Turkey Sanctions
Turkey, due to its strategic position at the intersection of Europe and Asia, stands as a key geopolitical player on the international stage. As a NATO member since 1952, Turkey safeguards the alliance’s southeastern flank, which holds strategic importance given its proximity to the Middle East and the Caucasus. Since 2021, Turkey has led NATO’s Very High Readiness Joint Task Force (VJTF). Nevertheless, Turkey experiences tensions with certain neighboring countries, such as Greece (a NATO member since 1952) and Cyprus, due to territorial disputes in the Aegean Sea and the Eastern Mediterranean, leading to conflicts over maritime boundaries, human rights and offshore resources.
Striving for an independent foreign policy, Turkey balances Western interests with growing ties to the East, including Russia and China. However, its policies, including tensions with Greece, prompted Turkey in 2017 to undertake a “significant transaction” with a Russian defense company by purchasing the Russian-made S-400 surface-to-air missile system to enhance its defense capabilities. This system is capable of transmitting information about NATO aircraft to Russia, directly threatening the security of the United States and NATO as a whole (Turkey declared that the S-400 would not be integrated into NATO’s defense system). In response to the acquisition, activation, and tests conducted in 2020, the Trump administration, despite long-standing resistance to imposing sanctions in response to appeals from both Republicans and Democrats, ultimately imposed US sanctions against Turkey on December 14, 2020, under the Countering America’s Adversaries Through Sanctions Act (CAATSA). This followed the passage of the National Defense Authorization Act (NDAA) for Fiscal Year 2021 by Congress, which mandated the imposition of CAATSA sanctions against Turkey within 30 days of its enactment.
These measures underscored the risks associated with deepening military cooperation with Russia and posed new challenges for companies and their sanctions attorneys.
Sanctions on Turkey
Let’s examine Turkey CAATSA sanctions in more detail. The restrictive measures under CAATSA target Turkey’s procurement from Rosoboronexport (ROE), Russia’s main arms export entity (ROE is listed on the CAATSA List of Specified Persons (LSP) as an entity that is part of or acts on behalf of the defense sector of the Government of the Russian Federation, in addition to its identification in the LSP, the Department of the Treasury designated ROE on April 6, 2018, under E.O 13582 as supporting the Government of Syria). The S-400 surface-to-air missile system, when activated, could allegedly provide Russia access to U.S. data, including the locations of U.S.-made Greek F-16s and other NATO aircraft by transmitting radar data back to Russia. Despite years of warnings from NATO countries, Turkey purchased the S-400 systems amid political disagreements with Greece, subsequently activating them and conducting test launches in 2020 in the Black Sea, following the detection of six Greek F-16s by the S-400 radars.
Sanctions on Turkey were imposed through Executive Order (E.O.) 13849, targeting the Republic of Turkey’s Presidency of Defense Industries (SSB) pursuant to Section 231 of the Countering America’s Adversaries Through Sanctions Act (CAATSA) for knowingly engaging in a significant transaction with Rosoboronexport by procuring the S-400 surface-to-air missile system.
Based on Section 231 of CAATSA and E.O. 13849, the United States imposed five out of the twelve types of sanctions available under Section 235 of CAATSA against Turkish individuals and entities:
- A prohibition on granting specific U.S. export licenses and authorizations for any goods or technology transferred to SSB (Section 235(a)(2));
- A prohibition on loans or credits by U.S. financial institutions to SSB totaling more than $10 million in any 12-month period (Section 235(a)(3));
- A ban on U.S. Export-Import Bank assistance for exports to SSB (Section 235(a)(1));
- A requirement for the United States to oppose loans benefitting SSB by international financial institutions (Section 235(a)(4)); and
- Imposition of full blocking sanctions and visa restrictions (Section 235(a)(7), (8), (9), (11), and (12)) on Dr. Ismail Demir, president of SSB; Faruk Yigit, SSB’s vice president; Serhat Gencoglu, Head of SSB’s Department of Air Defense and Space; and Mustafa Alper Deniz, Program Manager for SSB’s Regional Air Defense Systems Directorate.
The Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury added SSB and certain individuals to turkey sanctions list. All property and interests in property of these persons within U.S. jurisdiction are blocked, and U.S. persons are prohibited from engaging in transactions with them. Due to the extraterritorial effect of U.S. sanctions, individuals and entities outside U.S. jurisdiction are also prohibited from participating in transactions with these persons.
It is also essential to note the 50 Percent Rule. Any entities that are directly or indirectly owned 50 percent or more by one or more blocked persons are also blocked and subject to the same sanctions restrictions.
Without a OFAC License, all transactions involving any property or interests in property of designated or otherwise blocked persons are prohibited. Prohibitions include making any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person, as well as receiving any contribution or provision of funds, goods, or services from any such person.
Authorization Under CAATSA (Countering America’s Adversaries Through Sanctions Act)
CAATSA grants the U.S. government, through delegated authority to the Secretary of State and the Secretary of the Treasury, the power to impose various sanctions against countries engaged in strategic cooperation with America’s adversaries, such as Russia, Iran, and North Korea.
CAATSA provides for twelve types of sanctions:
Denial of Assistance from the U.S. Export-Import Bank
The U.S. Export-Import Bank is prohibited from providing guarantees, insurance, credits, or participation in credits to support the export of goods or services to sanctioned persons. This restriction applies to all transactions related to exports involving sanctioned entities (CAATSA, Section 235(a)(1)).
Export Sanctions
Prohibition on issuing export licenses or other authorizations for the transfer of goods and technologies to sanctioned persons. (Refer to the Arms Export Control Act, 22 U.S.C. 2751 et seq.; the Export Administration Act of 1979, 50 U.S.C. 4601 et seq. eu a., in effect under the International Emergency Economic Powers Act, 50 U.S.C. 1701 et seq.; the Atomic Energy Act of 1954, 42 U.S.C. 2011 et seq.; and other statutes requiring prior U.S. government approval for the export or reexport of goods and services) (CAATSA, Section 235(a)(2)).
Restrictions for Financial Institutions
Prohibition for financial institutions from being designated as primary dealers of U.S. government debt instruments or serving as repositories of government funds. These measures aim to undermine the financial stability and international reputation of sanctioned banks, potentially affecting their ability to operate with government entities and participate in international financial markets (CAATSA, Section 235(a)(5)).
Prohibition on Loans from International Financial Institutions
The President may use U.S. influence in international financial institutions, such as the International Monetary Fund (IMF) or the World Bank, to block loans and credits that may benefit sanctioned persons (CAATSA, Section 235(a)(4)).
Procurement Sanctions
The prohibition on the U.S. government from purchasing goods or services from sanctioned persons limits their participation in government tenders and contracts, reducing their revenues and opportunities for economic growth (CAATSA, Section 235(a)(6)).
Restrictions on Foreign Exchange Transactions
Prohibition on foreign exchange transactions involving sanctioned persons, making it difficult for them to access international financial systems and conduct transactions in foreign currencies (CAATSA, Section 235(a)(7)).
Restrictions on Banking Transactions
Prohibition on credit transfers and payments between financial institutions related to the interests of sanctioned persons. This limits their ability to conduct international transactions and manage financial flows through global banking systems (CAATSA, Section 235(a)(8)).
Sanctions on Property Transactions
Prohibition on the acquisition, use, transfer, and other dealings with property within U.S. jurisdiction connected to sanctioned persons. This restricts the ability of entities to manage assets, make investments, and participate in international trade (CAATSA, Section 235(a)(9)).
Prohibition on Investment in Equity and Debt
Prohibition on sanctioned persons from raising capital in U.S. markets through the sale of stocks and bonds, which reduces their financial resources and capacity for development (CAATSA, Section 235(a)(10)).
Denial of Visas for Corporate Officers
Prohibition on issuing visas to corporate officers associated with sanctioned entities (CAATSA, Section 235(a)(11)).
Sanctions on Executive Officers
These measures may be imposed on the principal executive officers of sanctioned entities, limiting their ability to manage and participate in international operations. Sanctions may include travel bans, asset freezes, and other measures aimed at impacting the leadership of sanctioned organizations (CAATSA, Section 235(a)(12))
Prohibition on Loans from U.S. Financial Institutions
U.S. financial institutions are prohibited from providing loans or credit lines to sanctioned persons exceeding $10 million over a 12-month period, except where such funds are intended for humanitarian purposes, such as alleviating human suffering (CAATSA, Section 235(a)(3)).
