A Path Forward

Review of 'US Sanctions Cuba "to Bring About Hunger, Desperation and the Overthrow of the Government"', Chapter 8 of Sanctions as War (2021) by Helen Yaffe

Given the variety of perspectives on the US sanctions on Cuba, we thought it would be instructive to review a chapter on Cuba in the book Sanctions as War (2021), a collection of essays edited by Stuart Davis and Immanuel Ness. As a privately-owned and operated company that facilitates authorized remittances from the US to Cuba, we find ourselves in a situation with a long history, which has in the past been, and still today is, sometimes very fraught, and very sensitive, dealing with questions of national sovereignty, security, difference in values, and human emotions. To create value to our customers, potential customers, and stakeholders in the long term requires that we build bridges and to contribute to mutual respect, dialogue, and diplomacy on both sides of the Florida straits. Our hope is that by reviewing Yaffe’s chapter in Sanctions as War, we will be able to better understand critics of current US sanctions law in Cuba, contribute to fostering dialogue from all stakeholders, and find ideas for how we can continue to improve and innovate in our services offered for the benefit of our customers. We also hope to help readers to understand the true reach of current sanctions, as well as chart a path of praxis forward given current political and legal realities on both sides.

In Chapter 8 of Sanctions as War, titled 'US Sanctions Cuba "to Bring About Hunger, Desperation and the Overthrow of the Government"', Helen Yaffe argues that the embargo on Cuba is a blockade that is aimed at generating regime change, transgressing international law and Cuban national sovereignty. She explores the history of US sanctions on Cuba over the last 60 years with a particular focus on the past 30 years, from the time of the Clinton presidency through early Biden, pre-2022 developments that removed the limits on family remittances and reinstated donative remittances.

Yaffe’s perspective is one that many share, not just in academia but also in Cuba itself, within the Cuban government, and in socialist communities all over the world. We must be respectful of this perspective because it is one that is deeply felt, even at the upper echelons of government, and it comes with decades, even hundreds of years, of a lived history and experience. This is a perspective that is proud of its independence and its unique way of doing things even in the face of powerful opposition. It comes heavy with the feeling of a colonial past, of being the colonized and the dominated, of being disenfranchised, and the fear of being taken over by a set of capitalistic values that are inimical to national culture and identity and to its very moral foundations.

In critiquing Yaffe’s chapter, we focus less on questions about the intents & purposes of the US or the Cuban governments, because these are both organizations that are complex in more than a few ways, including across time periods, with different divisions and competing parts sometimes even aiming for different things or not even clear what they are optimizing for. Instead, we look dispassionately at the facts that Yaffe raises, while being empathetic to the ill-effects she documents, with an eye to checking the facts and perhaps gently making several re-characterizations of current sanctions law, and proposing a positive path forward.

We show that: first, the embargo in its current form draws a distinction between the Cuban state and the Cuban people, blocking much (but not all) economic activity by the state but not that of the Cuban people, as represented by the private sector; second, that while sanctions impose an additional friction in trade between Cuba and the US, today, overcompliance is causing many of the ill-effects that Yaffe documents, not the stated laws of the sanctions themselves; and that finally, efforts from private citizens and corporations on both sides of the straits should focus on working within existing regulations to build financial and import/export infrastructure that are compliant with the spirit and letter of US law, while respecting Cuban national sovereignty and international law.

 

A nuanced view of the embargo

One of the biggest points Yaffe makes consistently throughout her chapter on Cuba is that exports from Cuba are blocked, as are imports into Cuba from the US and the rest of the world (as long as they intersect with some kind of US carrier or bank or other middle-party).

In her section on the rapprochement with Cuba under Obama, Yaffe states in page 140 "Cuban goods still could not be exported to the United States", with one exception of 'artisanal charcoal'.

We think this characterization could be qualified. While her statement may bear witness regarding the exports and imports of state-owned companies in Cuba, much of the prohibition on import and exports from private Cuban entrepreneurs were removed in January 2015 and through 2016, which created licenses and exceptions to support the Cuban people.

For example:

• License Exception Support for the Cuban People, which authorizes the export and re-export of goods and supplies for personal use of anyone who is not a prohibited official or Party member, and for private sector entrepreneurs, as long as they do not ultimately contribute to revenues or operation of the Cuban state apparatus.
• Imports and exports of private, self-employed entrepreneurs are generally allowed, according to the Section 515.582 List.
• Hiring Cuban programmers who are also not working for the Cuban government were now authorized (Section 515.578)
• Removal of the limits on family and donative remittances in Section 515.571
• Opening of U.S. bank accounts by Cuban nationals in Cuba to receive authorized or exempt payments and to remit the proceeds to Cuba (Section 515.584(h))

It is important to note that with the exception of limiting donative and family remittances, which we believe were targeted because of the remittance intermediaries that were set up and owned indirectly by the Cuban military, and repealing the general license on U-turn transactions (not mentioned above), none of these licenses were ever modified, repealed or removed in subsequent administrations. In fact, the provision in Section 515.571 that remains today even allows for loans to private Cuban entrepreneurs, so long as they are not using property that was confiscated in the 1959 nationalization! In other words, it seems clear to us that the embargo has been vastly lifted for private entrepreneurs and private individuals who are not prohibited officials or party members.

