Platform Modernisation: What the US Treasury Sanctions Review Is All About – Modern Diplomacy

The US Treasury has released an overview of its sanctions policy. It outlines key principles for making the restrictive US measures more effective. The revision of the sanctions policy was announced at the beginning of Joe Biden’s presidential term. The new review can be considered one of the results of this work. At the same time, it is difficult to find signs of qualitative changes in the US administration’s approach to sanctions in the document. Rather, it is about upgrading an existing platform.
Sanctions are understood as economic and financial restrictions that make it possible to harm the enemies of the United States, prevent or hinder their actions, and send them a clear political signal. The text reproduces the usual “behavioural” understanding of sanctions. They are viewed as a means of influencing the behaviour of foreign players whose actions threaten the security or contradict the national interests of the United States. The review also defines the institutional structure of the sanctions policy. According to the document, it includes the Treasury, the State Department, and the National Security Council. The Treasury plays the role of the leading executor of the sanctions policy, and the State Department and the NSS determine the political direction of their application, despite the fact that the State Department itself is also responsible for the implementation of a number of sanctions programmes. This line also includes the Department of Justice, which uses coercive measures against violators of the US sanctions regime.
Interestingly, the Department of Commerce is not mentioned among the institutions. The review focuses only on a specific segment of the sanctions policy that is implemented by the Treasury. However, it is the Treasury that is currently at the forefront of the application of restrictive measures. A significant part of the executive orders of the President of the United States and sanctions laws imply blocking financial sanctions in the form of an asset freeze and a ban on transactions with individuals and organisations. Decrees and laws assign the application of such measures to the Treasury in cooperation with the Department of State and the Attorney General. Therefore, the institutional link mentioned in the review reflects the spirit and letter of a significant array of US regulations concerning sanctions. The Department of Commerce and its Bureau of Industry and Security are responsible for a different segment of the sanctions policy, which does not diminish its importance. Export controls can cause a lot of trouble for individual countries and companies.
Another notable part of the review concerns possible obstacles to the effective implementation of US sanctions. These include, among other things, the efforts of the opponents of the United States to change the global financial architecture, reducing the share of the dollar in the national settlements of both opponents and some allies of the United States.
Indeed, such major powers as Russia and China have seriously considered the risks of being involved in a global American-centric financial system.
The course towards the sovereignty of national financial systems and settlements with foreign countries is largely justified by the risk of sanctions.
Russia, for example, is vigorously pursuing the development of a National Payment System, as well as a Financial Messaging System. There has been a cautious but consistent policy of reducing the share of the dollar in external settlements. China, which has much greater economic potential, is building systems of “internal and external circulation”. Even the European Union has embarked on an increase in the role of the euro, taking into account the risk of secondary sanctions from “third countries”, which are often understood between the lines as the United States.
Digital currencies and new payment technologies also pose a threat to the effectiveness of sanctions. Moreover, here the players can be both large powers and many other states and non-state structures. It is interesting that digital currencies at a certain stage may present a common challenge to the United States, Russia, China, the EU and a number of other countries. After all, they can be used not only to circumvent sanctions, but also, for example, to finance terrorism or in money laundering. However, the review does not mention such common interests.
The text does propose measures to modernise the sanctions policy. The first one is to build sanctions into the broader context of US foreign policy. Sanctions are not important in and of themselves, but as part of a broader palette of policy instruments. The second measure is to strengthen interdepartmental coordination in the application of sanctions in parallel with increased coordination of US sanctions with the actions of American allies. The third measure is a more accurate calibration of sanctions in order to avoid humanitarian damage, as well as damage to American business. The fourth measure is to improve the enforceability and clarity of the sanctions policy. Here we can talk about both the legal uncertainty of some decrees and laws, and about an adequate understanding of the sanctions programmes on the part of business. Finally, fifth is the improvement and development of the Treasury-based sanctions apparatus, including investments in technology, staff training and infrastructure.
