authorizations provided by a single authority may not be sufficient for the activities a humanitarian organization wishes to undertake.

For example, a non-US humanitarian organization seeking to repair water and sanitation infrastructure in the LNR (and engaging in related transactions otherwise prohibited under US sanctions, such as the transfer of funds through US banks) may benefit from an OFAC authorization (see e.g., General License 23, Executive Order 14065). However, the non-US organization would not benefit from the BIS license exception for humanitarian donations (see 15 CFR § 740.12(b)(3)) and therefore may still need to apply to receive licensing to export certain necessary materials, such as US-origin water pumps, seals, or valves. Moreover, non-US humanitarian organizations bringing other items essential for humanitarian action (such as navigation systems, computers, or radios) into the sanctioned regions could likewise present compliance issues if those items are subject to US jurisdiction. In such cases, obtaining specific approval from BIS can often take months and impede a timely humanitarian response. Navigating this compliance burden also leads to increased overhead and legal costs, which can divert much-needed funding from operations.

Even where adequate humanitarian authorizations are in place, financial institutions and commercial actors may decline to assume the legal risk of dealing in heavily-sanctioned jurisdictions, hampering relief efforts. This practice is known as “de-risking” and can impede or delay humanitarian operations.

Moreover, donor policies can exacerbate the impact of restrictive measures. Encouraged practices, such as beneficiary vetting, are frequently adopted as donor requirements. In some cases, humanitarian organizations report that cash-based assistance programs were discontinued in regions where donors required beneficiary vetting. These requirements can prevent humanitarian actors from operating with impartiality and can negatively affect aid access and acceptance.

Similarly, to manage their own legal risk, humanitarian organizations may simply choose not to serve populations in heavily-sanctioned jurisdictions. While unrelated to the Ukraine-Russia conflict, the Harvard Law School Program on International Law and Armed Conflict undertook an illustrative empirical survey on the impact of counterterrorism measures (including sanctions) on humanitarian action. The survey, which was distributed to humanitarian actors, found that “69 percent of survey respondents indicated that counterterrorism measures had chilled or curtailed their work,” while “38 percent of respondents stated that counterterrorism laws had caused their organization to forego, alter, or cease activities and programming.”

These adverse impacts may dissuade humanitarian organizations from operating in heavily-sanctioned territories altogether. This chilling effect on humanitarian action can “deprive people in need of humanitarian services and undermine the ability of humanitarian organizations to operate in an impartial manner.”

What Needs to be Done

Restrictive measures, such as trade restrictions and economic sanctions, are a critical and effective tool in US foreign policy. As the 2021 Sanctions Review recognized, “[a]t their core, sanctions allow U.S. policymakers to impose a material cost on adversaries to deter or disrupt behavior that undermines U.S. national security and signal a clear policy stance.”

Despite the natural tension between broad restrictive measures and humanitarian action, the Biden administration strives to harmonize its use of such measures with its humanitarian policy objectives. To achieve this goal, the Department of the Treasury resolved to “expand sanctions exceptions to support the flow of legitimate humanitarian goods and assistance and provide clear guidance” on the scope of sanctions authorities. The Treasury asserted that “this effort is worthy of significant time and effort to ensure the world understands that the provision of legitimate humanitarian assistance reflects American values.” The various general licenses issued by the Treasury for humanitarian action in Ukraine represents major progress towards this goal. I propose several additional measures that would immediately advance this priority and help facilitate legitimate humanitarian action in Ukraine.

First, the Departments of Commerce and the Treasury should seek to mitigate the regulatory burden on humanitarian organizations by harmonizing authorizations across their respective jurisdictions. The need to obtain approval from both agencies to engage in certain activities can interfere with timely humanitarian action. To resolve this issue, and avoid duplication, the Department of Commerce should provide a license exception for any humanitarian activities authorized by OFAC. This type of regulatory action has precedent (see e.g., 15 CFR 746.7(a)(2)).

Second, OFAC should expand existing general licenses to encompass US contractors undertaking humanitarian action on behalf of our allies. The American business community can be a powerful diplomatic asset, but in many heavily-sanctioned jurisdictions (including in the so-called LNR and DNR) current restrictive measures would prevent US companies from providing certain humanitarian services on behalf of allied nations without a specific license. This is the case even where an authorization would be available if the same work was undertaken on behalf of the US federal government or by a nongovernmental organization. Authorizing such activities by American contractors through general licenses would improve humanitarian coordination and foster goodwill with our allies. Further tailoring sanctions authorizations will also maintain the competitiveness of U.S. businesses abroad.

Third, given the complex and overlapping issues arising from restrictive economic measures, the administration should also facilitate ways for humanitarian organizations to express their concerns or questions without raising their risk of being targeted for anti-compliance measures.

Finally, the administration should continue advocating for the financial community to allow authorized transactions for humanitarian action. The Biden administration can do this by continuing to direct agencies to proactively provide financial institutions with clear guidance about existing authorizations.

Humanitarian organizations should be equipped to act decisively and quickly in response to humanitarian need. Sustained focus on the impact restrictive measures can have on humanitarian activities will help organizations gain the clarity to confidently engage in legitimate and authorized humanitarian activity in heavily-sanctioned jurisdictions.

Conclusion

The conflict in Ukraine demonstrates the often-simultaneous presence of humanitarian need and restrictive economic measures during times of war. It also illustrates how trade restrictions and sanctions can hinder the ability of humanitarian organizations to provide impartial assistance as foreseen by international law.

To effectively address the tension between restrictive measures and humanitarian needs, it is crucial for the United States to establish clear and consistent frameworks for neutral humanitarian access. This not only ensures legal availability for humanitarian action, but also allows humanitarian organizations to focus their resources on providing aid, rather than on navigating complicated regulations and processes. The Biden administration’s attention to this issue is commendable, but sustained focus on these issues will be important to fully address the complex challenges in this area.

Authors Note: The information provided in this blog post does not, and is not intended to, constitute legal advice. All information included in this blog post is intended for general informational purposes only.  The author recommends that any humanitarian organizations (or other entities) that have questions about specific operations or programs in Ukraine engage a law firm or call the OFAC hotline for guidance.

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Alexandra Francis is a Visiting Fellow of Practice at the Oxford Institute for Ethics, Law, and Armed Conflict at the Blavatnik School of Government.

 

Photo credit: UNICEF Ukraine

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