Disrupting the financing of proliferation (FoP) is potentially a key tool to combat state-sponsored WMD programs. However, detecting FoP is difficult. The majority of governments and financial institutions are unclear about what FoP looks like and how to identify it, so the tool is rarely exploited. This report describes typologies of financing the proliferation of WMD to address this issue.
The most comprehensive study of FoP to date was published by the Financial Action Task Force (FATF) in 2008. This includes a list of 20 “indicators of possible proliferation financing,” including, for example, transactions connected with designated individuals or entities or with countries of proliferation concern. Since then, more information has become available, particularly related to the proliferation programs of DPRK and Iran.
Project Alpha has carried out an analysis of data relating to DPRK, Iran, Syria, Pakistan and India provided by governments and financial institutions, contained in records of judicial proceedings, UN Panel reports, and media reports. The analyses are summarized in the form of 60 case studies. They enable identification of common elements between networks set up to finance proliferation or to circumvent financial sanctions, and of ways networks may mutate in response to sanctions.
Based on the 60 cases, the indicators in the FATF 2008 Report have been modified and categorised as “potentially highly indicative,” “potentially moderately indicative” or “potentially poorly indicative” of FoP. The study identified additional possible indicators, including transactions involving individuals connected with countries of proliferation concern, the use of cash, the involvement of small trading or intermediary companies, and others. By illustrating different types of FoP, the case studies are intended to support the work of governments and financial institutions worldwide in identifying FoP. They are intended to facilitate FoP risk assessments, to support regulators in providing guidance to financial institutions and to support financial institutions in complying with sanctions or other WMD controls.
Above all, combating proliferation of WMD by identifying and disrupting the financing is most likely to be successful when governments and the private sector cooperate and coordinate in sharing information. It is hoped that the FoP case studies included in this report will help this process.
Financing the proliferation of WMD is poorly understood and difficult to identify. Procurement networks hide their financial tracks to circumvent sanctions or other controls. Sources of funds,
which may be countries under sanctions, are concealed behind front companies or individuals acting on their behalf. Goods and materials procured by proliferation networks are generally industrial in nature and usually obtained from established overseas, often via brokers. Financial transactions are typically processed through the international banking system and usually appear to be related to legitimate trade. They may take place on “open account” terms” or
supported by trade finance operations.
In this context, on June 20, 2017, the workshop “Trade Finance and Proliferation Finance – Mitigating the Risks,” took place at King’s College London, UK. The objective of this workshop was to examine what is known about how current mechanisms for financing global trade might be exploited for the purposes of financing of proliferation (FoP) of Weapons of Mass Destruction. The workshop took place in the context of a study carried out by Project Alpha,
funded by United States Department of State, of current typologies of FoP. Participants included representatives from the commercial sector, amongst these banks, consultancy firms, insurance
companies, and others, and the government sector, including the UK and US governments, and crown dependencies.
The discussion took place under the Chatham House rule and was structured roughly into: challenges, regulatory expectations, possible solutions. The workshop aimed to
1) Review current mechanisms for trade finance and identify how these may be exploited for financing proliferation;
2) Identify possible measures governments and financial
sector could take to mitigate risks; and
3) Consider mechanisms for information sharing to support risk mitigation.
The attached report is a summary of main points and is not intended to be a comprehensive record. It is structured as follows: First, the main issues discussed during the workshop highlighted as the main challenges for the financial sector are described. Second, the specific
options for mitigating risks are delineated. Finally, a list of recommendations and follow up action items have been compiled by the workshop organisers and based on the workshop discussions are noted.
Project Alpha works to understand and counter procurement of technologies with a use in UN-restricted nuclear and missile programmes, as pursued by Iran, North Korea, and others. The Project has numerous strands that contribute to this objective, including educating industry on export controls and proliferation risks, researching the techniques used by proliferators to acquire goods illicitly, and conducting international outreach to improve the implementation of trade controls in third countries. Alpha also actively supports the work of UN organisations, the IAEA, and national governments.
On 12 June 2017, the VCDNP, with support from King’s College London, organised an event entitled “JCPOA Procurement Channel: Status and Lessons Learned.” The event was chaired by Laura Rockwood, VCDNP Executive Director, with opening remarks by the Ambassador of the European Union (EU) to the International Organisations in Vienna Didier Lenoir. The speakers included officials actively engaged in the Procurement Channel from the UN Secretariat, the EU External Action Service (EEAS) and the Islamic Republic of Iran. The event was organised under the auspices of the VCDNP’s newly launched European Non-Proliferation and Security Initiative (ENSI); Ian Stewart, who directs the ENSI, also participated.
