This post is part of a symposium on economic sanctions and TWAIL, presented in partnership with the Yale Journal of International Law.
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Since the end of World War II, financial imperialism—which focuses on economically coercing and controlling state and non-state actors—has been the dominant brand of imperialism. And the United States has been its preeminent practitioner. Amongst other things, the U.S. government has used this coercive power to implement sanctions policies of unparalleled scope and impact. As Aslı Bâli and Aziz Rana have argued, these American sanctions programs have often “impose[d] widespread financial distress on… population[s], all with the aim of telling foreign states that if they refuse U.S. directives they will be left unable to provide the basics for their citizens.”
As with all empires, the U.S. government’s imperialism has both depended upon and generated an army of colonizers. Under older territorial forms of imperialism—which involved capturing foreign territories and transforming them into colonies—the “colonizer” included government bureaucrats who developed and implemented colonial laws and policies, as well as private persons who lived and worked in the colony. As theorists like Albert Memmi have argued, these colonizers often participated in the colonial project because of the economic advantages they received, typically at the colonized’s expense.
In this current moment of U.S. financial imperialism and economic sanctions, a host of “new” colonizers have emerged. These colonizers include private plaintiffs holding unsatisfied civil judgments against so-called terrorists, terrorist organizations, or countries designated by the U.S. State Department as state sponsors of terrorism. Through two federal statutes—the Terrorism Risk Insurance Act (TRIA) and the Iran Threat Reduction and Syria Human Rights Act (Iran Threat Reduction Act)—these private plaintiffs are able to enforce their final judgments against the properties of these terrorist entities, which have been blocked pursuant to certain U.S. sanctions regimes. Far from run-of-the-mill judgment enforcement mechanisms, TRIA and the Iran Threat Reduction Act empower private parties to leverage U.S. sanctions to line their—as well as their attorneys’—pockets while siphoning off financial resources from sanctioned countries, entities, and individuals.
Just as the colonizers of yesteryear used imperial policies to destroy and deplete the colonized’s resources, these new colonizers pillage in their own modern way, leveraging and expanding the U.S. government’s imperialist reach to attach and liquidate the sanctioned assets of foreign state and non-state actors often in or from the Global South.
Financial Imperialism
Modern day financial imperialism represents both a break from and continuation with the territorially-focused imperialism that reached its apex in the late nineteenth and early twentieth centuries. While this older, predominantly European imperialism revolved around direct military conquest and occupation of territory, it was substantially driven by capitalist interests, much like the financial imperialism of today.
European territorial imperialism restructured the social, political, and economic relations of the colonized in order to produce a flow of human and natural resources that could be used both as a source of investment for European capital and market for European goods. Thanks to these imperial practices European powers were able to create a dependent relationship running from the colony to the empire that was crucial to the development of modern capitalism and industry in Europe.
Financial imperialism retains the capitalist motives of European territorial imperialism without requiring or necessitating territorial control. Instead, financial imperialists dominate state and non-state actors by manipulating and controlling international financial markets, investments, and trade. While these imperialists aim to ensure global capital can freely and profitably move through the system, they are particularly focused on keeping recalcitrant and disobedient state and non-state entities in check. Since global capital needs compliant countries and a stable system to operate profitably, preventing these disruptors from destabilizing or otherwise threatening that system is critical.
For the United States, economic sanctions have become an increasingly important tool both for maintaining this finance-driven capitalist imperium and disciplining actors that operate outside the U.S.-dominated global order. By leveraging the U.S. dollar’s hegemonic role in global trade and finance, the United States has implemented sanctions regimes that isolate and deplete the resources of state and non-state entities threatening U.S. interests without having to resort to kinetic war. As part of these imperialist sanctions policies, the U.S. government has deployed modern day colonizers and provided them with financial incentives to promote its sanctions agenda. TRIA and the Iran Threat Reduction Act are part of this effort to transform certain kinds of private parties into the system’s newest colonizers.
TRIA and the Iran Threat Reduction Act
Passed in the wake of 9/11, TRIA gives plaintiffs with final judgments against a “terrorist party on a claim based upon an act of terrorism or for which a terrorist party is not immune” the ability to execute against or attach in aid of execution the “blocked assets” of that terrorist party, including the blocked assets of its agencies or instrumentalities, in order to satisfy plaintiffs’ compensatory damages. While excluding certain specific types of properties, TRIA broadly defines a blocked asset as “any asset seized or frozen by the United States under… [the] Trading With the Enemy Act [TWEA]… or under… the International Emergency Economic Powers Act [IEEPA].”
To different degrees, IEEPA and TWEA give the U.S. president broad authority to sanction other countries, entities, or individuals in times of national emergency or war. Before 1977, presidents exercised this sanctions power mostly through TWEA, a World War I-era law that had been expanded over time. Since its passage in 1977, IEEPA—which sought (albeit unsuccessfully) to reign in the expansive Executive powers created by TWEA—has been the primary basis for U.S. sanctions, though TWEA still remains relevant.
Because an asset must be blocked pursuant to TWEA or IEEPA in order to be attached under TRIA, plaintiffs’ ability to use TRIA to execute on their judgments explicitly depends upon those other statutes. That means plaintiffs’ TRIA attachment efforts effectively rely upon the reach and scope of U.S. sanctions, as both TWEA and IEEPA are at the heart of modern U.S. sanctions policy.