Yaffe also brings up two more examples relating to the Cuban biotech sector, which we think are particularly important. We cover the first in this section of our review and the next in the second on overcompliance with sanctions. A lung cancer vaccine is being developed jointly between Roswell Park Cancer Institute in New York and the Center of Molecular Immunology in Havana, owned by BioCubaFarma, a Cuban state-owned company. Yaffe mentions the Roswell Park team had to jump through many hurdles through federal and state authorities. Efforts began in 2013, which was before the general softening of the embargo on Cuba under Obama. We think that today, the issue is generally straightforward and covered by Section 515.547 of the Cuban Assets Control Regulations which states that transactions regarding joint medical research with Cuban nationals for the purposes of research and marketing of FDA approved Cuban-origin pharmaceuticals are generally authorized. Furthermore, BioCubaFarma is not on the Cuban Restricted List, so we do not see a reason that such transactions would be blocked or considered prohibited.

In fact, the Cuban Assets Control Regulations do allow for other types of transactions with state-owned entities and the Cuban government in ways that benefit the Cuban people. For example, to "develop, repair, maintain, and enhance Cuban infrastructure that directly benefit the Cuban people". US carriers have roaming agreements with the Cuban national telecommunications company ETECSA.

 

Overcompliance with Cuban sanctions and export controls

As quoted in Yaffe, Dr Kevin Lee from Roswell Park says, "nobody understands the embargo anymore, it's so many regulations accrued over so much time". We sympathize with the sentiment, as wading through the layers of decades of regulations, additions and modifications in regulations was something we also had to go through ourselves during the process of starting our remittance service, as well as while writing this article and looking into the export control laws covered in this section. We think that this is the enduring casualty of the sanctions on Cuba: that even if something is legal, or needs a little push to be authorized, it doesn't get done because the effort required to understand the law and take educated risks is just a ‘needless expense’ for many individuals and businesses to contemplate.

Using source material from her interview with the director of the Cuban Neuroscience Center, Mitchell Valdes Sosa, Yaffe makes the case that imports of crucial medical parts and devices were cut off from Cuba, including parts for Phillips CT scanners meant for their hospitals, and ventilators & chromatographical systems when the suppliers were acquired by US companies (Part 8, page 142).

We empathize with the need of the Cuban healthcare system to be able to receive medicines and medical devices reliably in order to support their state healthcare operations for the Cuban people. Many countries have nationalized healthcare systems, including the UK. We argue that such a drastic and permanent cut-off by these US companies is not supported by a reading of the relevant portions of the Cuban Assets Control Regulations and the Export Administration Regulations. The regulations never tell companies that outright medical supplies to Cuba are blocked. Instead, they require private companies to apply for a license to export medical devices as required under 15 CFR 746.2(b)(1)(v), but also mention that they will ‘generally be approved’, as long as the devices will not be re-exported, used for torture or abuses of human rights, used to manufacture any ‘biotechnological product’, and can be verified by the US government to be used only to benefit the Cuban people. This language is also mirrored in the Cuban Assets Control Regulations’ 515.559(a)(2).

Pursuant to this, it is not clear if any license application was made by these three companies before the decision was made to stop supplying Cuba with these medical devices. If such an application was made and then denied, this is something that needs to be looked into further. We think it is more likely that these companies decided to cancel their contracts without attempting to do so. We think that there would have been a decent chance that these sales, including of spare parts, would have been approved, so long as the conditions were adhered to. Whether it would have been timely is another issue, which we are not qualified to discuss. The Bureau of Industry and Security states in 15 CFR Section 750.4 that “all license applications will be resolved or referred to the President no later than 90 days” from the registration of the application.  However, to take an example from another country that is also under sanctions, Iran, foreign minister Javad Zarif claimed in 2016 that “it look [the US government] seven months to issue licenses for seventeen out of the 118 planes Airbus plans to sell [to Iran]” (Bajoghli et al, 2024). Ultimately, such delays not just hurt the people of countries affected by sanctions, but they also hurt American businesses by making them less competitive against businesses in the rest of the world.

Yaffe also claims that even Jack Ma's donation of medical supplies during Covid was unable to land in Cuba due to the US sanctions. As we looked further into the issue, we found that the carrier, Avianca Airlines, had suspended flights to Cuba due to new U.S. ownership ‘while they resolve a pending matter with OFAC’.   While it is possible for Jack Ma to have hired an alternative airline that would have been able to land in Cuba without incident, including perhaps other American-owned airlines, we concur that the added friction and paperwork would not have been ideal in this situation.