The event focused attention on an underutilised mechanism of the Joint Comprehensive Plan of Action (JCPOA) intended to ensure that trade in nuclear-related items is consistent with the principles and requirements of the agreement: the JCPOA Procurement Channel.
In her welcoming remarks, Laura Rockwood noted that, a year and a half into the implementation of the JCPOA, it was timely to consider whether the Procurement Channel was living up to its expectations. It was with this in mind that the VCDNP had organised the event.
The JCPOA Procurement Channel includes measures intended to ensure that while Iran is able to benefit from regular trade in the field of single and dual‑use items of nuclear relevance, such items cannot be diverted to support a nuclear programme in Iran inconsistent with the JCPOA. The Procurement Channel is run by the Procurement Channel Working Group (PWG) which is coordinated by the EEAS, and has seven participating States: United Kingdom; the United States of America; France; Germany; Russia; China; and Iran. The channel is designed to receive proposals from States interested in exporting goods to Iran. The PWG has 20 working days (extendable to 30 days) to consider the proposals on any one export good. The PWG operates by consensus and once their decision has been made it is sent to the Security Council for its final decision. The Security Council has five days to make its decision, which is then communicated to the proposing State in the form of a written letter.
In his remarks, Erik Marzolf, Senior Political Affairs Officer in the Security Council Affairs Division of the UN Secretariat, outlined that the JCPOA, was endorsed by the Security Council through resolution 2231 (2015), just six days after the agreement was reached by the E3/EU+3 and Iran. This resolution terminated the provisions of all previous Security Council resolutions on the Iranian nuclear issue and replaced prohibitions with certain restrictions, including on nuclear-related transfers to Iran.
He noted that resolution 2231 generated a distinct working mechanism which differs from that which existed during the sanctions period. In particular, there was no longer a dedicated committee of the Security Council charged with overseeing implementation. Instead, all tasks are directly undertaken by the Security Council and one of its members (on a rotating basis) acts as the facilitator. This year it is Italy, last year it was Spain. The specific role of the Secretariat is to support the facilitator and to report every six months to the Security Council on the implementation of resolution 2231. The Procurement Channel is a system derived and endorsed by the resolution and administratively supported by the UN Secretariat.
Mr. Marzolf noted that the Secretariat acts as the point of contact for States in submitting proposals to the Procurement Channel. He emphasized that the Secretariat is not involved in the substantive review of the proposals. States are encouraged to submit proposals through UN Missions in New York, using the templates available on the UN website in all six official languages. Once proposals have been received, the UN Secretariat is tasked with translating them into English before providing the proposals to the PWG for its consideration. Translations are usually completed within a 24 to 48 hour time period. The proposals are handled in the participating States capitals and the EEAS in Vienna serves as the coordinator. The duration of the review process ranges from 42 and 58 calendar days and to date averages 47 days. Once the outcome of the review is determined, the Secretariat informs the Member State of the decision of the Council. Mr. Marzolf indicated that all proposals submitted thus far had been processed in due time with consideration given to confidentiality.
Klemen Polak of the EU External Action Service and coordinator of the PWG noted that trade with Iran had entered a new era as a result of the JCPOA. The Procurement Channel, he said, had been quickly set up, with the necessary administrative items, such as templates, available as of Implementation Day. The Procurement Working Group has met every third week in Vienna since then and is the only working group under the JCPOA that has regular scheduled meetings.
Mr. Polak also mentioned the need to balance transparency with confidentiality, given that the information provided through the Procurement Channel could involve potential commercial sensitivities. In the spirit of transparency he highlighted that the PWG reports every six months to the Security Council on its review of the proposals. Mr. Polak concluded that to date a positive trend could be seen and it appeared that the Procurement Channel was working properly and that the PWG had provided sufficient information and guidelines for States to submit proposals. He also noted that of the proposals received to date, most included items on the dual-use list, which includes manufacturing equipment such as for the automobile industry. Though the Procurement Channel is working he recognized that it is still a new mechanism and more work needs to be done, especially on a national basis within each participating State.
