Over the past two years, sanctions have proven to be among the Trump administration’s most frequently utilized foreign political tools. The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has enacted several rounds of sanctions against Russia and Iran, perhaps most notably the Countering America’s Adversaries Through Sanctions Act (CAATSA) in August 2017. Sanctions can be used coercively or punitively, and some experts have warned that over-utilizing sanctions could lead to a decrease in efficacy. As the Trump administration pressures Iran and Russia to alter their behavior, it risks undermining long-term U.S. interests in the Caspian Sea region by indirectly punishing U.S. regional partners. At the same time, countries that want to continue working with the United States as the third partner in a multi-vectored foreign policy offset by Russia and China will increasingly need to weigh the short- and long-term costs of working with each foreign partner.
To be certain, many of the U.S. sanctions against Russia and Iran predate the Trump administration. For example, many OFAC designations for Russian entities were implemented by the Obama administration for Russia’s political and military interference in Ukraine, including the 2014 annexation of Crimea and continued Russian support for separatists fighting in eastern Ukraine. In the case of Iran, the United States has imposed a variety of sanctions since the 1979 Islamic Revolution in order to address activities such as the state sponsorship of terrorism, malign activity in the Middle East, money laundering and other illicit financial behavior, and nuclear proliferation. While some of the U.S. sanctions were eased as part of the Joint Comprehensive Plan of Action (JCPOA), a multilateral nuclear accord signed in 2015, the sanctions were reinstated when the United States unilaterally withdrew from the JCPOA in May 2018.
U.S. sanctions against Russia and Iran under CAATSA and other OFAC designations are noteworthy for the potential security and economic implications they have for U.S. interests in the Caspian Sea region. Several U.S. partners in Central Asia and the South Caucasus have significant security and military-technical cooperation with Russia. Additionally, as full members of the Collective Security Treaty Organization (CSTO), Armenia, Kazakhstan, the Kyrgyz Republic, and Tajikistan could be particularly vulnerable to secondary sanctions. Initial interpretations of CAATSA’s language indicated that countries that conduct business with Russia in violation of CAATSA would be warned by the State Department to change their behavior before secondary sanctions would be imposed, and then the secondary sanctions would be at the President’s discretion. The first case of CAATSA-related secondary sanctions occurred on September 2018 when the State Department and OFAC sanctioned the Equipment Development Department of China’s Ministry of Defense under Section 231 for its purchase of 10 Su-35s and S-400 missile system-related equipment from Russia’s Rosoboronexport. Although the primary target was Russia, the enforcement of secondary sanctions against China demonstrated the Trump administration’s intent to abide by the letter of the law.
Despite the CAATSA-related secondary sanctions against China, other U.S. partners have not been deterred in pursuing significant purchases of Russian military technology. Turkey announced in July 2017 that it would purchase the S-400 missile system from Russia and signed an agreement finalizing the deal in December 2017. Turkish government officials stated that the threat of sanctions would not deter Turkey from obtaining the S-400, but U.S. lawmakers made it clear that Turkey could not purchase the advanced Russian missile system and remain a member of the F-35 Joint Strike Fighter program, as the S-400’s intelligence technology would compromise the F-35’s stealth capabilities. Despite the fact that Turkey is a NATO ally and host to a major U.S. airbase at Incirlik, President Trump is under growing pressure from the U.S. Congress to sanction Turkey under CAATSA. The message to other U.S. partners is that not even allies will be spared secondary sanctions, should they choose to align with Moscow.
Separate from CAATSA-related sanctions on military purchases from Russia, Iranian sanctions impact connectivity between the Caspian Sea region and Central and South Asia. As part of his August 2017 remarks outlining the administration’s Strategy in Afghanistan and South Asia, President Trump urged India to take a more active role in Afghanistan, “especially in the area of economic assistance and development.” India invested $500 million in the development of cargo facilities and transport infrastructure at the Iranian port of Chabahar, in part to open new trade routes into Afghanistan and Central Asia and increase regional connectivity. Initial wheat shipments from India reached Afghanistan via Chabahar and the Zaranj-Delaram highway in November 2017 and demonstrated the viability of the route for regional trade. Yet there continues to be some debate as to whether Chabahar is subject to Iranian sanctions or, more accurately, whether entities that conduct business at Chabahar are subject to secondary sanctions. In November 2018, the State Department announced that the development of the port at Chabahar, the connected railway project, and Iranian petroleum shipments to Afghanistan would be exempt from sanctions, but by May 2019, the United States ceased extending exemptions for countries—including India—that imported Iranian petroleum. Meanwhile, India continues to struggle to find a company willing to operate Chabahar’s cargo facilities since no entity wants to risk triggering secondary sanctions.
Chabahar also plays a key role in the long-planned North-South Transport Corridor Initiative (NSTC). Originally based on an agreement signed by Russia, Iran, and India in 2002, the trade corridor was intended as a series of sea, rail, and road routes connecting Russia to South Asia. After many years of inactivity, the NSTC has received renewed attention over the past five years as infrastructure projects around the Caspian region have been completed. In addition to Azerbaijan’s extensive work on its road and rail routes, China and Uzbekistan have joined the Kazakhstan-Turkmenistan-Iran railway corridor. Prior to Chabahar’s completion, it was anticipated that Iranian ports at Bandar Abbas, Amirabad, and Astara would be major hubs for potential NSTC routes. While the Trump administration has not announced that it will pursue secondary sanctions against Azerbaijan and its Central Asian neighbors for their continued trade with Russia and Iran, perhaps that is only because U.S. officials are still privately working to persuade regional partners to seek other opportunities.
So what does this mean for the countries in the Caspian Sea region? First, countries should not anticipate they will receive exemptions in order to continue doing business with sanctioned entities. China has already been sanctioned for its military-technical cooperation with Russia, and Turkey might soon face secondary sanctions as well. Second, countries in the Caspian Sea region that continue to engage with Russia while simultaneously receiving U.S. security assistance might be able to avoid secondary sanctions on the grounds that sanctions would harm the vital national security interests of the United States. However, those countries could still see further reductions in U.S. assistance, which in turn will lead to decreased bilateral engagement. Finally, some countries could increasingly be forced to choose between their major partners. As full members of the Eurasian Economic Union with economies directly connected to Russia’s economy, Armenia, Kazakhstan, and the Kyrgyz Republic are especially vulnerable to secondary sanctions from the United States and the second-order effects of Russian counter-sanctions against the United States. On the other hand, actively choosing closer cooperation with the United States could present some countries with unprecedented opportunities.
At the same time, there will be long-term consequences for the United States if it alienates its regional partners through secondary sanctions. As U.S. partners look for ways to evade sanctions in order to continue working with Russia and Iran, eventually the United States could find itself excluded from Caspian cooperation. But with the United States increasingly focused on finalizing a peace deal with the Taliban, regional economic development is going to become even more important for Afghanistan’s future. Afghanistan’s prosperity requires cooperation among, and with, its regional neighbors. Sanctions are only effective when they are calibrated and enforceable, and achieving U.S. strategic objectives in the long term might require making some concessions in the short term.
The views expressed are those of the author and do not represent the position or policy of the U.S. government, the Department of Defense, or the National Defense University.