US President Donald Trump on Thursday signed an executive order, paving the way for slapping tough sanctions on countries and foreign entities and individuals violating the Countering America's Adversaries Through Sanctions Act (CAATSA).
CAATSA, a newly-enacted US law that imposed sanctions on Iran, North Korea and Russia, has the potential to affect India's defence purchases as it is planning to buy five S-400 Triumf missile air defence systems from Russia.
As per the executive order released by the White House, the sanctions include prohibitions on certain financial transactions, blocking all property and interests in property, denial of export licences, visas and entry into the US.
It also imposed sanctions on the principal executive officer or officers of sanctioned persons.
Though India's purchase of the Russian missiles would violate sanctions under the CAATSA, the lawmakers have allowed the possibility of a presidential waiver for certain countries on a case by case basis.
In the recent 2+2 Dialogue held in New Delhi, US Defence Secretary James Mattis had said, "The sanctions aren't intended to adversely impact countries like India. They are intended to have an impact the sanctioned country, which is Russia. And so we'll work our way through the waiver decision as the days and weeks proceed, and we'll do that alongside our partner, India, as well."
He had also said that the US was working to impose CAATSA Section 231 in a way that is appropriate and lawful and to exercise that waiver authority only where it makes sense.
As per the executive order, a determination of CAATSA sanctions would prevent any US financial institution from making loans or providing credits to the sanctioned person totalling more than USD 10 million in any 12-month period, unless the person is engaged in activities to relieve human suffering and the loans or credits are provided for such activities.
In addition to prohibiting transactions in foreign exchange that are subject to US jurisdiction and in which the sanctioned person has any interest, the sanctions would prohibit transfers of credit or payments between financial institutions, or by, through, or to any financial institution.
The sanctions will also block all property and interests in property of the sanctioned person that are in the US and prevent any American from investing in or purchasing significant amounts of equity or debt instruments of the sanctioned person.
As part of the CAATSA sanctions, the Export-Import Bank will deny approval of the issuance of any guarantee, insurance, extension of credit, or participation in an extension of credit in connection with the export of any goods or services to the sanctioned person, the executive order said.
Also, US departments and agencies would be prohibited from issuing any specific license or grant any other specific permission or authority under any statute that requires the prior review or approval of the government as a condition for the export or reexport of goods or technology to the sanctioned person.
The US executive director of international financial institutions, like the International Monetary Fund and the World bank, have been directed to oppose any loan from them that would benefit the sanctioned person.
In a separate note, the Department of Treasury laid out the broad parameters of what would be considered as a significant transaction under CAATSA.
As per the note, "significant" transaction can be determined on the basis of its size, number, frequency, nature and the level of awareness of management and whether it is a part of a pattern of conduct and the nexus between it and a blocked person.
It also includes the impact of the transactions on statutory objectives, whether the transactions involve deceptive practices and such other factors that the Secretary of the Treasury deems relevant on a case-by-case basis.
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