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Treasury Needs Better Pre,- Post-Analysis of Sanctions Impacts, Official Says

The Treasury Department ‘understands” the challenges faced by banks, law firms, companies and others in trying to comply with multiple Russian sanctions regimes across the U.S., the EU and elsewhere, and is working to better align those restrictions to alleviate some headaches, said Brian Nelson, Treasury’s undersecretary for terrorism and financial intelligence. Nelson, speaking during a law conference in Washington last week, said the agency is “working hard” to harmonize “our actions, our targets, the guidance that we're providing so that they are consistent across our jurisdictions.”

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Nelson said the U.S. needs “to put more resources” into analyzing “ahead of time what the consequences of our sanctions actions are going to be, both at the target but also our partners and allies.” Part of that effort should find ways to better “mitigate those consequences and ensure that we get support from partners and allies,” he said during the conference, hosted by Mayer Brown, the American Bar Association and American University.

But he also said the agency needs to “beef up” its review of sanctions after they have been imposed to make sure they’re having the intended effect and not unnecessarily burdening industry. Nelson said Treasury recently created a chief sanctions economist position to undertake that work. “Hopefully we don’t find ourselves in another significant conflict,” he said. “But we will be, I think, prepared with the learnings from this one and hopefully will have laid the groundwork for really productive and quick conversations with partners and allies about the right strategic approach.”

Nelson added that he and other Treasury officials have been traveling to countries in which the U.S. has “significant transshipment concerns” about controlled items going to Russia. He specifically mentioned Turkey, the United Arab Emirates and Oman, adding that the U.S. is working with allies on how “we can sharpen our message about the dual-use goods and components that we're most concerned about, and how we can better share information and intelligence about what we're seeing.” So far “that message has been well received.”

He added he isn’t too concerned about countries subject to U.S. sanctions, such as China and Russia, using mechanisms to evade the U.S. dollar and the American financial system. He said those countries wouldn’t have to avoid only the dollar, but they also would have to cut out the Japanese yen, the European euro and the British pound.

“Maybe it’s one thing to avoid the dollar,” Nelson said, “but it’s much harder to avoid all of these currencies.” He also said the dollar is the “most liquid currency in the world,” and “it’s not clear” that China or Russia would even want to abandon it. “But it is something that we always have to be very attentive to,” he said.

For other countries questioning whether to avoid those currencies in order to bypass Russia sanctions, Nelson said their choices are clear. “Really, the options are: Align with nations that represent more than 50% of the global economy or, frankly, support Russia's illegal war.”