In addition to TRIA, in 2012, Congress passed the Iran Threat Reduction Act to authorize specific groups of plaintiffs holding judgments against Iran to execute against particular assets belonging to Iran’s central bank. Those assets were previously blocked under an IEEPA-authorized sanctions regime. Again, like TRIA, plaintiffs’ judgment enforcement opportunities under the Iran Threat Reduction Act depend upon the reach of U.S. sanctions.
Reinforcing U.S. Imperialism
Like the colonizers of old, plaintiffs bringing judgement enforcement actions under TRIA and the Iran Threat Reduction Act reinforce and bolster U.S. financial imperialism in two ways. First, these judgement enforcement efforts help to further discipline and financially punish sanctioned state and non-state actors by negatively impacting their ability to do business. Second, TRIA and Iran Threat Reduction Act plaintiffs help expand and extend the reach of U.S. financial imperialism by facilitating the permanent confiscation of sanctioned assets—a practice generally disfavored by the modern U.S. sanctions regime but reminiscent of older, territorial forms of imperialism.
To begin with their disciplining function, judgment enforcement efforts under TRIA and the Iran Threat Reduction Act reinforce U.S. sanctions’ devastating impact on the ability of sanctioned entities to transact in a globalized economy. U.S. sanctions can completely cut off a non-state or state entity from critical international financial networks and trade. As applied to non-state entities, these sanctions measures can cripple livelihoods and the overall wealth of persons and organizations. As applied to state actors, they can do great damage to the economic circumstances of a country and its citizens by, for example, causing the national currency to lose value, increasing inflation and unemployment, and making it harder to obtain basic necessities, like food and medicine.
U.S. sanctions can also punish state and non-state actors through more indirect forms of financial isolation. Operating in regions that are subject to significant sanctions restrictions comes with increased financial cost and risk for organizations and entities that must comply with sanctions laws. As a result, businesses, especially financial institutions, often choose not to operate in these risky areas, especially where the expected economic return is low. This phenomenon—which is known as “de-risking”—can lead to slower economic growth in impacted countries and regions.
These trends are reinforced by judgment enforcement efforts under TRIA and the Iran Threat Reduction Act. From directly targeting the assets of foreign states to pursuing properties of other, independently sanctioned persons and entities—like central banks and foreign businesses—plaintiffs bringing suit under TRIA and the Iran Threat Reduction Act make it harder for these entities to do business. They do so by subjecting these actors’ blocked assets—which may be critical to their business or financial dealings—to attachment and execution to satisfy outstanding U.S. court judgements—judgements which have often been issued without the participation of those so-called terrorist entities. Recent TRIA cases brought against Afghanistan’s central bank—which have deprived the Afghan state and people of access to much needed U.S. dollar reserves—are a stark case in point.
As for their imperial expansionist consequences, judgment enforcement efforts under TRIA, as well as the Iran Threat Reduction Act, arguably expand upon the largely disfavored practice of permanently confiscating the blocked assets of sanctioned individuals and entities. Permanent confiscation means the permanent transfer of ownership in an asset from the original owner or holder of a beneficial property interest to another person or entity.
The permanent confiscation of sanctioned assets—especially private property—has long been controversial in the United States and tightly circumscribed. For example, under IEEPA and TWEA, permanent confiscation of sanctioned properties is allowed only in certain enumerated circumstances—including during times of war—and, then, only by the U.S. government. The government can also permanently confiscate the assets of actors engaged in violating sanctions through criminal or civil forfeiture proceedings. For example, under the federal civil forfeiture statute, 18 U.S.C. § 981(a)(1), the government can bring civil forfeiture claims against property that is derived from proceeds traceable to violations of either IEEPA or TWEA.
Outside of these exceptions, the government is generally prohibited from permanently confiscating assets blocked under its sanctions authority. That being said, sanctions policies can affirmatively transfer wealth from sanctioned countries to the sanctioning country in other, more indirect ways. This can occur where sanctions bolster or protect domestic industries. For example, in the 1990s, Congressional representatives from oil-producing U.S. states supported tightening sanctions on Iraq, based in part on concerns that Iraqi oil would compete with the domestic U.S. oil industry.
But while these indirect forms of wealth transfer are substantial and troubling, they do not change the fact that the direct confiscation of sanctioned assets remains limited under U.S. law. Private judgment enforcement efforts under TRIA and the Iran Threat Reduction Act arguably upend that default position. They do so both by allowing private parties to participate in confiscation efforts and by permitting them to do so even if there are no armed hostilities or war with the terrorist party in question. Together, these enforcement efforts expand the sheer volume of efforts to permanently confiscate blocked assets, as well as the circumstances under which confiscation can occur.
Whichever way you cut it, sanctions’ new colonizers profit at the expense of the colonized.
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One might respond to all this by arguing that TRIA and the Iran Threat Reduction Act simply right grievous wrongs by compensating private persons injured in terrorist attacks. Certainly, that is the avowed purpose of both laws. But, as this short post demonstrates, that is not their only consequence. TRIA and the Iran Threat Reduction Act are part of a broader arsenal of U.S. sanctions’ tools that punish recalcitrant state and non-state actors through economic coercion that depletes the resources of those actors while financially benefitting those working—whether directly or indirectly—on behalf of the imperialist U.S. state.
This post is based upon the author’s forthcoming article in the Harvard National Security Journal, “How Private Actors Are Shaping U.S. Sanctions.”
