What US sanctions may look like under the Trump administration

In every major sanctions area, it appears the US may be moving in the opposite direction from the former President Barack Obama's  administration's actions. As a result, insurers and reinsurers in the London market would want to closely monitor US developments and align their activities to remain compliant with the applicable rules.

Russia
Russia is one area where President Donald Trump and Republican Congress strongly disagree. Although  Trump appears to be leaning toward easing US sanctions, it is far from certain that restrictions would be lifted quickly - or at all - as that would put the President at odds with Congress. Congress appears intent on either tightening the sanctions or requiring congressional approval before current ones can be lifted.

The Counteracting Russian Hostilities Act of 2017, S.94, is a bipartisan bill proposed in Congress that would codify present sanctions and impose additional ones, including, for example, targeting investments of $20m or more in the Russian oil and gas sector. There is also talk of a compromise bill that would not impose new sanctions but would require congressional approval before Trump could lift existing sanctions, most of which were imposed under executive powers and could be easily lifted by Trump's unilateral action.

In light of these pressures, it is more likely that US developments will await quid-pro-quo progress on the Russian side, which may enable Trump to potentially ease the existing sanctions and keep Congress from introducing new restrictions.

Iran
With tensions recently escalating between Iran and the US, the easing of certain nuclear-related sanctions from last year may be in jeopardy.

During his campaign, Trump was very vocal about his opposition to the Joint Comprehensive Plan of Action and there is support in Congress and among the US public for a tougher stance toward Iran. Iran's own actions may give rise to possible new sanctions legislation in Congress and/or withdrawal of the US from the JCPOA, but that would put the US at odds with its international partners, not just the EU but also Russia.

Rather than pull out of the JCPOA, it appears more likely that the US may impose new sanctions relying on a non-nuclear basis, targeting for instance Iran's ballistic missile programme, human rights abuses or terrorism, all of which are outside the nuclear deal. Recent designations of 25 Iranian entities were done to sanction Iran's ballistic missile programme.

If, however, the US were to withdraw from the JCPOA, General License H issued by US Treasury's Office of Foreign Assets Control likely would be revoked and secondary sanctions re-imposed, so insurers and reinsurers may be faced with the same restrictions that were in effect prior to 16 January 2016.

Unlike the EU approach, the OFAC is not likely to grandfather all contracts entered into during the JCPOA period. Instead, a six-month wind-down period could be granted, allowing parties to extricate themselves from Iran dealings. As a result, there could be adverse impact both on US-owned insurers and reinsurers and all other participants in the London market.

Cuba
At present there is a pause until Cuba policy is reviewed by the Trump's administration.

During the campaign, Trump voiced opposition to Obama's executive actions that eased certain Cuba-related restrictions. There has not been much talk recently about Cuba, so it is possible the new administration would not be seeking to reverse the current position, although Trump could easily roll back prior executive actions without congressional approval.

The US public and business community both support the steps taken to date to ease sanctions so there is probably a lower likelihood of seeing reversal of Obama actions on Cuba compared to actions on Iran. However, sanctions still remain popular among the politically powerful Cuban community in Florida, a key presidential election state.
State and Treasury will be involved in the review of current policy on Cuba and that may impact any pending licensing requests.

Sudan
Sudan currently benefits from significant easing done in the last days of the Obama administration, but the country is not yet free from all US restrictions.

According to reports, this easing was coordinated with the incoming administration, so there is some hope President Trump would not necessarily reverse the general license issued by the OFAC.

By July 2017, the Trump administration will have an opportunity to assess whether certain conditions are met, which could result in revocation of the prior executive orders imposing sanctions.

However, Sudan remains subject to broad export control restrictions under US law, so an export license still may be required from the US Commerce Department if particular activity involves goods, software or technology on the Commerce Control List. The OFAC's general license does not obviate the need to consider the applicability of the Commerce Department's Export Administration Regulations for transactions involving commercial and dual-use items.

Sudan also remains designated as a state sponsor of terrorism, federal contractors are still required to execute Sudan-related certifications, and various state laws in the US requiring divestment from those who do business in Sudan or prohibiting public procurement remain in effect.

Insurers and reinsurers in the London market need to monitor all these developments and align their activities to remain compliant with the applicable rules.

Also read Jamie Rogers and Aleksandar Dukic's views on what UK sanctions may look like after Brexit