Impact of Sanctions on Turkey
Turkey was excluded from the F-35 Joint Strike Fighter program as a preventive measure related to its purchase of Russian air defense systems, losing billions of dollars in contracts and being deprived of fifth-generation fighters. At the same time, Congress imposed a de facto arms embargo on Turkey, and after a long period of sanctions inactivity, the Trump administration eventually implemented measures under CAATSA.
The CAATSA sanctions against the Presidency of Defense Industries (SSB), which include a ban on the issuance of U.S. export licenses for any goods and technologies related to SSB, significantly limited Turkey’s ability to modernize and develop its defense systems. Approximately 35% of Turkish defense industry exports depend on American components. Turkish defense companies, such as TUSAŞ and Roketsan, among others, also faced difficulties obtaining and renewing Export Licenses, hindering the completion of both domestic and international projects:
- The contract for the supply of 30 T129 helicopters was not fulfilled because Honeywell could not obtain an Export License for the engines.
- Boeing CH-47 Chinook helicopters were delivered incomplete as BAE Systems also failed to obtain an export license for the Echidna Phase 2A system.
- The sanctions also affected military equipment, aircraft, and weapons such as the E-7T AEW&C Peace Eagle, KC-135 Stratotanker, P-235 Meltem II (CASA CN-235 Honeywell), GE Aviation F110 jet engines for the F-16 (licensed from TUSAŞ Engine Industries), Korea Aerospace Industries KT-1T, Phalanx MK-15 Block 1B, and Raytheon Rolling Airframe Missile MK-49 mod-3.
While OFAC sanctions are an effective punitive measure against Turkey for purchasing the S-400 at the moment, the long-term damage to the transatlantic security structure outweighs any goals of OFAC sanctions. Sanctions against Turkey serve as an instrument of war that will inflict significant collateral damage on American business, as well as on the military potential and combat readiness of a key member of the transatlantic alliance and the U.S.-Turkey relations.
Meanwhile, in the context of recent political developments, Turkey has also been subjected to other sanctions measures, including for violations of U.S. export control related to the supply of semiconductor chips and other U.S.-made parts to Russia. (There were also statements by U.S. Assistant Secretary of Commerce Matthew Axelrod regarding the introduction of new measures, August 2024).
Turkey sanctions Screening
Our OFAC attorneys emphasize that when conducting business with partners from Turkey, it is crucial to comply with OFAC sanctions by screening your clients and partners against current sanctions lists, such as the Specially Designated Nationals and Blocked Persons List (SDN List) Title 31 (CFR) Part 501. When conducting financial transactions with Turkish counterparties, it is necessary to develop and implement a comprehensive AML/CFT program (see related laws: USA PATRIOT Act, Bank Secrecy Act, BSA) that includes customer identification (KYC), thorough vetting, and identification of all clients to prevent participation in illegal financial operations. Utilize transaction monitoring systems to detect suspicious activities related to money laundering or terrorist financing. We also recommend conducting regular internal audits to ensure your AML/CFT program complies with current legal requirements.
If you are engaged in the export or import of goods and services with Turkey, you may need to obtain Special Licenses from U.S. regulatory bodies, such as the Bureau of Industry and Security (BIS) and OFAC, depending on the nature of the goods or services.
Violations of sanctions regimes and AML/CFT requirements can result in serious legal consequences, including fines, restricted access to financial services, and even criminal liability.
Turkey Sanctions Lawyer
Our sanctions attorneys have extensive experience navigating complex legal requirements and ensuring compliance with all 38 OFAC Sanctions Regimes. We offer comprehensive legal advice and support, including developing strategies to minimize risks and manage international business operations in a sanctions environment. If you have any questions or difficulties, contact us for professional assistance and protection of your interests.
Our legal team works closely with clients, providing them with up-to-date information on sanctions regimes and helping them adapt their business models to changing conditions. We also provide services in preparing necessary documents for obtaining licenses and permits required for conducting business under autonomous sanctions regime. Our specialists possess deep knowledge of international law and are ready to offer tailored solutions for each unique situation.