Dr. Behzad Saberi, Counselor, Permanent Mission of the Islamic Republic of Iran to the International Organisations in Vienna who represents his country in the Procurement Working Group, reflected on the functioning of the Procurement Channel from an Iranian perspective. He noted that the Procurement Channel was one of the last measures to be agreed on in the JCPOA negotiations, due to mutually exclusive principled positions of different parties which were only brought to agreement through creative solutions and flexibility shown by all sides. He clarified that it had taken some time for Iran to set up the internal mechanisms necessary for the issuance of the end user certificates required under the Procurement Channel, and further explained that Iran had now established the Atomic Energy Organisation of Iran as the certifying authority for nuclear items and the Ministry of Industry, Trade and Mine as the certifying authority for non-nuclear civilian end users.
Dr. Saberi noted that the working mechanisms of the Procurement Channel were indeed set up effectively, and with a positive working spirit, but that, to date, too few cases had been referred through the Channel than expected. He elaborated on a number of reasons why he thought the use of the Channel had not yet yielded a greater output. These included, inter alia: (a) the considerable time that inevitably had been needed for setting up the arrangements and working methods related to the Procurement Channel in (and among) the Working Group, the UN, Iran and other participants of the Working Group. He mentioned that before the JCPOA Implementation Day there existed other more pressing priorities, and that therefore serious work on the necessary preparations for the Procurement Channel began only afterwards; (b) the novelty of the mechanism, meaning that States, industries (both in Iran and in the exporting countries), banks and financial institutions would require some time to become aware of the new possibilities and learn how to use it; (c) the fact that cases resulting from commercial transactions could naturally take some time to negotiate; (d) uncertainties among the private sector about re-engaging with Iran, as a result of the “shenanigans, sabotages and actions” by certain governments and interest groups who have retained their mind-set of sanctions and pressure; and (e) the fact that the appetite on the demand side seems to be less than expected. In this regard he highlighted that, for a country that had been under sanctions for a number of years, industries had had to learn either to indigenize the needed technology and become independent from foreign supply, or to modify their production lines to obviate the need for sanctioned items. Therefore, it will take time for such industries to gain trust in the efficiency and sustainability of this new network and to re-structure their planning to include items that may not have been available from abroad before the JCPOA. In his final remarks, he stressed the need for the Procurement Channel to be seen as available to all and as a reliable mechanism. In building this trust, more proposals could filter in through the channel in the future.
The overall sense from the three speakers was that the mechanisms were well‑established but underutilised. Ambassador Lenoir Didier of the EU Delegation in Vienna described the JCPOA as a bright force in an uncertain era and commented that the improving Iranian economy was a positive sign for the JCPOA’s viability. Nonetheless, the JCPOA’s challenges were noted. Ambassador Lenoir highlighted that the JCPOA – and the Procurement Channel in particular – was a technically complex and politically sensitive agreement, which required daily engagement among officials. All speakers noted the positive trend of the channel but also were not blind to the current shortfalls. However, the common belief that the JCPOA and the Procurement Channel are a success and in the best interest of all prevailed, and the speakers highlighted their own entities serious commitment to achieving the results defined in the agreement.
During the discussion period, the question of whether the Procurement Channel was necessary was raised. It was suggested that the Procurement Channel provides a useful additional mechanism for all parties to maintain confidence that Iran, and the other members of the E3/EU+3, are maintaining their commitments to the JCPOA. Further, it was suggested that, given broader geopolitical uncertainties, such additional confidence building measures would be useful in maintaining the JCPOA in the years ahead.
Another participant emphasized the technical nature of the Procurement Channel process, highlighting that the Channel only looks at the technical aspects of the mechanisms and proposals. As long as proposals are consistent with the JCPOA and resolution 2231, there is no reason why such proposals should not be approved. Referring to the 10 year timeframe for the Channel, the participant noted that little outreach could be done in such a short period. Thus, in encouraging States to submit proposals, it is important to recognize that no one State will be “black listed” or shunned should a proposal be denied, but rather the State would be encouraged to re-submit a proposal that is within the technical guidelines defined in both the JCPOA and resolution 2231 so that it could be accepted by the Procurement Working Group and the Security Council.
