Key Takeaways:

• U.S. augments current sanctions on Nicaragua by imposing additional sanctions on the Nicaraguan mining authority and the former Nicaraguan head of state security, and expanding sanctions authorities allowing the U.S. to prohibit new U.S. investment in certain specified sectors of the Nicaragua economy, as well as the importation and/or exportation of certain products to or from Nicaragua
• EU extends current Nicaragua sanctions regime for another year
• Broader restrictions on trade with Nicaragua are likely forthcoming

_____________________________________________________On October 24, 2022, President Biden signed Executive Order (E.O.) 14088 “Taking Additional Steps To Address the National Emergency With Respect to the Situation in Nicaragua,” expanding the authorities available to the U.S. government to impose sanctions on Nicaragua. E.O. 14088 amends prior E.O. 13581 “Blocking Property of Certain Persons Contributing to the Situation in Nicaragua,” and provides the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) the authority to sanction entities and individuals that operate or have operated in the gold sector of the Nicaraguan economy, and any other sector identified in the future by the Secretary of the Treasury in consultation with the Secretary of State. 

The new E.O. also provides expanded sanctions authorities that allow the U.S. government to prohibit new U.S. investment in certain specified sectors in Nicaragua, the importation of certain products of Nicaraguan origin into the United States, or the exportation from the United States, or by a United States person, wherever located, of certain items to Nicaragua. Even though the specific sectors and products that may become the target of these sanctions authorities have not yet been identified, the expanded authorities signal that further sanctions on Nicaragua are likely forthcoming. 

On the same day that E.O. 14088 was issued, OFAC also added the Nicaraguan mining authority General Directorate of Mines (DGM), as well as the former Nicaraguan head of state security and close confidante of Nicaraguan President Daniel Ortega to the Specially Designated and Blocked Nationals (SDN) List. DGM is a subordinate office within the Nicaraguan Ministry of Energy and Mines, and has managed most mining operations in Nicaragua on behalf of the Nicaraguan government since OFAC sanctioned state-owned mining company Empresas Nicaraguenses de Minas (ENIMINAS) in June 2022. In connection with the sanctions on DGM, OFAC has issued Nicaragua General License 4, which allows U.S. persons to wind down transactions involving DGM until November 23, 2022.

As a result of the SDN List designations, almost all transactions by U.S. persons with the SDNs are prohibited, and all U.S. assets of the SDNs are “blocked” and must be reported to OFAC. Designated natural persons are also subject to a travel ban, and all entities owned 50 percent or more by an SDN are generally treated as if they were also on the SDN List (known as the “50 Percent Rule”), even if they are not expressly listed. In addition, any person, including a non-U.S. person, may themselves be designated as an SDN for materially assisting, sponsoring, or providing financial, material, or technological support for, or goods or services to or in support of, these SDNs.

The sanctions were imposed by the U.S. in response to Nicaragua’s increased human rights violations, continued dismantling of democratic institutions, attacks on civil society, and increasing security cooperation with Russia. Nicaragua is currently one of only four countries, and the only country in Latin America, to have voted with Russia against an October 2022 United Nations General Assembly resolution condemning Russia’s attempted annexation of parts of Ukraine.

The new U.S. sanctions follow on the heels of the EU Council’s decision to extend the EU sanctions regime against Nicaragua for another year until October 15, 2023. The current EU sanctions place asset freezes on 21 individuals and 3 entities, including the Nicaraguan National Police, the Nicaraguan Supreme Electoral Council and the regulator overseeing telecommunications and postal services in Nicaragua. EU citizens and EU companies are generally prohibited from making funds available to the sanctioned entities and individuals. 

The EU sanctions were extended following the expulsion of the Head of the EU Delegation from Nicaragua, and Nicaragua’s decision to cut diplomatic ties with the Netherlands. 

The new U.S. sanctions, as well as the extension of the EU sanctions regime against Nicaragua, signal a considerable augmentation in sanctions against Nicaragua by Western allies. While U.S. sanctions on Nicaragua have thus far targeted specific entities and individuals, the expanded U.S. sanctions authorities signal that broader restrictions on trade with Nicaragua may be forthcoming, including prohibitions on the export and import of certain products, and investments in certain sectors of the Nicaraguan economy. Both U.S. and non-U.S. companies that engage in business in Nicaragua should ensure that they are complying with all applicable sanctions on Nicaragua. 

Law Clerk Jane Yu co-authored this alert.