US Should Make Better Use of Sanctions, Related Tools, US Panel Told
Many opportunities exist to increase the effectiveness of U.S. financial sanctions, researchers said during a Feb. 20 hearing of the congressionally mandated U.S.-China Economic and Security Review Commission.
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Kimberly Donovan, a former Treasury Department official who is now director of the economic statecraft initiative at the Atlantic Council, said the U.S. should provide more resources to sanctions enforcement agencies so they have enough people and better technology to do their work. “We’re very good at sanctioning,” Donovan testified. “We’re not very good at the enforcement.”
Donovan believes agencies engaged in various forms of “economic statecraft,” including export controls, sanctions and foreign investment screening, could benefit from increased coordination. The National Economic Council “needs to be more engaged on these issues and could be the belly button that brings some of these things together,” she said. Donovan said it also might be time to reorganize Treasury’s Office of Terrorism and Financial Intelligence, which was created after the Sept. 11, 2001, terrorist attack but now has many non-terrorism roles.
Donovan would also complement the use of “punitive” measures, such as sanctions, with more “positive” economic statecraft tools. “I think we’ve missed opportunities to further invest in Kyrgyzstan or in countries like Georgia to try to influence those countries to work closely with the United States and stop trading with Russia,” she said. “We’ve just gone and said you can’t trade with Russia anymore.”
Anthony Ruggiero, a former National Security Council official who is now adjunct senior fellow at the Foundation for Defense of Democracies, said policymakers should place less emphasis on the number of sanctions they impose and more on the quality of those measures. For example, the previous administration would announce it sanctioned hundreds of entities, but it would turn out “it’s a bunch of LLCs and companies that are probably non-existent now,” Ruggiero testified. “There’s a time and a place for that, but we really should be focusing on revenue, the networks and having a real impact on the adversaries that we’re trying to approach.”
Ruggiero also said the U.S. could better enforce the three North Korea sanctions laws it enacted in 2016, 2017 and 2018 to deprive Pyongyang of revenue for its nuclear weapons and ballistic missile programs. He said sanctions imposed on North Korea often do not touch Chinese entities and individuals that assist North Korean sanctions evasion networks.
Elina Ribakova, nonresident senior fellow at the Peterson Institute for International Economics, said that although the U.S. and allied countries have sanctioned Russia’s “shadow” tanker fleet (see 2501100027 and 2412160024), some of those vessels continue to operate, providing substantial revenue to Moscow's war machine. To reduce that money flow, “we should go after these networks as well,” including those that continue to provide port access to the fleet, Ribakova testified. Ribakova would also seek to replace Russian oil with American energy exports.
Asked whether the U.S. should designate China as a primary money laundering concern under Section 311 of the USA PATRIOT Act, as it has done for Iran, Donovan said that such an "escalatory" move could have a significant impact, including prompting U.S. financial institutions to cut off ties with China. "Going after China with that type of tool would definitely create several ripple effects," she testified.