In concluding, Ian Stewart observed that mechanisms like the Procurement Channel would help to sustain the JCPOA over the next decade, but that it was incumbent on the E3/EU+3, Iran and other parties to secure a longer-term resolution of the issues that the JCPOA sought to address. He noted that, with the newly launched ENSI at the VCDNP, the Center hoped to play a useful role in this context through the organisation of further follow-on events and activities.
More information on the Procurement Channel can be found here.
This event was also featured on the EEAS website here.
This ‘Alpha in Depth’ report uses open-source research to identify and characterise entities involved in India’s strategic weapons programme. Relatively little analysis has been conducted since the US normalised relations with India and lifted the majority of sanctions by 2005 – 2008. This report aims to update the record on Indian entities and will be of interest to government and private sector customers dealing with proliferation issues, particularly with regards to sensitive and dual-use items headed for end-users in India.
This baseline study examines the visible activity of 243 entities that have contributed to India’s strategic nuclear and missile programmes as key weapon stakeholders, unsafeguarded nuclear fuel cycle entities, defence supply chain entities, developers of auxiliary systems such as vehicles, and entities conducted dual-use research of concern. In many cases, entities are openly known to be major stakeholders in strategic weapons programmes. However, this report finds a wider and deeper network of suppliers and researchers involved in this system. The extent of this network is laid bare in this report, and includes more than the original list of entities designated as involved in nuclear and missile activities by the US in 1998 – 2001.
The Restricted version of the report includes the full range of entity profiles sorted by Governmental department, major and minor industry suppliers, and entities conducted dual-use research of concern. An accompanying data file in table format provides a collated record of identifying information such as phone numbers, fax numbers, addresses and key individual names.
The Public version of this report includes the key findings, contextual overview, and informational charts.
Why does India warrant examination?
India is a burgeoning, de facto nuclear weapons power which is beginning to achieve force modernisation through a triad of delivery systems (air, ground and sea) designed to deter through assured retaliation. In line with this, the Indian arsenal has been increasing, and has diversified to utilise highly enriched uranium, previously the product of enrichment facilities serving the civil energy programme and submarine reactor needs. However, there are multiple areas of concern, some of which might destabilise the intended path towards a stable mutually deterrent relationship between India and its neighbours. Furthermore, an acute nuclear crisis in South Asia would see India mobilise its science and technology potential to undergo a new massive expansion of nuclear capabilities (a ‘third breakout’).
What are the key points of this report?
First, India’s unique nuclear status mimics that of a Non-Proliferation Treaty (NPT) recognised nuclear weapon state. India has a waiver from the Nuclear Suppliers Group (NSG), permitting trade without requiring it to have NPT membership. India has chosen to selectively engage with international non-proliferation agreements, such as the NSG, whilst eschewing others, such as the Fissile Material Cut-Off Treaty and Comprehensive Test Ban Treaty. Continued special treatment threatens to erode the interlinked non-proliferation regime by demonstrating the viability of achieving nuclear weapon state status outside the NPT and the possibility of Indian reintegration without significant concessions.
India’s continued efforts to join the NSG are primarily based on a desire to secure nuclear trade for its ambitious three-stage fuel cycle (which allows them to harness thorium as fuel). Admission to the NSG will necessitate a delicate balancing act between India’s national interest and commercial value of on one hand, and the concerns of India’s neighbours about proliferation and the second-stage of the fuel cycle. The second stage of Fast Breeder Reactors could be utilised to produce plutonium, and goods provided under an NSG membership waiver could enable India to pursue nuclear proliferation.
Second, India’s strategic weapons complex has the potential to push India’s nuclear capabilities to a full spectrum of weapon systems. India has so far focused on the establishment and enhancement of its ground and sea-based delivery systems: the construction of four nuclear-powered ballistic submarines for continuous at-sea deterrent and ground-based intercontinental range capable missiles. Beyond this, this report highlights that India’s strategic weapons complex has explored and developed additional weapons systems that could be made nuclear-capable should there be political will. Historically, periods of capability breakout occurred around India’s milestone nuclear tests (1974 and 1998). In such instances, the initiative of the strategic weapons complex in developing ‘technology demonstrators’ (science feasibility projects that scale-up to a potential system), has pre-empted political decision making to adopt such technologies as military capabilities. The development pathway of the Agni is one such example wherein the decision to adopt ground-based long-range missiles as a nuclear delivery system was taken after scientists had demonstrated the feasibility of an indigenous nuclear‑capable ballistic missile, rather than the science and technology sector being directed by decision making authority.
