EU Lebanon Sanctions: First Appraisals

2021-09-27    |   

EU Lebanon Sanctions: First Appraisals

Sanctions have become a prominent feature of international politics in an increasingly multipolar world. Today, Lebanon finds itself at the centre of this new frontier. 


On 30 July 2021, the European Council adopted Decision 2021/1277 and Regulation (EU) 2021/1275, by which it agreed a legal framework for the imposition of sanctions on designated individuals and entities in Lebanon. The new regime comprises two basic elements: (i) a travel ban, which prohibits designated persons’ entry into or transit through the member states of the European Union; and (ii) financial sanctions, which target the financial resources of designated persons by freezing any funds or assets located within the territory of the EU and prohibiting the making available, directly or indirectly, of any funds or economic resources for the benefit of designated persons. Unlike the United States, EU sanctions do not purport to have any extraterritorial effect, which means that they apply only to acts carried out within the territories of EU member states, as well as the acts of EU nationals.


The Framework for Designation: Who Can Be Sanctioned?


The Council Decision sets out parameters for the designation of persons under the new regime. It provides that the following categories of person can be designated:


“(a) natural persons responsible for undermining democracy or the rule of law in Lebanon through any of the following actions:


(i) obstructing or undermining the democratic political process by persistently hampering the formation of a government or by obstructing or seriously undermining the holding of elections;


(ii) obstructing or undermining the implementation of plans approved by Lebanese authorities and supported by relevant international actors, including the Union, to improve accountability and good governance in the public sector or to implement critical economic reforms, including in the banking and financial sectors and including the adoption of transparent and non-discriminatory legislation on the export of capital;


(iii) serious financial misconduct concerning public funds, insofar as the acts concerned are covered by the United Nations Convention Against Corruption and the unauthorised export of capital’


(b) natural persons associated with persons designated under point (a)”.


There are several apparent difficulties with this framework.


First, with the exception of the provision dealing with corruption and serious financial misconduct, the parameters are strikingly imprecise. For example, what kinds of acts can properly and consistently be regarded as “obstructing or undermining the democratic political process”? How is one to determine which persons are to be characterised as “persistently hampering the formation of a government”, as opposed to making legitimate political claims and demands in the context of protracted multiparty negotiations? Government formation negotiations, particularly those in pursuit of the so-called “national unity” governments seemingly favoured by European states, involve a multitude of stakeholders making competing demands and claims to legitimate authority. It is difficult to envision how one could determine which party is to be held responsible for “hampering” the formation of a government in that context without imposing some normative judgment as to whose political claims are legitimate and whose are not. That, in turn, looks straightforwardly like an exercise of illegitimate foreign interference. 


Second, and perhaps most importantly, these categories are liable to political manipulation, both at home and abroad.


Within Lebanon, the introduction of these measures may have the perverse effect of further entrenching and incentivising sectarian mudslinging between rival political factions, as each party seeks to evade the prospect of being sanctioned whilst simultaneously attempting to justify the imposition of sanctions against its opponents. The result might be the further ossification of political life and internal consolidation of Lebanon’s various sectarian warlords.


As to the EU member states themselves, the new sanctions framework could be used as an instrument of partisan and quasi-imperial interference with Lebanon’s internal affairs. Although there is little doubt that the entire ruling class in Lebanon could be legitimately accused of undermining the democratic political process (such as it is) in the years since the civil war, there has been no indication that the EU intends to impose sweeping sanctions on this class in its entirety. Who, then, is to be sanctioned? The nature and breadth of the designation powers under the new regime is such that their exercise is likely to be highly discretionary and vulnerable to abuse. EU member states and their allies have a range of associates and proxies within Lebanon’s constantly shifting political terrain – a discretionary sanctions regime of this kind is liable to be used as a covert means of advancing their political and economic interests.


Financial Measures: “Smart” Sanctions or Economic Suffocation?


