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1. A quick thread on Trump's sanctions u-turn today. The current US sanctions regime is in trouble. It's increasingly politicized and inconsistent. That means that other states are more likely to want to push back or bargain, and may embolden domestic legal challenges.
2. It isn't first time that Trump has undercut Treasury on sanctions. @ANewman_forward describe the earlier - and much bigger reversal on ZTE here - washingtonpost.com/news/monkey-ca… . But what it does is to make that ZTE wasn't a once-off. Trump sees sanctions as bargaining chips.
3. This has implications for US relationship to China. The current rolling crisis in their relationship has two distinct causes - the trade relationship and geopolitics. Trump seems to care primarily about the first, but national security officials care far more about the second.
4. This is the reason why there have been mixed signals about Huawei. Trump apparently sees the pressure on Huawei as part of what is necessary to get a trade deal. People in the Pentagon see Huawei, correctly or incorrectly as a long term threat, worrying that Huawei 5g networks
5. would allow China to spy on Western countries in much the same way as NSA has been able to spy on both adversaries and allies in the past. Military/intelligence people are clearly worried that Trump is going to give away the shop on Huawei, trading it for soybean concessions
6. New sanctions move will make them fear that they are right. It is also important in its own right. The US sanctions regime relies on at least tacit acceptance by allies and also the inability of sanctioned entities to get relief in US courts.
7. By overturning sanctions a day after they were announced, Trump damages both. He encourages allies and adversaries to push back against sanctions against their firms - perhaps even introducing tariffs and NTBs that can later be traded against sanctions relief.
8. And he makes it easier for targeted actors in US courts to argue that the sanctions regime is driven by economic rather than security concerns, perhaps weakening the traditional deference to Treasury determinations.
9. There are two ongoing cases against Treasury's Office of Foreign Assets Control - one taken by ExxonMobil and the other by Deripaska - lawyers for both plaintiffs are sure to find this policy development intriguing.
10. Finally, this may accelerate a flight to the doors at OFAC. An interesting article today bourseandbazaar.com/news-1/2019/3/… suggested that OFAC is suffering staff losses. Trump erratic policy may accelerate this. When the Russian ambassador appeared on a panel with a sanctioned tycoon
11. a former OFAC senior staffer described it as "horrifying" bloomberg.com/news/articles/…. OFAC staff cannot have been enthused at the ZTE decision, or at the whiff of horsetrading around the Huawei case. Lawyers at places like OFAC could get paid far more in private sector, so that
12. esprit de corps and morale play a very important role in staff retention. It's reasonable to guess as an outsider that today's decision won't help much with either. Finis.
Coda: it's since become clear that the sanctions Trump was referring to were unannounced further sanctions - the above analysis still stands.