The process of Indian science developments taking the lead over policy direction is why India’s technological latency should raise concerns. Beyond the establishment and further enhancement of India’s existing triad capabilities, new technologies developed into capabilities in line with the capabilities of major nuclear weapons powers would allow India to drift towards a ‘maximalist’ nuclear arsenal utilising both tactical and strategic nuclear weapons in a graduated escalation posture. For example, air-launched supersonic/hypersonic cruise missiles, tipped with low-yield nuclear warheads, and coupled with new fifth generation fighter aircraft could be considered by Indian policy makers in the near future as a means to conclusively end conventional conflict. India’s commitment to ‘No First Use’ and to a maximum retaliation-only posture would be eroded by these new possible capabilities.
This report also highlights the possible erosion of political control of the nuclear arsenal. Generally, the Indian interpretation of a nuclear weapon includes the mating of the fissile material pit with the warhead and delivery system itself .Traditionally, India’s nuclear weapons have been kept de-mated and under the control of different bodies, necessitating an inter-agency system commanded firmly by a political body (the Nuclear Command Authority chaired by the Prime Minister) to assemble and deploy the nuclear arsenal. The Agni V intercontinental range capable ballistic missile is pre-mated in the same manner as the pre-mated ballistic missiles used on-board Arihant-class SSBNs. This will have a significant impact on nuclear policy and command and control
Third, India’s scientific complexes (nuclear, missile, and space) are poorly separated. The nuclear programme in India has been partially submitted to international safeguards, but this remains limited and allows India to exercise de facto nuclear weapons state privileges regarding the production of special fissile material. India has invested in new special fissile material production facilities. This large unsafeguarded nuclear fuel cycle encompasses a number of entities performing dual civil and military functions.
India’s space programme is dedicated to civil and peaceful purposes, and for the most part this remains the case. Instances of historical technology transfer from civil rocketry to military missile programmes is perhaps no longer an active concern as missile programmes are self-sustaining and have achieved key milestones. An inverse technology flow, from military to civilian sector, remains a possibility. Military and civil scientists and engineers continue to meet discreetly in forums and conferences, which should raise concerns about cross-field blurring. Domestic students and international guests are frequent attendees and these science and technology spaces are a proliferation risk.
Fourth, poor separation in these strategic sectors should sharpen the need for tight export controls on intangible transfers and tangible trade to India. Whilst end-user monitoring agreements are in effect for some entities, this report drives forward the imperative for sensitive industries to adopt ‘Know Your Customer’ best practices. This report highlights the complex relationships of India’s domestic technological base, and provides information on the degree of complicity to the nuclear weapons programme.
Fifth, Indian entities are at onward-proliferation risk. The potential danger lies with the re/export of sensitive items and knowledge out of India to foreign powers. The domestic industry supplying India’s strategic weapons complex and the country’s nuclear programme have reached sufficient technical maturity to export expertise and tangible nuclear and missile-related goods. The Indian government’s support for its domestic industry in the face of international sanctions and technology denial has continued since the normalisation of trade relations in 2008. A science and technology culture of self-reliance and import substitution has formed, and although India’s strategic sectors remain reliant on imports, the balance of domestic supplied goods and foreign imports will tend towards domestic provisions in the coming years. This is one compelling reason why drawing India into firm non-proliferation commitments would enhance international security for the longer term. India has taken strong steps towards implementing a control list (SCOMET), synchronising it with key control regimes, and adopting best practices for businesses; this effort must be sustained.
In sum, greater care and attention needs to be paid to the current issues with India’s nuclear power while also anticipating a future shift in India’s capabilities. Looking forward, there remains room for India to be drawn into firm non-proliferation compliance.
On June 20, 2017, Project Alpha will host the workshop “Trade Finance and Proliferation Finance – Mitigating the Risks,” in London.The workshop’s aim is to better understand how trade finance might be exploited to finance WMD proliferation and will build upon a typologies study of proliferation finance currently being carried out by Project Alpha. The report is available here.
The objectives of the workshop are to:
Review current mechanisms for trade finance and identify how these may be exploited for financing proliferation;
Identify possible measures governments and financial sector could take to mitigate risks;
Consider mechanisms for information sharing to support risk mitigation.
