President Trump Targets Turkey with New Executive Order on the Situation in Syria

Concurrently, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated the Government of Turkey’s Ministry of National Defence and Ministry of Energy and Natural Resources, as well as the Minister of National Defence, Minister of Energy and Natural Resources, and Minister of the Interior as Specially Designated Nationals (SDNs). Treasury Secretary Steven Mnuchin announced that “[t]he United States is holding the Turkish Government accountable for escalating violence by Turkish forces, endangering innocent civilians, and destabilizing the region.” According to OFAC’s press release, these ministries and officials were designated as “a result of the Turkish Government’s actions that further deteriorate peace, security, and stability of the region.” OFAC also announced that they “are prepared to impose additional sanctions on Government of Turkey officials and entities, as necessary.”

1. What does the EO do?

The EO blocks all property and interests in property that are or come within the United States, or that are or come within the possession or control of any US person, of persons whom the Secretary of the Treasury determines to be:

• Involved in actions that threaten the stability of Syria;
• Involved in the commission of Syria-related serious human right abuse;
• A current or former official of the Government of Turkey;
• An agency or other division of the Government of Turkey; or 
• Owned/controlled by, acting for, or materially assisting anyone blocked under the EO.

The EO also gives the Secretary of the Treasury the ability to list any sector of the Turkish economy and then block anyone the Secretary of the Treasury determines to be operating in that sector.

Further, the EO authorizes the Secretary of the Treasury to prohibit a foreign financial institution from opening or maintaining correspondent or payable-through accounts at US financial institutions if the foreign financial institution is determined by the Secretary of the Treasury to have knowingly conducted a significant financial transaction for or on behalf of any of the persons blocked pursuant to the EO.

The EO authorizes the Secretary of State to select one or more of a visa denial, ban on certain large loans or credit, transfers of credit, foreign exchange transactions, significant debt and equity transactions, imports, or a full blocking on any foreign person whom the Secretary of State determines to be:

• Directly or indirectly involved in:
  • Obstructing a ceasefire in northern Syria
  • Intimidating displaced persons trying to return to Syria
  • Forcibly repatriating refugees to Syria
  • Obstructing efforts toward a political solution to the conflict in Syria
  • Expropriating property for political gain in Syria
• An adult family member of anyone determined to meet any of these criteria.

The Secretary of State may also issue a visa ban for anyone determined to meet any of the criteria for sanctions in the EO.

2. Entities designated as SDNs

OFAC has so far added the following names to its list of SDNs and Blocked Persons pursuant to the October 14, 2019 EO:

• Republic of Turkey Ministry of National Defence, for being a subdivision, agency, or instrumentality of the Government of Turkey.
• Republic of Turkey Ministry of Energy and Natural Resources, for being a subdivision, agency, or instrumentality of the Government of Turkey.
• Hulusi Akar, the Minister of National Defence of the Republic of Turkey, for being a current or former official of the Government of Turkey.
• Suleyman Soylu, the Minister of Interior of the Republic of Turkey, for being a current or former official of the Government of Turkey.
• Fatih Donmez, the Minister of Energy of the Republic of Turkey, for being a current or former official of the Government of Turkey.

Accordingly, all property and interests in property of these ministries and ministers (including, among others, all funds, merchandise, and contracts) in the possession or control of US individuals and entities is blocked. Further, any entity owned in the aggregate, directly or indirectly, 50 percent or more by the newly designated SDNs is also blocked.

a. General Licenses

OFAC has issued three General Licenses pertaining to the EO and the new SDN designations.

1. General License 1: Official Business of the United States Government

General License 1 authorizes transactions for the “conduct of the official business of the United States Government by employees, grantees, or contractors”.

2. General License 2: Authorizing Certain Activities Necessary to the Wind Down of Operations or Existing Contracts Involving the Ministry of National Defence or the Ministry of Energy and Natural Resources of the Government of Turkey

General License 2, the wind down license, authorizes transactions “ordinarily incident and necessary to the wind down of operations, contracts, or other agreements involving the Ministry of National Defence or the Ministry of Energy and Natural Resources of the Government of Turkey, or any entity in which one or more of such ministries own, directly or indirectly, a 50 percent or greater interest, that were in effect prior to 12:01 eastern daylight time October 14, 2019.” Activities are authorized through 12:01 a.m. Eastern Standard Time November 13, 2019. This general license does not, however, permit the debiting of any blocked account on the books of a US financial institution.