All these measures can hardly be called new. Experts have long recommended the use of sanctions in combination with other instruments, as well as improved inter-agency coordination. The coordination of sanctions with allies has escalated due to a number of unilateral steps taken by the Trump Administration, including withdrawal from the Iranian nuclear deal or sanctions against Nord Stream 2. However, the very importance of such coordination has not been questioned in the past and has even been reflected in American legislation (Iran). The need for a clearer understanding of sanctions policy has also been long overdue. Its relevance is illustrated, among other things, by the large number of unintentional violations of the US sanctions regime by American and foreign businesses. The problem of overcompliance is also relevant, when companies refuse transactions even when they are allowed. The reason is the fear of possible coercive measures by the US authorities. Finally, improving the sanctioning apparatus is also a long-standing topic. In particular, expanding the resources of the Administration in the application of sanctions was recommended by the US Audit Office in a 2019 report.
The US Treasury review suggests that no signs of an easing are foreseen for the key targets of US sanctions. At the same time, American business and its many foreign counterparties can benefit from the modernisation of the US sanctions policy. Legal certainty can reduce excess compliance as well as help avoid associated losses.
From our partner RIAC
How China’s zero covid strategy impacted its economy
RIAC Director of Programs, RIAC Member, Head of “Contemporary State” program at Valdai Discussion Club, RIAC member.
There is no roadblock in the way of improving Sino-US ties
An Underdeveloped Discipline: Open-Source Intelligence and How It Can Better Assist the U.S. Intelligence Community
The impact of Biden’s policies on China
The Snowbirds: An American Phenomenon
The levels and axes of the Chinese vision in practice to deal with Washington
Chinese political shift approach to Washington during Biden’s administration
China’s economy faces a number of challenges — specifically the spread of the covid19 pandemic and the country’s ambitious zero-covid approach (which has resulted in severe lockdowns) and a grave real estate crisis arising out of the crackdown on the property market.
The slow down of China’s economy was acknowledged by  Chinese Premier Li Keqiang. In a meeting he is reported to have said:
‘It is necessary … to further cut taxes and [administrative] fees to ensure a stable economic start in the first quarter and stabilize the macro economy.’
During a meeting in December 2021, the Chinese leadership flagged ‘stability’ as its key aim for 2022. This was in stark contrast to targets for 2021, which was focused on ‘the disorderly expansion of capital’ driven by President Xi Jinping’s objective of reducing inequalities in Chinese society.
China’s zero covid strategy is impacting its economic links with the rest of the world as international air travel is restricted, and even the stringent lockdowns applied in the country are likely to take their toll on global supply chains. A lockdown in Xian for instance has already prompted Samsung Electronics and Micron Technology, two of the world’s largest memory chip makers, to red flag the possibility of their chip manufacturing bases in the area being hit.
As a result of its zero covid strategy, and its aim of controlling the spread of the pandemic in Xian, and also before the Beijing winter Olympics next month, China has further tightened regulations for the import of products from neighbouring countries in South-East Asia. Trucks, with agricultural products, from Vietnam and Myanmar have been stranded for weeks (some for well over a month), as a result of which products have being rotting (especially fruits like mangoes and jackfruit), and exporters in both countries have had to face losses (exports of non agricultural products, such as rubber and minerals, from Laos to China have also suffered). Apart from stringent checks, exporters of commodities are supposed to carry Chinese trucks across the border – the unloading of goods and transfer is a time consuming process and this leads to further delays.
It is not just mainland China, but even Hong Kong an important financial hub has been following a zero covid policy which has impacted its economy – especially the tourist sector. The fact that Hong Kong will be opening to China before it opens to the rest of the world has also not sent out a positive message to international businesses.
China faces the onerous responsibility of not just keeping covid19 under check, but also preventing a further slow down in its economy. Economic challenges and the zero covid approach will lead not only to domestic problems, but also impact its economic linkages with the rest of the world, especially neighbouring countries in South East Asia (China is an important market for agricultural products of Vietnam and Myanmar). The slow down in China’s economy and the remarks by Li Keqiang with regard to the same also highlight the limitations of Xi Jinping’s economic vision and the fact that there is a growing concern with regard to the country’s possible economic challenges over the next few months.
