CAATSA
US statute of August 2, 2017 that requires the president to impose secondary sanctions, notably on anyone engaging in a significant transaction with Russia's defense or intelligence sectors.
CAATSA is the US federal statute that requires the president to impose secondary sanctions. The Countering America's Adversaries Through Sanctions Act (CAATSA), Public Law 115-44, became law on August 2, 2017, against the White House's preference and by veto-proof majorities. It covers Iran, Russia and North Korea. What sets it apart is the verb: where IEEPA (International Emergency Economic Powers Act) permits, section 231 compels. The president must impose at least five of the twelve measures on the section 235 menu on any person that knowingly engages in a significant transaction with Russia's defense or intelligence sectors. Section 216, for its part, subjects any easing of Russia sanctions to congressional review. The menu runs from denial of export licenses, through a ban on loans of more than $10 million in any twelve-month period from US banks, up to full blocking of executives' assets. It was first used on September 20, 2018, against China's Equipment Development Department and its director, over Su-35 fighters and S-400 equipment. Then on December 14, 2020, against Turkey's SSB (Savunma Sanayii Başkanlığı), the defense procurement agency of a NATO ally, for its S-400 transaction with Rosoboronexport. The measures chosen: denial of licenses, a ban on US loans above $10 million, and an SDN (Specially Designated Nationals) listing for its president, Ismail Demir. For underwriting, the statute works like political risk in reverse. A sovereign buyer that picks a Russian arms supplier can lose, in one decision, access to dollar funding, US parts and export licenses, which reaches non-payment risk, export credit and cargo alike. The law allows case-by-case waivers, which leaves the political calendar with the final word.
Textbook case: a $30 million syndicated loan funds a third country's arms procurement agency, with non-payment cover placed in the market. US banks hold 40 percent of the syndicate. The agency buys a Russian surface-to-air system and is hit, under section 231, with the ban on US loans above $10 million over twelve months. The US share, 30,000,000 x 0.40 = 12,000,000 dollars, can no longer be drawn or rolled over, and the underwriter has to read whether the policy treats that funding gap as an act of a foreign government or as the consequence of an excluded sanction.
Countering America's Adversaries Through Sanctions Act, CAATSA section 231, CAATSA sanctions, Public Law 115-44, CAATSA section 235 menu, CAATSA Turkey S-400, CRIEEA
Follow the research
One letter a week. First, the week's underwriting note, when one is published: a dated, argued decision, signed by Paul Bernardski. Then what the observatory published on cyber risk, political risk and insurance. No account, no tracking.
No spam, one-click unsubscribe, no data ever sold.