Subject to the concerns identified above in relation to the parameters for designation, the case for imposing travel bans on members of Lebanon’s political class is fairly compelling. For those embroiled in decades of corruption, many of whom have assets and properties hidden away in Paris or Milan, the threat of a travel ban may go some way towards loosening their uncompromising grip on the institutions of state power. The position is markedly different in relation to financial sanctions, however.


Until relatively recently, international sanctions generally took the form of trade sanctions, i.e. import and export restrictions on a state which could rise to the level of a comprehensive blockade or embargo. Measures of this nature have devastating human consequences. In Iraq, UNICEF estimated that upwards of 500,000 children under the age of five may have died as a result of the brutal embargo imposed upon the Iraqi state in the 1990s. Famously, when this figure was put to her in the course of a 60 Minutes television interview in 1996, Madeleine Albright, then Secretary of State for the United States, said that the price of half a million children dead was “worth it”.


Partly in recognition of these staggering human costs, and the fact that trade sanctions often have the perverse effect of entrenching the target regime’s grasp on state power as opposed to weakening it, the period since the early 2000s has seen a general shift away from comprehensive trade sanctions. The move towards so-called “smart sanctions”, which target the financial resources of individual designated persons and entities rather than entire states, are more sophisticated financial sanctions regimes. They include various exemptions for the provision of reasonable living costs and humanitarian necessities, subject to authorisation by national authorities.


Under the new regime of sanctions targeting Lebanon, Article 4 of Regulation (EU) 2021/1275 provides a helpful illustration of the framework of targeted sanctions and exemptions. It provides as follows:


By way of derogation from Article 2 [which imposes an asset freeze and a prohibition on making funds available to designated persons] the competent authorities may authorise the release of certain frozen funds or economic resources, or the making available of certain funds or economic resources, under such conditions as they deem appropriate, after having determined that the provision of such funds or economic resources is necessary for humanitarian purposes, such as delivering or facilitating the delivery of assistance, including medical supplies, food, or the transfer of humanitarian workers and related assistance or for evacuations from Lebanon”.


Although this approach appears attractive in principle, the reality is starkly different. In practice, even so-called “smart sanctions” are likely to have sweeping effects on a small national economy such as Lebanon. The legal risks involved, as well as the significant costs associated with introducing adequate compliance procedures, mean that commercial parties and financial institutions will often prefer not to conduct business in a country which is the subject of a sanctions regime. This point was recognised by the International Court of Justice in its Order of 3 October 2018 in the case of Islamic Republic of Iran v. United States of America. The United States had argued that its sanctions measures did not create a risk of irremediable prejudice in relation to the humanitarian needs of the Iranian people because the applicable legal regime included broad authorisations and exemptions to allow for humanitarian-related activity. The Court emphasised, however, that US sanctions measures made it significantly more difficult in practice for Iran and Iranian people to engage in the financial transactions necessary to meet basic humanitarian needs (at [89]):


“Furthermore, the Court notes that, while the importation of foodstuffs, medical supplies and equipment is in principle exempted from the United States’ measures, it appears to have become more difficult in practice, since the announcement of the measures by the United States, for Iran, Iranian companies and nationals to obtain such imported foodstuffs, supplies and equipment. In this regard, the Court observes that, as a result of the measures, certain foreign banks have withdrawn from financing agreements or suspended co-operation with Iranian banks. Some of these banks also refuse to accept transfers or to provide corresponding services. It follows that it has become difficult if not impossible for Iran, Iranian companies and nationals to engage in international financial transactions that would allow them to purchase items not covered, in principle, by the measures, such as foodstuffs, medical supplies and medical equipment.”


By the same token, the imposition of financial sanctions on designated individuals in Lebanon is likely to exacerbate an already suffocating economic crisis, described by the World Bank as a severe and prolonged economic depression likely to rank amongst the most severe episodes of crisis globally since the mid-nineteenth century.


This article is an edited translation from Arabic.


Keywords: Lebanon, EU sanctions, Sanctions, Economic resources, Economic crisis 

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