When the world of ‘virtuality’ starts a digital intercourse with the world of ‘reality’ inbreeding deformities erupt. This is when every crisis of the world perceived as solved via crypto-currencies, every collectable-art of the world acquired as an NFT code. This is how, every dream visualized as idiotic visualization of disconnected graphics, places visited in psychedelic distortions and every desire digitally delivered with licking of the pre-flavored screen. Mesmerism of metaverse makes real world crises appears as amusing jokes. This is how brains stirred fried.
Let us get the fire going; there is nothing wrong with a data-centric mentality driving virtual fantasies on borderless platforms to create drips of currencies as super successful models to make fast money. There is nothing wrong, creating global hype and driving the virtual agenda to fool the public. This already achieved by many industries across the world. Terribly wrong, is when the biggest technology and globally institutionalized bodies come into play as savior of the planet, social justice, economy and voting? Such variations lead to dystopian zombie-lands.
Houston, we need a bigger Frying Pan; Sometimes, it takes a century; Cannabis jailed more people than any other crime, today, on the cover of most glossy magazines, as cure of the century, with deluxe shops on almost every other corner, dimly let downtowns of Western economies declared this industry as key economic drivers. The video game generations, comfortably-high in state of mind, convinced that it is the AI that will help them find a job, guide them on voting and find a balanced and perfectly adjusted partner and take care of them.
Artificial Intelligence = Artificial Ignorance; whenever required as a global stock price uplift, all extremely creative programming is sold as AI, like believing that inside a Fridge lives a hidden person adjusting temperature. Study deeply how selective programming identifies facial recognition to satisfy pre-programmed biases but illusionary narrative points to AI, something as dumb as a rock, without a single proton of any brain. This total nonsense and Hollywood sensationalism needs adjustments.
World of virtuality is not a world of reality: Suddenly, ‘fake it until, you make it’ saviors bring the new recipes for the fried kind; create hyperactive ‘make-believe’ living, as feeding hungry children in metaverse restaurants. Now, overnight influencers selling programs on how to become a ‘billionaire’ by selling their caravan and trailer parks as super deluxe Lamborghinis on Mars where trillionaires outfitted marching as slow motion avatars wandering as space-refugees
Real world of economic failures: Economic development of small medium business economies of the world, largest economic sector in the world, mostly in the hands of the job seeker mindset searching for solutions, now must face harsh challenges for not having sufficient number of right mindsets. After all, job seekers build organizations, but it is the entrepreneurial job creator’s mindsets, as unique contributors, to find the original cause of starting that organization in the first place. Real world builds real value, but the virtual world is to do it yourself, designing for your own illusionary dreams. Real world needs real value creation and not imaginary success. Study Expothon expansion on Google
Study real entrepreneurialism; ask bold questions on how to find work for and occupational activity for billions of displaced workers. Now, how will all day daydreaming solve such issues, how can metaverse factories and offices fulfill crypto-salary jobs. How can citizens go further deep into groceries-bonanza and bring busloads of groceries to virtual metaverse luxury condominiums. Were these the heavenly fables promised, where rivers of milk and honey did the tricks? Do you smell something burning, right now? Unless sitting on the stove, it may be the brains on fire.
Meta Verse = Data Curse: when for every move and transaction of humanity recorded all the time, every sneeze becomes a cyclone and every fart a tornado. Data of the size of Mount Everest is what the world produces as garbage, daily, and the same goes for unframed mismatch data. To control the masses some data is usable but to control the mind no data is large enough.
History laced with failures; where the Pharaohs of our days predicted sun and the moon and strangled nations in the process. Now as presenters styled in upper half prêt-a-Porte couture, on global access networks claim the divide of real living with virtual living. Divide the mind to confuse, as AI is not the runaway train to blame, neither an army of drones and sniper-dog-robots on hunt as a facial recognition based elimination task force. It is the pre-programmed intent. Beware; what is not visible on their upper half is that the Pharaohs are not sitting on a real throne but possibly, on commodes. Study reality but wisely
The rest is easy. 
The media has emphasized the volatility of the global economy leading to sovereign defaults, surging financial uncertainty, economic activity contraction, investment bust and a financial crisis. Finance professionals rely on quarterly economic assessments oblivious to the fact that they do not provide insights into the future of economies. Contrary to the expert’s assessments the global economy will not lead to a systemic meltdown.