Workshops participants will include experts and practitioners from the financial sector, consulting firms with experience advising clients in trade finance or proliferation finance contexts, banking association representatives, government agencies, and research and academic organisations.
For inquiries regarding attending the workshop as a speaker or participant, please contact Andrea Viski through email to Andrea.Viski@kcl.ac.uk.
On 24/25 April, Quentin Michel from the University of Liege and Ian Stewart from King’s College London convened a small group of government officials, academics, and industry practitioners with the purpose of examining the implications of Brexit on strategic trade controls. The workshop was conducted under Chatham House rules with participation in private capacities. The purpose of this short article is to capture the key impressions and issues identified by the hosts. This document does not reflect the views or comments of any specific participant.
The main finding of the workshop was that the exit of the UK from the European Union strategic trade control system will have an impact that goes far beyond trade control law regulations and procedures. Much attention was given to the implications of the trading arrangement that will replace the UK’s access to the ‘single market’. Concerns abound that board tariffs will be adopted by both the EU and UK. However, while the issue of export controls will likely receive scant public attention, inadequate arrangements could have a negative impact that is even more significant than the effect of tariffs. The EU, and separately the UK, must devise mechanisms to ease transfer and, more specifically, licensing of dualuse goods after Brexit. It is unclear presently whether the EU will have the capacity to take the steps required, while also conducting an unrelated review of its own dual-use items export control Regulation, 428/2009. Considering the usual two years delay necessary to finalise the process to adopt a regulation, it is strongly recommended to integrate already the Brexit into the review process.
During the course of the workshop, numerous specific implications were identified. These can broadly be categorised into five areas:
The legal basis and the ‘Norway issue’: Before addressing other issues related to Brexit, an answer is needed on what legal basis the UK will use to implement export controls in the future. One alternative would be that the UK will adopt national legislation (initially through the ‘Great Repeal Act’) implementing the requirements of the international export control regimes directly, rather than drawing on the EU regulation applicable in all EU Member States. If this is the case, UK and EU export controls can thus be expected to diverge over time after Brexit. The alternative would be for the UK to align systematically its national provisions to the EU regulation, perhaps following the path of Norway. However, Norway at present cannot take part in EU working groups on export controls and therefore has not possibilities to defend its views when the regulation is amended or updated. Moreover, Norway is excluded from information sharing arrangements whereas that will change probably soon.
Harmonisation of controls and competition: There is a real possibility that EU and UK export controls will diverge post-Brexit and that this could result in unhealthy competition and a ‘race to the bottom’ in terms of controls. This might could result in an increase in undesirable transactions, for example. It could also distort markets, particularly if the EU moves forward with the adoption of an autonomous control list in relation to human security issues, as proposed by the European Commission under the recast review, which the UK did not adopt.
Information sharing: trade facilitations between States and effective implementation of export controls is contingent on various types of information being shared. This includes not only information on licence denials, which is necessary to prevent ‘undercutting’ and a race to the bottom, but also more sensitive intelligence or other information related to specific transactions. In many cases such information sharing could take place through other channels. However, there would be specific advantages to a structured exchange of information in relation to denial notifications and the updating of any relevant control lists. Ideally, the UK will continue to have access to the DUeS platform.
Licensing conditions: The UK is to leave the single market which will mean that the transfer of all strategic items will require licensing to and from the UK and not only a limited number (e.g. Annex IV of Dual Use Regulation 428/20009). This will affect a substantial range of goods and sectors. A solution will be required to allow such items to be easily transferred while minimising the burden on industry. The easiest option might well be to create ‘general’ or ‘open’ licences. However, this would generally require companies to report transfers to authorities and be subject to audit, which might in itself be a substantial burden for industry and licensing authorities. Alternatives include reliance on individual licences (which could be burdensome for companies and authorities) or the creation of some new mechanism intended to record transfers in a low-burden way.
Technical capacity: Presently, it is the UK that drafts the EU control list. The UK also provides vital expertise and advice to EU Member States in assessing technical parameters of certain items. While the UK might still be in a position to provide such support post-Brexit, the EU27 might nonetheless need contingency plans.
