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On April 17, United States National Security Advisor John Bolton announced a new round of sanctions against Venezuela, Cuba and Nicaragua—dubbed the “troika of tyranny”—including caps on remittances from the U.S. to Cuba, a full implementation of Title III of the Cuban Liberty and Democratic Solidarity Act of 1996 (known as the Helms-Burton Act), and sanctions against the Central Bank of Venezuela and financial services provider Bancorp, Inc.
The added pressure on Venezuela will further disrupt energy supply chains in the Western Hemisphere, but it is the implementation of Title III and the potential secondary sanctions for trading in gold and other goods and services that has non-U.S. companies concerned. The supply chain and compliance implications for EU companies, in particular, are significant.
“[W]ithin days the administration will add over two dozen additional entities owned or controlled by the Cuban military and intelligence services to the restricted list of entities with which financial transactions by U.S. persons are prohibited,” Bolton said. “[N]ew sanctions will target networks operating within corrupt Venezuelan economic sectors and deny them access to stolen wealth. Most immediately, the new sanctions will prevent U.S. persons from engaging with actors and networks complicit in corrupt or deceptive transactions in the Venezuelan gold sector.”
Bolton added, “Finally, in Nicaragua, the United States continues to condemn the Ortega regime’s violence and repression against its citizens and opposition members. … [T]he Nicaraguan regime, like Venezuela and Cuba, will feel the full weight of America’s robust sanctions regime.”
A more detailed list of regulations and sanctions will be released in the coming months, but implementation of Title III of the Helms-Burton Act will have begun May 2. Title III regards the “protection of property rights of United States nationals,” and allows U.S. citizens to sue entities for “trafficking in confiscated property claimed by United States nationals.” Since the act was signed into law in 1996, successive administrations waived Title III pursuant to agreements with the European Union. The decision not to sign the waiver and allow U.S. nationals to pursue damages in court threatens, above all, European companies doing business in Cuba, and comes at a time when the U.S. and EU are renegotiating a trade agreement. According to the U.S. Department of Justice, more than 8,800 claimants have valid cases, totaling just under USD 2 billion.
The EU and Cuba
The EU has cultivated a strong relationship with Cuba following the implementation of the Political Dialogue and Cooperation Agreement in 2017. This agreement calls for political, cultural and economic cooperation that has resulted, thus far, in a trade relationship involving tourism, agricultural products, tobacco and energy. The EU is the biggest foreign investor in Cuba and Cuba’s second largest trade partner, and EU citizens account for approximately a third of the arriving tourists. Spain especially benefits from trade with Cuba and has successfully lobbied the EU to protect Spanish commercial interests on the island in the event of U.S. sanctions and lawsuits.
Brussels has said it will bring the case before the World Trade Organization, will consider activating the EU Blocking Statute, which allows EU companies to sue EU-based U.S. subsidiaries of companies that sue EU companies in U.S. court, as well as bring “all the instruments at its disposal to protect its interests.”
“In the light of the United States Administration's decision to not renew the waiver related to Title III of the 1996 Helms-Burton (Libertad) Act, the European Union reiterates its strong opposition to the extraterritorial application of unilateral Cuba-related measures that are contrary to international law,” the EU announced in a joint statement. “This decision is also a breach of the United States' commitments undertaken in the EU-US agreements of 1997 and 1998, which have been respected by both sides without interruption since then.”
Other US-EU conflicts on the horizon
On April 12, TheWall Street Journal reported that the EU was preparing a list of tariffs on U.S. products worth USD 12 billion in retaliation for proposed U.S. tariffs of USD 23 billion. The proposed tariffs come as a result of an ongoing spat at the World Trade Organization regarding subsidies to Boeing Company and Airbus SE. The World Trade Organization has yet to provide a definitive ruling, but both sides are preparing for the worst. Tariffs include aviation items and other items including European cheese and bicycles, and U.S. agricultural and manufacturing goods.
The U.S. also withdrew from the Joint Comprehensive Plan of Action, the multilateral agreement that suspends most sanctions on Iran in exchange for a marked curtailing and monitoring of Iran’s nuclear program. European leaders indicated they would hold to the agreement, regardless of U.S. moves to snap back both primary and secondary sanctions against Iran, but most companies have left Iran in the months following the U.S. withdrawal. The EU also announced invoking the Blocking Statute to protect EU companies from reinstated sanctions, but no actions have been taken since that announcement, despite the President of the European Commission, Jean-Claude Juncker, reiterating the EU’s commitment to protecting its economic interests in Iran:
In Sofia, we saw a show of European unity. As long as the Iranians respect their commitments, the EU will of course stick to the agreement of which it was an architect — an agreement that was unanimously ratified by the United Nations Security Council and which is essential for preserving peace in the region and the world. But the American sanctions will not be without effect. So we have the duty, the Commission and the European Union, to do what we can to protect our European businesses, especially [small or medium enterprises].
These conflicts threaten to widen the rift between the EU and the U.S., and could overshadow trade talks this spring between them, following a brief trade war last year.
Takeaways
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The United States is increasing pressure on Venezuela through added sanctions and actions against Cuba and Nicaragua.
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The moves threaten to widen the rift between the European Union and the U.S., and will have significant implications for companies trading with Cuba and Venezuela.