Recessions caused by economic crisis take longer to recover but the present recession is a non-economic crisis which will last for a brief period. Unlike natural disasters it has not resulted in massive destruction of infrastructure. In the past two decades, disasters caused direct economic losses worth $3 trillion globally.
The pandemic has disrupted and not destroyed the global economy. It hindered production and investments. Several sectors such as utilities and finance were unaffected while Mergers and Acquisitions (M&As) and foreign investments (FI) were taking place.
Countries and international organizations disbursed trillion dollar rescue packages. Advanced economies spent about 6% of their GDP on relief programs. US and India implemented measures to increase domestic demand and growth.  Pent-up demand for retail goods, travel and cars will spur consumption.
Historically, economies are not impacted by pandemics. Smallpox did not derail the Industrial Revolution. Smallpox declined sharply after vaccination was widely adopted. The 1918 Spanish Flu challenges were more daunting than today’s crisis.
Pandemics and the global economy
The Spanish Flu Pandemic
In 1918 the world witnessed geopolitical events such as the end of WWI, the Russian revolution and the US Senate’s rejection of the Versailles Treaty and President Woodrow Wilson’s plan to join the League of Nations. Spanish flu devoured more lives than WWI and WWII combined. F. R. Velde concludes that Spanish flu had a negligible effect on the US economy as it grew by 42% from 1921 to 1929. Economic activity increased by 1923 driven by consumerism, household appliances sales, growth of radios and cinemas, Ford model T car, Federal Highway Act of 1921 and country wide electrification projects.
The technological and macroeconomic conditions across the two time periods have significantly improved since 1918. The Spanish flu’s mortality effect dwarfed Covid 19. In 1918 a majority of the global population was economically poor, suffered from poor health and lived in low hygienic conditions. By comparison 2022 will be more settled and calmer despite huge disruptions. 
Economically, infrastructurally and socially WWII was more devastating as compared to Covid 19. Yet the post war US economic growth proved economists Paul Samuelson and Gunnar Myrdal both future Nobel Prize winners wrong. Samuelson mentioned an economic downturn while Myrdal wrote about societal turmoil. 
The US spent 42% of GDP due to an increase in the war budget by 1944. War rationing provided a boost to economic revival. Rationing led to an increase in US household savings of 40% of GDP. The expansion of the highway system led to the development of new suburban areas. Cars contributed to the flourishing of the entertainment and hospitality sectors as people had easy access to resorts and restaurants.
The post WWII world ushered in an era of international organizations. Container ships expanded global trade. The Golden Age of Capitalism witnessed the birth and flourishing of development economics. The Marshall Plan invested $22 billion or roughly $182 billion in 21st century dollars in European economic assistance. The US invested $2.2 billion in Japan’s reconstruction programs from 1946 and 1952. Contemporary Japan is a democracy, the world’s third largest economy and America’s significant security partner in the Indo Pacific region.
The US established its position as the world’s economic superpower by manufacturing airplanes, ships and refrigerators. Its economy grew by 37% and the GNP skyrocketed to $300 billion during the 1950s compared to $200 billion in 1940. By 1960, it had topped $500 billion.
The post war period was one of the finest eras of economic expansion in world history. US GDP increased from $228 billion in 1945 to under $1.7 trillion in 1975. By 1975, the US economy represented 35% of world industrial output.
Businesses during the pandemic
Stable capital expenditures has led to soaring cash balances. The cumulative global funds for long-term investment is approaching $3.5 trillion. The total firepower could exceed $10 trillion with the addition of private funds. The IHS Markit’s purchasing managers’ indices indicated expansion of the US services sector during the pandemic.
There are 1200 companies with a record $3.8 trillion in cash reserves. Assets under management of sustainable funds nearly doubled from roughly $900 billion in 2019 to over $1.7 trillion in 2020. TSMC announced an investment of $12 billion in a US chip factory. Amperex Technology declared an investment of $5.1 billion in Indonesia. Honeycomb Energy Technology invested $2.3 billion while Groupe PSA invested $2.2 billion in Germany. The top 5,000 non-financial listed companies increased their cash holdings by more than 25% to $8 trillion. Toyota increased cash holdings by more than $30 billion (up 68%) and Volkswagen by $22 billion. Suez Canal’s annual revenues in 2021 were $6.3 billion, the highest in the waterway’s history. The high levels of cash reserves will boost foreign investments in the next decade.
