Economic Sanctions: Developments and Lessons for Boards of Directors

• Publication year: 2024
• Citation: Vol. 1 No. 3

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Chase D. Kaniecki, Samuel H. Chang, and William S. Dawley ^*

In this article, the authors offer suggestions about economic sanctions for boards of directors to keep in mind.

Continued volatility in geopolitical events last year and corresponding responses in sanctions policies highlight the importance of integrating economic sanctions considerations in board agendas. In particular, boards of directors should be aware of the increasing global collaboration among sanctions authorities as well as the continuing expansion and application of sanctions in new domains such as digital assets. Sanctions developments can be expected to be particularly fluid with respect to China, Russia, and Venezuela.

Responses to Global Conflict and Crises

In 2023, economic sanctions by the United States and its partners and allies continued to be a key component of conflict and crisis response.

For example, as the Russian offensive in Ukraine entered its second year, the United States, United Kingdom, and European Union have maintained close coordination in the further imposition and enforcement of sanctions, in particular with respect to the enforcement of the price cap against Russian-origin crude oil and petroleum products. ¹

Also, in response to commitments made by representatives of Venezuelan President Maduro and the Unitary Platform relating to democratic elections and the release of prisoners, the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC) suspended sanctions relating to oil and gas sector operations in Venezuela through April 18, 2024, authorized certain transactions involving the Venezuelan state-owned mining company, and—consistent with private-sector sentiment and pressure—revoked a

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Trump-era ban on the ability of U.S. persons to purchase Petróleos de Venezuela, S.A. and Venezuelan sovereign bonds on the secondary market. ² The U.S. government has threatened the reimposition of certain sanctions—most prominently the general license authorizing oil and gas transactions—if the Maduro regime fails to follow through with its commitments to take concrete steps toward a democratic election in 2024.

In addition, following the October 7, 2023, attack by Hamas against Israel, the United States imposed several rounds of sanctions, primarily targeting Hamas operatives and financial facilitators, including conduits for illicit funds. The United States stated its intention to continue imposing such sanctions this year to disrupt Hamas's financial network, including through new sanctions authorities, as discussed below. ³

Sanctions Coordination

The war in Ukraine has served as a catalyst for the Biden administration's emphasis on incorporating multilateral coordination into its sanctions policy. For example, in May 2023, members of the G7 and other partners imposed additional sanctions on Russia in response to commitments made at the G7 Leader's Summit. Also, throughout 2023, the United States updated its sanctions guidance and enforcement posture relating to the joint price cap on Russian crude oil and petroleum products in coordination with the price cap coalition countries. ⁴

October 2023 marked the first year of the OFAC-UK Office of Financial Sanctions Implementation (OFSI) Enhanced Partnership between U.S. and UK sanctions authorities, ⁵ through which OFAC and OFSI coordinated at multiple levels of seniority to exchange best practices, align on sanctions implementation and shared objectives, and hold joint private-sector engagements (including the first round table with fintech and digital assets stakeholders). This partnership has manifested in concrete actions, including coordinated sanctions in response to the Israel-Hamas conflict, ⁶...