Analysis | What does the secondary embargo mean, for Russia and the world

1. What is a secondary prohibition?

Secondary sanctions involve a party involved under the initial sanctions but target commercial activity that occurs outside U.S. legal jurisdiction. Imposition of secondary sanctions means forcing companies, banks and individuals to make a difficult choice: continue to do business with authorized entities or with the United States, but not both. Due to the predominance of US dollars as a source of value, most companies prefer to maintain good relations with the United States.

2. How are they applied?

In contrast to the initial sanctions, which can be enforced through fines and confiscation of US-held assets, secondary sanctions rely on the centrality of the US financial system in the global economy and the widespread use of the US dollar as a global reserve currency to operate. A company or individual violating a secondary embargo may be hit by U.S. export controls or be placed on the Treasury Department’s list of specially designated citizens and blocked persons, which would prevent Americans from doing business with it.

3. Why are they being discussed now?

Measures taken against Russia by the United States, the United Kingdom, and the European Union have had a significant effect, leading to rising Russian inflation, closing its stock market, and causing some of its banks to collapse. But an engraving on the sanctions regime that allows Russia to continue selling oil and gas to European markets has eased some of the effects, helping the ruble recover much of the value lost in the weeks following the onset of the attack. Ukrainian President Volodymyr Zelensky and members of his government have urged the United States and its allies to impose additional sanctions, and members of Congress have pressured the administration to consider minor sanctions.

4. How have secondary restrictions been used in the past?

Two-thirds of all U.S. secondary sanctions apply to companies affiliated with Iran; The rest applies to entities associated with North Korea. Secondary sanctions were part of a US-led campaign to pressure Iran to stop developing nuclear weapons. Sanctions have made it difficult for Iran to sell oil on the world market. China and Russia have also been subject to minor sanctions for years.

5. Why are they controversial?

The use of secondary sanctions has been described as an outside application of U.S. law. Opponents of the practice say they are a tool to influence other US policy and decision-making processes that would not otherwise violate US sanctions. There is a risk that the United States will break the transatlantic front against Russia if secondary sanctions are imposed. Justin Walker, head of ACAMS’s sanctions compliance and risk, a global membership group focused on financial crime prevention, said that although secondary sanctions would be “very, very effective”, they would be a “reluctant last resort”.

6. In what ways can a minor embargo hurt the Alliance?

If Germany continues to buy oil and gas from Russia, for example, it may find itself on the wrong side of US sanctions. Secondary sanctions can create confusion about which activities are banned, leading to excessive compliance, which could lead to an overall slowdown in world trade and the loss of political support for sanctions imposed on Russia.

20 A 2021 report from the Center for a New American Security on secondary sanctions.

• Bloomberg News reports that Russia has overtaken Iran to become the world’s most banned country and how sanctions have not yet hit half of Russia’s richest billionaires.

A statement from the US Treasury Department regarding the preliminary sanctions on Russian debt and the Treasury’s review of the 2021 global sanctions.

Qu QuickTake commentator on Putin’s history of sanctions aimed at Russia, Russia-Ukraine tensions and sanctions as a financial war.

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