An additional key area of consideration relates to sanctions. Presently, the UK is a principle actor in relation to EU sanctions. It is understood that the UK has produced several of the evidentiary packages that have been used in relation to specific sanctions designation listings, for example. As one of the largest global economies (equal in size to the 20 smallest EU States) and as a central player in the global financial system, UK adherence to sanctions has been central to their effectiveness. Any move away from harmonisation of sanctions with the European Union could thus undermine either common foreign policy goals or the effectiveness of sanctions. Moreover, practical questions related to sanctions such as who will maintain evidentiary packages for EU sanctions submitted by the UK before Brexit and who will produce evidentiary packages for EU sanctions in the future, if not the UK, must also be considered.
Two important final questions emerged from the discussions. The first concerns how the EU will devise a response to the issues outlined above. It seems apparent that only a group of officials, such as the Council’s Dual-use Working Party, will have the necessary expertise to examine these issues in depth and devise a policy for future dual-use trade between the EU and UK. The second question, which is related, is whether it is feasible to advance both Brexit and the recast of the EU export control regulation (428/2009) in parallel. Given the sheer volume of the dual-use trade implications of Brexit and the fact that the recast, which has now been underway for more than 4 years is the main way in which the EU could adopt a new or amended general export licence for the UK, it seems at the least that it would be useful to consider Brexit issues as part of the recast
The UN Panel of Experts on North Korea at the end of February released a substantial report on North Korea’s proliferation-related activities.
The report contains a significant number of cases concerning North Korean illicit trade and sanctions violations. The report also notes a ‘significant increase’ in the number of national implementation reports by UN Member States since the adoption of UNSCR 2270.
The report contains numerous recommendations to the UN Security Council as listed below. It is notable that the intensely political Security Council in recent years has often failed to adopt the recommendations of its Panel of Experts. The Security Council has nonetheless now renewed the mandate of the Panel of Experts for a further 12 months. The recommendations contained in the new resolution are also reproduced below.
On 6 January, the Office of the Director of National Intelligence (DNI) released the official report on alleged Russian “activities and intentions” regarding the 2016 US elections. The report assesses an “influence campaign” by the Kremlin, whose aim was to undermine the US public’s faith in the electoral process and help Trump’s election chances through a blend of covert intelligence activity, such as cyber‑attacks, and overt pro-Trump propaganda.
On 29 December 2016, US President Barack Obama authorised sanctions against 11 Russian entities and individuals, including two key Russian intelligence services ─ the Federal Security Service (FSB) and Main Intelligence Directorate (GRU) ─ over alleged cyber-attacks against the Democratic National Committee (DNC) and attempts to influence the 2016 US election.
Four top GRU officers, including the Chief, Deputy Chief and First Deputy Chiefs, have been designated, along with three companies that provided material support to the GRU’s cyber operations. Two individuals have also been designated for using cyber-enabled means for personal financial gain.
This is the most extensive US response to a state-sponsored cyber-attack. Along with the Executive Order designation, the US State Department also declared 35 Russian government personnel as persona non grata, with a 72-hour notice period to leave the US. The Department also closed two estates in Maryland and New York that it claimed were used for “Russian intelligence-related purposes”.
Despite the US government’s strong response, evidence tying the GRU or FSB to a plan to influence the election is lacking. A 29 December Joint Analysis Report conducted by the Federal Bureau of Investigation and the Department of Homeland Security detailed Russian military and civilian intelligence services’ capabilities associated with cyber-attacks. But the report fell short in identifying any Russian intelligence election interference.
The timing of the sanctions is notable. They come less than a month before president-elect Donald Trump is sworn into office, leaving him to decide whether the latest sanctions should be lifted in a move contrary to what the majority of the Republican party want. It is unlikely the new designations will have a significant impact on either of the Russian intelligence agencies, which generally do not hold assets in the US and whose officials rarely travel there.
Nonetheless, the allegations that Russia was behind cyber operations that affected the US elections are serious and have driven Republications to hold Congressional hearings. Given the power of Congress in adopting sanctions and the traditional viewpoint held by Congressional Republicans that the US and Russia are strategic rivals, it is unclear whether the Trump administration could reset relations with Russia even if it was minded to do so. This uncertainty also affects other sanctions on Russia, including those related to the country’s annexation of Crimea. As a result, it remains unclear whether the US – and indeed the EU – will maintain or ease their Russia sanctions regime in 2017.
The individuals added to the sanctions list are as follows: