US imposes CAATSA sanctions on Turkish SSB and related officers

On Monday, December 14, 2020, the United States imposed sanctions on Turkey in response to its acquisition of the S-400 anti-aircraft missile system from Rosoboronexport (ROE), Russia's defense export agency. The sanctions, which were issued under Section 231 of the Countering America's Adversaries Through Sanctions Act (CAATSA), target Savunma Sanayii Başkanlığı (SSB) (Turkey's Presidency of Defense Industries) and certain of its principal officers. SSB is a public institution affiliated with the Presidency of the Republic of Turkey to manage the Turkish defense industry and related procurements.

In particular, SSB was added to the US Department of Treasury's new Non-SDN Menu-Based Sanctions List (NS-MBS List) and subjected to the following CAATSA sanctions:

1. a prohibition on granting specific US export licenses and authorizations (including from DDTC, BIS, or DOE) for any goods or technology transferred to SSB;
2. a prohibition on loans or credits by US financial institutions to SSB totaling more than US$10 million in any 12-month period;
3. a ban on US Export-Import Bank assistance for exports to SSB; and
4. a requirement for the United States to oppose loans benefitting SSB by international financial institutions.

We are still waiting on guidance to understand if the restrictions will also apply to any of SSB's nine different subsidiaries that operate in and outside Turkey and that include a number of prominent defense, aerospace, and technology companies. It is also unclear what impact the sanctions may have on existing licenses for the export of US-origin goods to SSB.

In addition, the following four officers of SSB were added to the US Department of Treasury List of Specially Designated Nationals and Blocked Persons (SDN List), meaning all property and interests in property of such individuals (or any entities they have a 50 percent or greater interest in) in the United States is blocked and US persons are generally prohibited from engaging in transactions involving such persons:

1. Dr. Ismail Demir, president of SSB;
2. Faruk Yigit, SSB's vice president of SSB;
3. Serhat Gencoglu, Head of SSB's Department of Air Defense and Space; and
4. Mustafa Alper Deniz, Program Manager for SSB's Regional Air Defense Systems Directorate.

The officers are also subject to certain visa restrictions prohibiting their travel to the United States.

Overall, the sanctions, which have been the subject of significant recent Congressional pressure, are more limited than many had feared. For example, there is no general prohibition on engaging in all transactions involving SSB, at least insofar as the transactions do not involve US-origin goods that require a US export authorization for export to Turkey, or the four identified officers. Nor do the restrictions extend to the Turkish Ministry of Defense (such as was enacted under EO 13894), the Turkish military or defense sector more broadly.

Parties contemplating transactions involving SSB should, however, exercise caution and perform due diligence to ensure that the transactions do not involve controlled US-origin goods (including foreign items containing more than 25 percent US-origin content by value) and that none of the identified officers are personally involved in the transaction (e.g. signing any relevant agreements on behalf of SSB).

While these restrictions are fairly modest, more robust sanctions remain pending in Congress, including the Protect Against Conflict by Turkey Act (PACT) (H.R. 4695) and its companion bill in the Senate, the Promoting American National Security and Preventing the Resurgence of ISIS Act of 2019 (S.2641). While it appears unlikely such legislation will be enacted during the remainder of the Trump administration, we will have to wait and see what the approach of the new Biden administration will be.

We will continue to monitor events related to Turkey closely and publish additional updates, as appropriate.