General License 2 does not authorize dealings with the designated ministers, but as long as there is no direct dealing with one of the blocked ministers, transactions with their ministries are permitted to the extent covered by the general license.

3. General License 3: Authorizing Official Activities of Certain International Organizations Involving the Ministry of National Defence or the Ministry of Energy and Natural Resources of the Government of Turkey

General License 3 authorizes transactions

involving the Ministry of National Defence or the Ministry of Energy and Natural Resources of the Government of Turkey, or any entity in which one or more of such ministries own, directly or indirectly, a 50 percent or greater interest, that are for the official business of the United Nations, including its Programmes and Funds, and its Specialized Agencies and Related Organizations.

General License 3 goes on to list several examples of UN organizations that are covered by the general license. OFAC’s press release notes that “[t]oday’s actions are not intended to affect or disrupt the operation of international humanitarian NGOs or the United Nations in Turkey in rendering humanitarian assistance to Syrian communities in need.”

b. Specific authorizations

OFAC’s press release states that “OFAC is prepared to issue authorizations, such as general or specific licenses, as appropriate, to ensure that today’s action does not disrupt Turkey’s ability to meet its energy needs.”

3. What should US companies do?

The EO covers a broad array of activities. Companies doing business with Turkey should take the following actions:

1. Assess Business Activities:
   • Sales/Contracts: Determine if the company has current contracts or other business with the SDNs, including any companies in which one or more of such SDNs directly or indirectly own, individually or in the aggregate, a 50 percent or greater interest.
   • Supply Chain: Companies should be sure to focus not only on customers but also their supply chains, as many US companies have contracts with Turkish suppliers to manufacture parts and components for military contracts pursuant to Department of State and Commerce authorizations.
   • Past Activities: Companies should also review past customers and suppliers in Turkey to ensure compliance going forward, including blocks on future activities and identifying any property in which SDNs hold an interest that is in a US person’s possession and subject to blocking.
2. Assess Application of the General Licenses:
   • For US Government contractors, General License 1 may authorize certain activities if engaged in pursuant to a contract with the US Government and in conjunction with official US business. While General License 1 would not be applicable to direct commercial sales, it is possible that it would authorize activities related to foreign military sales. Because this authorization is light on details, it is advisable to consider obtaining further guidance from both the company’s contracting officer and OFAC to ensure the activity is authorized prior to proceeding.
   • For other companies, General License 2 related to wind-down activities may authorize some activities, however, it does not authorize any new contracts, agreements, or sales. To utilize this authorization, companies must have had an existing agreement in effect prior to October 14, 2019. General License 2 does not authorize the debiting of a blocked account, so if the Turkish Ministry of Energy and Natural Resources owes money under an existing contract, this General License does not authorize a US person to be paid from a US bank account of that Ministry.
3. Assess any Property that May be Subject to Blocking
   • If a company holds property in which one of these Ministries (or a company in which one or more of such ministries own, directly or indirectly, a 50 percent or greater interest) or other SDN has an interest, then that property must be blocked and a blocked property report filed with OFAC within 10 days of the date of the blocking. Examples of property that may be subject to blocking:
     • Payments received by a US company for services or goods that have not been provided to the SDN customer and are not covered by the wind-down general license;
     • Contracts with US companies that are still in effect after any authorized wind-down period;
     • Goods supplied to a US company for which it has not yet paid the SDN supplier and that are not covered by the wind-down general license.
4. Consider Submission of a Specific License
   • As noted above, in particular if you are active in the energy sector, it may be possible to obtain a specific license from OFAC. Of course, these take some time to obtain. Additionally, OFAC may also consider other specific license applications depending on the facts and circumstances, such as activities supporting US foreign policy.