Following Turkey’s unilateral incursion into Northern Syria, a number of countries have imposed varying degrees of sanctions and other trade restrictions designed to curb business dealings with Turkey. Canadian businesses engaged in or contemplating activities involving Turkey should be carefully monitoring these developments.
Turkey initiated military operations in the Northeast region of Syria following the United States’ withdrawal of its troops from the area. The Turkish offensive is targeting Syrian-based Kurdish forces who were allied with the United States and other nations in the military campaign against Islamic State forces. The Turkish Government views these Kurdish forces as a terrorist entity on the basis of their links to the Kurdistan Workers’ Party, which for decades has sought autonomy in eastern Turkey.
On October 14, 2019, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued an Executive Order listing Turkey’s Ministry of Energy and Natural Resources, Ministry of National Defence, and three senior Turkish Government officials as designated persons with whom dealings are generally prohibited. OFAC blocking and reporting obligations are also now triggered in relation to certain property and interest in property owned or controlled by these individuals and ministries. To assist with the transition and implementation of the sanctions, OFAC has created three new General Licences that authorize certain limited activities that would otherwise be prohibited under the Executive Order.
It should be noted that OFAC has stated that it is prepared to impose additional sanctions as the situation in Northern Syria evolves. Turkey’s recent acceptance of a proposed ceasefire may decrease the likelihood that further sanctions are be implemented by the U.S.
Canadian and Other Measures
While Canada has not imposed formal economic sanctions against Turkey, Global Affairs Canada (GAC) confirmed on October 15, 2019 that it has temporarily suspended the issuance of new export permits to Turkey, particularly for military equipment and technology. Turkey is currently ranked as the third most significant non-US destination for the export and transfer of military goods and technology from Canada. The effect of Canada’s suspension on pre-existing export permits remains unclear; however, companies seeking to export military and dual-use items should be aware that any new applications for permits are unlikely to be approved by GAC.
Although this has yet to be made clear by the Canadian government, a policy of denial may also be applied to applications for brokering permits regarding Turkey. On September 1, 2019, Canada’s new brokering control regime came into force requiring that permits be obtained for arranging or negotiating a transaction that relates to the movement of certain military goods or technology from one foreign country to another foreign country. Further details are set out in our recent client alert, which can be reviewed here.
A number of countries in the EU, including Britain, France and Germany, have also suspended arms exports to Turkey.
Any economic sanctions imposed by Canada against Turkey could be implemented through the Special Economic Measures Act, the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law), and/or, in the unlikely case of sanctions from the United Nations Security Council, the United Nations Act.
We will continue to monitor developments in relation to trade with Turkey, and provide timely updates. In the meantime, businesses who currently engage, or are contemplating engaging, in transactions involving Turkey should assess the application of the OFAC sanctions and Canadian permit suspensions to their activities.