In November 2019, the EU adopted financial sanctions against Turkey. The USA has also been threatening to impose sanctions for months – albeit with different backgrounds. Economic operators who maintain business relations with Turkey should therefore monitor further developments closely.

EU sanctions against Turkey

The background of the EU sanctions are Turkey's natural gas drillings in the Mediterranean Sea, which the EU believes violate the sovereign rights of its member state Cyprus. In response to these drilling activities, Regulation (EU) 2019/1890 of 11 November 2019, which is based on the Decision CFSP 2019/1894 of the same date, was adopted. Up to now (as of 29 January 2020), the regulation does not contain any restrictions relating to goods, but only to persons, so-called financial sanctions: All funds and economic resources belonging to persons, entities and bodies listed in Annex I of the Regulation are frozen. It is also prohibited to make funds or economic resources available to these persons, directly or indirectly.

According to the recitals of the Regulation and Decision, persons, entities and bodies responsible for or participating in, the drilling activities off Cyprus may be listed, for example by planning, undertaking preparatory actions or providing support for such activities. Financial or technical assistance also constitutes a listing risk.

However, at present neither Annex I of Regulation (EU) 2019/1890 nor the Annex to Decision CFSP 2019/1894 contain any entries (as of 29 January 2020).  Therefore, direct practical effects do not (yet) result from the Regulation. Nevertheless, it has more than just symbolic significance: its adoption should be seen as a clear sign of political solidarity between the EU and its Member State Cyprus. Despite the close economic ties between the EU and NATO partner Turkey, the EU has laid the basis for sanctions that can be "activated" at any time by adopting the regulation. The EU thus signals its ability to act.

US sanctions against Turkey

The background of the US sanctions against Turkey is the Syrian conflict. In October 2019, Turkey sent troops to northern Syria to take action against the Kurdish Yekîneyên Parastina Gel (People's Defence Forces - YPG) and occupy the areas located there in order to establish a "security zone".

The YPG are part of the Syrian Democratic Forces (SDF), which is allied with the USA. Therefore, there is a perception in the USA that Turkey's actions undermine the successes achieved against the so-called Islamic state. In response, the US President had already imposed sanctions on Turkey in mid-October 2019 and announced further consequences. These included the freezing of accounts of Turkish ministers and the imposition of a punitive duty of 50% on Turkish steel imports. However, the sanctions were lifted again at the end of October 2019 by an Executive Order of the US President - against the will of many members of Congress.

Congress continues to be critical of Turkey's behaviour. The House of Representatives has already passed a bill that also provides for sanctions against Turkey (Protect Against Conflict by Turkey Act - PACTA). The PACTA draft, which includes measures against persons responsible for or associated with the invasion of northern Syria, is currently being voted on in the Senate, the second chamber of the US Congress. It is uncertain whether the bill will find approval in the Republican-dominated Senate. In the Democrat-dominated House of Representatives, however, the bill has already received cross-party support: in a bipartisan vote, a large number of Republican MPs also voted in favor of the bill.

If the Senate votes in favor of the bill, possible sanctions include freezing assets and visa restrictions. Likewise, no further US weapons systems are to be sold to the Turkish government.

A second sanctions bill targeting Turkey is being prepared at the moment. The Promoting American National Security and Preventing the Resurgence of ISIS Act has not yet passed Congress but is being discussed. Should the bill be enacted, it will include restrictions regarding Turkish officials, foreign persons providing arms to Turkey and financial institutions, which facilitate financial transactions for the Turkish armed forces.

Outlook

Turkey's role in the Northern Syria conflict is also viewed critically in the EU. Although the EU Member States have so far not imposed an arms embargo on Turkey, the Federal Government has already announced that it will no longer issue licenses for military equipment that could be used in Northern Syria by Turkey. It cannot be ruled out that the EU will also react to the situation in Northern Syria with its own measures. Overall, caution is therefore currently called for in business relations with Turkey. They are at least potentially critical in terms of sanctions and embargo law. As soon as concrete listings are made by the EU, the so-called "indirect prohibition of provision" must be complied with.

Dr Lothar Harings, Attorney
Franziska Zegula, Attorney,
both Hamburg