Will Covid-19 unwind global sanctions regimes? UN calls for change

Leading figures at the United Nations have called on member states to ease their sanctions regimes in the wake of the Covid-19 crisis. The interventions follow increased tensions between Iran and the US, which imposed fresh sanctions last week as part of its “maximum pressure” campaign against Iran.

Multinational companies – continually restricted by the ever-expanding global sanctions framework of recent years – will be watching closely to see if the international response to the crisis might precipitate an opening up of previously fettered global trade and financial transactions.

In a letter to the G-20 group of industrialised powers, UN Secretary-General António Guterres explicitly asked leaders to forgo sanctions in vital areas:

"I am encouraging the waiving of sanctions imposed on countries to ensure access to food, essential health supplies, and COVID-19 medical support.” 

The UN, as an international body and sometime mediator, has long been critical of the overuse and unilateral use of financial sanctions, particularly by the United States. National legislation imposing sanctions usually incorporates opt-outs for humanitarian purposes, but the difficulties involved in proving compliance often represent a de facto barrier to their practical exercise. This is a reality the UN has long sought to highlight, and one set to be exacerbated by the global health crisis brought on by the pandemic.

The UN High Commissioner for Human Rights, Michelle Bachelet, also added her voice to the calls on Tuesday, publicly stressing the strain on global medical systems caused by sanctions, particularly those that target economic sectors without discrimination:

“At this crucial time, both for global public health reasons, and to support the rights and lives of millions of people in these countries, sectoral sanctions should be eased or suspended,” she said. Adding: In a context of global pandemic, impeding medical efforts in one country heightens the risk for all of us."

Ms. Bachelet named Iran, Cuba, the Democratic People’s Republic of Korea, Venezuela and Zimbabwe as a particular concern, and it is in relation to these countries in particular that we can expect to the UN to lobby its members initially, with others potentially following as Covid-19 takes hold over parts of Africa.

Significantly, Ms. Bachelet referenced not just the sanctions regimes themselves but “over-compliance with sanctions by banks” as a problem. This reflects a longstanding complaint of international businesses, that even when they are in compliance with sanctions legislation, they find it near impossible to transact in certain jurisdictions due to the defensiveness of the financial institutions upon whom they rely for funding.

Whilst the European Union will likely be receptive to the UN’s efforts, success in easing and establishing waivers within the notoriously tough framework of the United States will prove difficult for the organisation in the weeks and months ahead; and there is little actionable censure for not following the UN guidance. In the UK – yet to map out its own post-Brexit sanctions trajectory – companies will be alert to signals that a more ameliorated framework may be on the horizon.