Unpacking illegal sanctions on Zim

THE United States still maintains the pretence that illegal sanctions on Zimbabwe are “targeted” at specific entities and individuals. But the Zimbabwe Democracy and Economic Recovery Act of 2001 (ZDERA) — which is still extant, and was also arbitrarily imposed as a response to the Land Reform Programme — shows that they are anything but targeted.

Section 4(c) of ZDERA, titled “Multilateral Financial Restrictions”, reads: “Until the President of the United States makes the certification described in subsection 4(d), the Secretary of the Treasury Executive to each of the international financial institutions must oppose or vote against: (i) an extension by the respective institutions of any loan, credit or guarantee to the Government of Zimbabwe; (ii) Any cancellation or reduction of indebtedness owed by the Government of Zimbabwe to the United States or any international financial institution.”

ZDERA was amended in August 2018. The reality on the ground is that, for over two decades, the coercive measures have damaged a major artery of Zimbabwe’s economy: the financial services sector.

The principal US organ that has been ensuring that transactions originating from Zimbabwe are compliant with the extraterritorial legislation has been the Office of Foreign Assets Control (OFAC) of the US Department of the Treasury, which administers and enforces economic and trade sanctions based on US foreign policy.

Exclusion from the African Growth and Opportunity Act — legislation that was approved by the US Congress in May 2000 to improve economic relations between the US and Sub-Saharan Africa through offering concessions such as duty-free access to the US market — was similarly meant to throttle Zimbabwe’s economy.

The European Union, in concert with the US, also imposed sanctions on Zimbabwe in 2002.

What makes the sanctions illegal

The unilateral coercive measures by the West are in contravention of international law, mainly Article 2 (4) of the United Nations (UN) Charter, which “prohibits the threat or use of force and calls on all members to respect the sovereignty, territorial integrity and political independence of other states”.

The UN has consistently upheld its principles of non-interference in the sovereign affairs of member states.

In July 2018, Russia, China and South Africa vetoed a Western-backed UN Security

Council resolution to impose international sanctions on Zimbabwe.

Not targeted

Sanctions have effectively cut Zimbabwe off from the global financial system.

This has gone to the extent of affecting the local financial services and payment systems. They are affecting the generality of Zimbabweans.

It is a fact that was emphasised by Econet founder and billionaire Strive Masiyiwa at a meeting of Afreximbank clients in 2018.

“When sanctions hit the country, every credit line disappeared. You could not talk to anyone; they were shutting down. For us as a business, there was one institution that remained and it was Afreximbank,” he said.

The “international financial institutions” referred to in ZDERA are multilateral development banks and the International Monetary Fund (IMF), while “multilateral development banks” refer to the International Bank for Reconstruction and Development, the International Development Association, the International Finance Corporation, the Inter-American Development Bank, the Asian Development Bank, the Inter-American Investment Corporation, the African Development Bank, the African Development Fund, the European Bank for Reconstruction and Development, and the Multilateral Investment Guaranty Agency.

This shows the scope of the illegal sanctions.

Impact on the private sector

OFAC rules are seemingly ambiguous, as several local and international banks have discovered.

According to OFAC, prohibited transactions under Executive Order 13391 “include, but are not limited to, exports (direct and indirect), imports (direct and indirect), trade brokering, financing and facilitation, as well as most financial transactions”.

A June 2016 IMF discussion note titled “The Withdrawal of Correspondent Banking Relationships: A Case for Policy Action” says banks are required to comply with economic and trade sanctions, Anti-Money Laundering/Countering the Financing of Terrorism requirements, and anti-bribery and tax evasion regulations applicable in the jurisdiction(s) in which they operate, as well as with those in their home jurisdictions, but pointed to OFAC rules being “unclear, inconsistently communicated, unevenly implemented”.

In 2017, CBZ Bank was slapped with a US$385 million fine by OFAC for thousands of financial transactions done on behalf of ZB Bank, which was then under economic sanctions imposed by the US.

And the previous year, OFAC had fined Barclays Bank Plc US$2,48 million to resolve potential civil liability for 159 apparent violations of the Zimbabwe sanctions regulations. OFAC claimed, between July 2008 and September 2013, Barclays processed 159 banned transactions worth about US$3,4 million through financial institutions in the US, including Barclays’ New York branch, for corporate customers of Barclays Bank of Zimbabwe Limited that were owned 50 percent or more, directly or indirectly, by a company on OFAC’s List of Specially Designated Nationals and Blocked Persons.

In 2019, Standard Chartered Bank was fined US$18 million for violating OFAC’s sanctions on Zimbabwe for over 1 795 transactions worth close to US$77 million that were done by Standard Chartered Bank New York and Standard Chartered Bank Zimbabwe.

What will it take for sanctions to be lifted

According to ZDERA, one of the key requirements for sanctions to be lifted is the need for Zimbabwe to enforce the SADC Tribunal judgments on land.

A provision of the Act reads: “It is the sense of Congress that the Government of Zimbabwe and the Southern African Development Community (SADC) should enforce the SADC tribunal rulings from 2007 to 2010, including 18 disputes involving employment, commercial and human rights cases surrounding dispossessed Zimbabwean commercial farmers and agricultural companies.

“If not done, under Section (c) of the ZDERA, the United States Secretary of the Treasury is ordered to ‘instruct the United States executive director to each international financial institution to oppose and vote against any extension by the respective institution of any loan, credit, or guarantee to the Government of Zimbabwe; or any cancellation or reduction of indebtedness owed by the Government of Zimbabwe to the United States or any international financial institution’.”

SADC, however, disbanded the SADC Tribunal in 2011 after its ruling was found to be contrary to the principles of respect of national sovereignty.

Zimbabwe has since announced a US$3,5 billion package to compensate white former commercial farmers for the improvements they made on land that was repossessed.

So, lifting of sanctions is clearly at the discretion of the US government.

What the US has also failed to explain is how Zimbabwe poses an “unusual and extraordinary threat to the foreign policy of the United States”.