Low borrowing costs and buoyant financial markets are leading to M&A activities. Global M&As in the first four months of 2021 recorded higher value. M&A grew to $73 billion especially in the technology, financial services and consumer goods sectors while chemicals and information and communication sectors led to 24% increase. Notable deals include the purchase of Cypress by Infineon for $9.8 billion. The pandemic led to a revenue increase of 15% in the health care sector. One of the biggest deals was the acquisition of The Medicines by Novartis for $7.4 billion. Among the largest acquisition were the purchase of Carlton United Breweries by Asahi Group for $11 billion and Hitachi’s acquisition of ABB Power Systems for $9.4 billion.
Countries and the pandemic
Countries are liberalizing regulations and simplifying investment procedures. G20 announced fiscal packages exceeding $10 trillion while the WB provided $160 billion to developing economies. The US has proposed a multi-year infrastructure package and launched the American Rescue Plan of $1.9 trillion and $5 trillion in stimulus funding. Tax increases are likely to follow the present measures.
India’s $280 billion economic package is 10% of its’s GDP. India implemented the $24 billion social support plan. India has launched several reforms to attract organizations that are looking for an alternative to China. Several sectors such defense, aviation and insurance were liberalized. The easing of lockdowns in India led to a rise in economic activity. During Diwali 2020, e-commerce giants reported a 55% jump in sales in just one week to $4.1 billion, compared to $2.7 billion during the same period in 2019 according to CMIE.
The next decade
The global economy is poised to stage its most robust post-recession recovery in 80 years in 2022. Fewer barriers to investments is associated with lower macroeconomic volatility and smaller output falls during downturns. Productivity drives economic growth. US and India will experience lower crisis duration as they have higher productive capacities as measured by the Economic Complexity Index.
Fourth organizational revolution
Crises can spur the adoption of new technologies and business models. The pandemic has accelerated the fourth digital revolution. Digitization is implemented as automation and online services increase. The SARS outbreak is often attributed with the growth of online shopping in China, accelerating Alibaba’s rise. Organizations will invest in cloud computing, medical technologies and robotics.
Economic growth
The unprecedented global stimulus of 20% of GDP alongside the gradual reopening of economies will make this the shortest recession in post-war history. The recovery in global trade will be broad based with consumer goods and industrial supplies all back at or above pre-pandemic levels. Governments will implement macro policies to ensure financial stability in a prolonged environment of low interest rates and high liquidity.
Fiscal stimulus measures and consumer demand are expected to revive the US economy. US fiscal policy has strongly boosted business activity. US economic growth is expected to reach 6.8% in 2022, the fastest pace since 1984. President Joe Biden infrastructure plan, consumer demand and the implementation of 5G infrastructure will lead the economic recovery. The Federal Reserve’s monetary policy will remain accommodative with quantitative easing and zero interest rates for an extended period.
India is situated in the most volatile region of the world surrounded by two hostile nuclear powers. China and Pakistan have fought wars with India. Since the last 30 years various geopolitical events and crisis situations such as the 1991 economic crisis, Pakistan aiding terrorism, the Kargil war, scams between 2004 and 2014 and the Covid 19 pandemic have taken place.
Yet India is attracting foreign direct investment and foreign institutional investors and its citizens are investing in the India story. The $3 trillion Indian equity market is on a history making spree as it touched the 60,000 mark during the pandemic. India is projected to be the fastest growing economy in 2022. India will grow by 8.5% while China is projected to grow by 5.6% in 2022 according to the IMF. India is implementing structural reforms and public sector privatization. The e-commerce market in India is projected to expand by 150%. The opportunities in the next 25 years are greater as compared to the last 25 years. India will continue to grow.
China’s economy will lead to a downward trend and diminishing productivity in response to belligerent foreign and military policies, US trade wars and global decoupling from China.
