Enforcement
Earlier this week, French Foreign and Trade Minister Laurent Fabius, a former prime minister not known for drama or emotion, spoke up, emotively. Referring to possible sanctions exceeding $10 billion being considered by the U.S. Justice and Treasury Departments and New York State authorities against the French bank BNP Paribas for allegedly violating U.S. sanctions relating to Sudan, Iran and Syria in the period 2002-2009, he said such a move could threaten transatlantic free-trade negotiations. (Minister Fabius is well aware that President Obama has been pressing to conclude this trade pact.) "If there is an error or a violation then it's normal that there is a fine, but the fine has to be proportionate and reasonable," the Minister said, adding, "it's an extremely serious question that the Americans must handle in a spirit of partnership and not unilaterally".
That BNP Paribas (ranked in 2013 as the world's 4th largest bank by assets) violated sanctions, repeatedly, is apparently not in question. CEO Laurent Bonnafe told shareholders last month that the bank is doing what it can to ensure such "mistakes" do not occur in the future: "We have improved our control processes," he said. And the $10 billion fine would not threaten the bank's existence: its assets were $2.5 trillion at the end of 2013. But the fine would exceed the bank's entire net profit in 2013 (some $6 billion), would far exceed the amount the bank set aside for an expected fine (some $1.1 billion), and would set a record for this sort of violation of U.S. sanctions regulations (the prior being $1.5 billion). Apart from the immediate financial impact, such a large fine could dampen BNP's targeted expansion in North America, seen by the bank Board as a key strategy to increase revenue and profit outside its traditional, slow-growing European markets. And there could be worse: U.S. authorities may insist BNP plead guilty to criminal charges, and might also temporarily suspend the bank's authority to clear U.S. dollar transactions, something that would effectively stop the bank from being a bank.
It is little wonder, then, that BNP alerted the French government of the impending fine, or that the Foreign Minister spoke out forcefully against its potential amount. But it is equally unsurprising that the U.S. administration is signalling, with the record $10 billion fine, its clear intent to enforce its policy of sanctions through the imposition of significant penalties for violators. Sanctions - and drones - seem to be President Obama's new, favored tools of foreign policy, replacing traditional means of intervention via troops-on-the-ground supported by air power. The President is deadly serious about this. His responses to the crises in Syria, Iran, and most recently Ukraine and Russia, are clear examples of what some are calling a new "Obama Doctrine".
So, when the President meets with French President Hollande tomorrow evening at a Paris dinner, he is unlikely to suggest any backing away from pursuing the $10 billion BNP fine, however much this is adding to tensions between the two countries arising in part from France's insistence on completing an existing contract to supply Mistral-class helicopter carriers to Russia (the latest target of U.S. sanctions). For its part, France is still smarting from the Obama administration's last-minute cancellation in September 2013 of a planned joint military action in Syria - just as France readied its jets for take-off. And France is resisting General Electric's thrust to buy Alstom's energy business.
It will be a service to all involved if the Paris State dinner, and the next day's joint visit to Normandy to mark the 70th anniversary of the D-Day landings, are brief.