Most export control and sanctions officers do not specialize in the various licenses and exceptions of the Cuban Assets Control Regulations—of which there are almost 100 that we have counted. These compliance officers at banks and companies have a limited time and resource capacity to invest in understanding the laws and structuring the legal arrangements and documentation to ensure that their operations in sanctioned jurisdictions are compliant. Faced with a full-time schedule of other competing matters, or hiring outside sanctions counsel to research details of how to potentially make something work, from the perspective of a large corporation with many other customers in other countries, it is easier to play it safe & simply eliminate the risks by terminating its contracts in a sanctioned country. Indeed, this has become a phenomenon known as ‘de-risking’, where banks and other financial institutions terminate accounts, or companies terminate customers based not on a careful individualized risk-based assessment of each customer or contract, but on their demographic (Cuba, in this instance). The US Treasury published a report about their de-risking strategy in April 2023 and mentioned that financial institutions felt that there was an ‘unspoken belief on the part of regulators that they should not be engaging in such business based on examiner expectations’, even though the report implies that the ‘added scrutiny’ is there to ensure ‘effective bank supervision’ and presumably not to dissuade such business entirely.  

One more example of overcompliance comes from Yaffe’s reliance on an Amnesty International report from 2009 regarding the requirement of a ‘Presidential certificate through on-site verification’ for exports of medicines or medical devices. As of today, according to 15 CFR 746.2(b)(v), there is no requirement for an on-site verification for medicine donations "for humanitarian purposes" to an NGO, which is presumably the situation that Amnesty International is speaking about, as an NGO. 15 CFR 746.2 does not mention a ‘Presidential verification’ either, but rather, just the requirement for an ‘on-site verification’ for goods delivered to the Cuban government to be used only for ‘the people’. What form this takes is not spelled out legalistically and pedantically, but seems to be left as an exercise for the private sector and those with the will to do so to formulate.

At the end of the day, it seems clear to us that there is a lot of potential for assisting in these kinds of transactions that are legal, or just need a bit more paperwork, and yet have been scrapped without further investment in sanctions and export controls compliance. While Yaffe blames the sanctions for some of the ill-effects stated above, it is only so far in their adding friction into the process of exporting or sending money to Cuba, drowning businesses in paperwork and time and fees for legal research, rather than any stated legal policies in the Export Administration Regulations or Cuban Assets Control Regulations to deny license applications for legitimate purposes to benefit the people of Cuba, or to bring about ‘hunger, desperation’, as the quote suggests in the chapter title (from the oft-quoted 1964 memo by then Deputy Assistant Secretary of State for Inter-American Affairs Lester Mallory).

This being said, we are mindful that the sanctions are expressly aimed at encouraging the growth of the private sector in Cuba, which the Cuban government may not agree with, and view as antithetical to its ideals of the revolution. But that is different from the 1964 idea of sanctions aiming to cause the general population to starve, and a ‘regime change’ through mass revolts as a result of this ‘hunger’ and ‘desperation’. We must be respectful of the difficulties that the Cuban government and its entities on the receiving end may face as a result of the sanctions and understand how the very existence of sanctions may be experienced as an economic assault, regardless of the actual licenses and the exceptions that are made available to soften its impact on the welfare of the people. We see ourselves helping US companies that wish to export to Cuba and expanding our documentation and product capabilities to include more authorized transactions in the future, including with Cuban government entities.

A path forward

The above has shown that even under the current US sanctions on Cuba, there is much room to work with to facilitate financial transactions and imports and exports to and from Cuba, both to the private sector and to the state, so long as they benefit the Cuban people. At the same time, we must approach our work with an attitude of humility and gratefulness for the opportunity to serve. It is not our place to agitate for ‘regime change’ as a private provider of financial infrastructure. These are political questions that must be left up to those who have the right to decide.

Being mindful of the political sensitivities involved, we must never take our place for granted. We must prove at every juncture the points we make about overcompliance with sanctions not just with words, but with action: by committing to provide financial services to support activity that is fully authorized by OFAC, by continuing to improve our compliance capabilities, to build trust and to benefit all parties we work with, and to build the first-in-class sanctions empowered financial infrastructure that the Cuban state and its citizens deserve, while fulfilling the spirit and the letter of US sanctions compliance regulations as a US company. So that billions of dollars of authorized transactions that can get done, should get done, and will get done – in a compliant manner.

Bibliography

Bajoghli, N., Nasr, W. R., Salehi-Isfahani, D., & Vaez, A. (2024). How Sanctions Work: Iran and the Impact of Economic Warfare. Stanford University Press.

Davis, S. H., & Ness, I. (2023). Sanctions as War: Anti-imperialist Perspectives on American Geo-Economic Strategy. Haymarket Books.

Namazi, S., 2013. Sanctions and Medical Supply Shortages in Iran. Retrieved April 1, 2024 from https://www.wilsoncenter.org/sites/default/files/media/documents/publication/sanctions_medical_supply_shortages_in_iran.pdf.

United States Treasury, 2023.  The Department of the Treasury’s De-risking Strategy. Retrieved April 1, 2024 from https://home.treasury.gov/system/files/136/Treasury_AMLA_23_508.pdf.