FI will recover to pre-pandemic levels of about $1.5 trillion by 2022. In 2023, investments in developed economies are expected to increase by 20%. FI in the US is projected to increase by 15%. In 2022 emerging markets are expected to accelerate to 6% supported by high commodity prices.
Consumer Spending
Consumers will be excited to get back to shopping and socializing. During Covid the personal savings rates surged above 20% of disposable income. Consumer spending will increase due to higher savings as compared to the pre covid levels. US households saved $1.6 trillion according to Oxford Economics. Retail and travel sectors will benefit as consumers start spending, restrictions are lifted and people are vaccinated.
US retail sales could rise as much as 8.2% to more than $4.33 trillion in 2022.  In India the 2021 Diwali shopping sales broke the 10-year record as sales generated ₹1.25 lakh crore. Consumer spending will lead to gross tax revenues which will expand to the highest pace as compared to pre pandemic levels.
Organizations will focus on portfolio optimization. It is a buyers market and deals will be the most consequential activity of this decade. The world should expect a rise in M&A as volumes and shareholder returns will likely reach or exceed pre-pandemic levels driven by plentiful cheap liquidity. The hunt for good assets will continue to be competitive with an estimated $3.1tn in dry powder globally, a low interest rate environment and promising new opportunities.
Fleet expansion plans by shipping companies means trade is picking up. Cargo growth has led to a $10 Billion buying spree for containerships. At least 47 ultra-large container vessels are expected to be delivered by 2024 according to research firm Drewry. CMA CGM has ordered 22 containerships while Ever Given’s Operator has placed an order for 20 New Ultra-Large Ships. Korea Shipbuilding & Offshore Engineering and Samsung Heavy Industries have won combined orders worth $3 billion for 25 container ships,. The Port of Los Angeles closed its fiscal year with volumes of 10,879,383 TEUs, setting a new Western Hemisphere record.
The 20th century witnessed several crises such as WWI, Spanish Flu, WWII, cold war, collapse of the Soviet Union and dot com bubble. The first decade of the new millennium brought a financial crash and the rise of global terrorism. Each of these historical crisis periods was succeeded by an economic revival. The aviation industry was not permanently affected by 9/11. Terrorist attacks have not prevented people from travelling to the Middle East and Europe. A similar pattern of renewal will emerge from the present crisis. 
Historically crisis events have spawned new trends that are favorable for the economy. The Spanish Flu led to research in infectious diseases and 9/11 led to a secure environment. The pandemic will eventually give way to commercial activity, innovation and global cooperation.
A century ago our predecessors did not have the benefits of technological and scientific advances and international organizations. Today governments are supporting their economies through the crisis. The world will be out of the bunker as the effects of the pandemic fade away.
The US Treasury has released an overview of its sanctions policy. It outlines key principles for making the restrictive US…
According to my long-term observations, the challenge that the US strategic circle has been confronted with in assessing Sino-US ties…
China’s economy faces a number of challenges — specifically the spread of the covid19 pandemic and the country’s ambitious zero-covid…
2021 marked the 25th year in a row in which the key Greenland ice sheet lost more mass during the melting season, than it gained during the winter,…
Open-Source Intelligence (OSINT) is defined by noted intelligence specialists Mark Lowenthal and Robert M. Clark as being, “information that is…
When the world of ‘virtuality’ starts a digital intercourse with the world of ‘reality’ inbreeding deformities erupt. This is when…
With the current situation in Kazakhstan remaining unclear and reports on last-minute developments being incomplete and controversial, many fundamental questions…
There is Merit in Creating A New Country of the Maghreb Nations
Out of the bunker: A new post pandemic world
Ethical aspects relating to cyberspace: Copyright and privacy
American policies and China’s influence in the Middle East
Klaus Schwab Releases “The Great Narrative” As Sequel To “The Great Reset”
Indo-Pacific strategy and the new China-IDF relationship
The negative effects of US-Chinese competition on the future of US interests in the Middle East
Emerging Economies More Optimistic about Artificial Intelligence
Copyright © 2021 Modern Diplomacy


Leave a comment

Your email address will not be published.