United States Eyes Proliferators' Assets

Buying, selling, and transporting biological, chemical, and nuclear weapons, as well as their related materials and components, requires money. At the end of June, the Bush administration unveiled a new measure intended to make funding for such transactions even costlier and riskier.

In a June 29 executive order, President George W. Bush authorized the Department of the Treasury to freeze the U.S. assets of foreign individuals, groups, companies, and government agencies identified as weapons proliferators. U.S. citizens and companies are barred from doing business with the alleged proliferators while foreign counterparts risk having their U.S. assets frozen. The measure also expands on previous U.S. proliferation sanctions that generally barred alleged proliferators from U.S. government contracts, aid, and military or military-related exports for a specified period.

Treasury Secretary John Snow said June 29 that the order “sends a clear message: if you deal in weapons of mass destruction, you’re not going to use the U.S. financial system to bankroll or facilitate your activities.”

Although the Treasury Department’s Office of Foreign Assets Control will be in charge of implementing the order, other government agencies will help select which entities to target.

The president’s directive currently applies to one Syrian, three North Korean, and four Iranian entities, including the Atomic Energy Organization of Iran. Others could be added over time, a Department of State official told Arms Control Today July 19. A public notice will be made in such an instance.

No Chinese entities were singled out for punishment even though more than half of the Bush administration’s 112 publicly announced proliferation sanctions have been imposed on Chinese entities. (See ACT, March 2005.) The State Department official said that the original entities specified in the executive order had “distinguished themselves” as proliferators.

It is uncertain whether any of the eight entities possess U.S. assets. Treasury Department spokesperson Molly Millerwise told Arms Control Today Aug. 3 that the United States would not disclose assets or amounts frozen.

Not all entities doing business with those sanctioned by the order will automatically have their U.S. assets frozen. The State Department official said there is “very broad discretionary authority” for determining which entities might be penalized. For instance, the Financial Times reported June 29 that a White House official said Russian entities involved with the Atomic Energy Organization of Iran in building a nuclear reactor at Bushehr would not face punishment.

Still, U.S. officials caution that the order puts the world on notice about what entities they should avoid doing business with if they do not want to risk having their U.S. assets frozen.

Washington also is encouraging other governments to follow its lead. “The effectiveness of economic sanctions grows exponentially when they are applied multilaterally,” Snow stated. He added, “I urge our partners around the globe to put into place similar systems that allow for the freezing of proliferators’ assets.”

Although other governments have yet to follow suit, some are expressing support for the new U.S. measure. At the July Group of Eight (G-8) summit in Gleneagles, Scotland, Bush won endorsement for the executive order’s general concept from the leaders of the other G-8 countries—Canada, France, Germany, Italy, Japan, Russia, and the United Kingdom. In a summit statement, the heads of state declared, “We also call for enhanced efforts to combat proliferation networks and illicit financial flows by developing, on an appropriate legal basis, co-operative procedures to identify, track, and freeze relevant financial transactions and assets.”

The president’s order has been in the works for months and is modeled on an earlier measure to freeze the assets of entities involved in or supporting terrorist activities. It also stems from Bush’s Feb. 11, 2004, call to enhance the voluntary Proliferation Security Initiative (PSI) to go after sources and middlemen that make proliferation possible. Endorsed by some 60 countries, PSI aims to interdict shipments of dangerous weapons and related materials and components in transit at sea, on land, and in the air.