Following Russia’s invasion of Ukraine, governments around the world, including the US, UK, and EU announced sweeping sanctions targeting the Russian and Belarussian economies. These sanctions prohibit a specified level of economic activity in an effort to use economic influences to punish targeted countries. Almost overnight, we saw unprecedented restrictions put in place for multinational companies doing business in Russia or Belarus.
Separately, recent events in Iran led the US government to authorize additional Internet/communications activities, which were being used widely by average Iranians protesting against the government. This was done by expanding some existing licenses, or exceptions, to sanctions the US has imposed on Iran.
While the use of sanctions as a tool for responding to foreign relations crises is nothing new, the wide-ranging multilateral sanctions that have been imposed on Russia and the recent authorizations in Iran are significant and provide fresh examples of how sanctions can affect access to a free and open global Internet.
Balancing interests in sanctions policy
Cloudflare is committed to complying with all applicable sanctions, including US, UK, and EU sanctions, and we have put in place programs to ensure that compliance. At the same time, we recognize the important role we and other Internet infrastructure companies play in protecting a key human right and principle also supported by the US, UK, and EU governments: free expression online.
One overarching principle of sanctions policy is that sanctions are intended to increase the cost of violating international norms and ultimately force authoritarian regimes and malicious actors to change behavior. The purpose of sanctions is not to punish or isolate ordinary citizens of a particular country or region. In fact, ordinary citizens can be powerful catalysts for the policy changes that sanctions are seeking to achieve. However, as we’ve seen over and over again, changes in policy, particularly in countries that have authoritarian regimes, do not happen overnight, and they often depend on the ability of individuals to communicate with each other and with the rest of the world. For example, in Iran, we’ve witnessed the important role that social media has played in helping support and spread the protest movement sparked by the killing of Mahsa Amini. Similarly, in the wake of Russia’s invasion of Ukraine, ordinary Russians continue to look for ways to access non-Russian news sources via private Internet access tools and VPNs.
It’s a tricky balance to impose costs on bad actors while maintaining open lines of communication for ordinary citizens, but it’s a balance that we’ve seen the US Government take a leading role in preserving, even in areas where most other transactions/activities might otherwise be prohibited. For example, the key US law authorizing the executive branch to deploy sanctions exempts “any postal, telegraphic, telephonic or other personal communication, which does not involve a transfer of anything of value.” The US government also has a long tradition of issuing authorizations, also known as General Licenses, permitting additional telecommunications and Internet-related activities, including in Cuba, Iran, Russia, Syria, and certain restricted regions of Ukraine. This means that US companies, like Cloudflare, can continue to provide many products and services that support free and secure Internet communications.
Although these exemptions and licenses can help the US Government establish the policy goal of supporting Internet freedom, they are only effective if private sector companies make use of them. That may be easier said than done. Because of the financial and reputational penalties that can be imposed if a company violates sanctions, even inadvertently, companies often have an incentive to take a simple and blunt approach to sanctions compliance without trying to do the nuanced thing and availing themselves of the exceptions in the General Licenses. Companies have to invest significant time and money into understanding the legal requirements and applicable exemptions and licenses when deciding whether to provide services in high risk countries. Cloudflare has made these investments because they align with our goal of helping build a better Internet and making a free and secure Internet accessible to all.
As governments continue to use sanctions as a foreign policy tool, we think it’s important that Internet infrastructure companies discuss how the legal framework is impacting their ability to support a global Internet. Described below are some of the key issues we’ve identified and ways that regulators can help balance the policy goals of sanctions with the need to support the free flow of communications for ordinary citizens around the world.
There are two broad categories of sanctions: (1) country-/region-based, and (2) individual/entity list-based. Sanctions can vary across jurisdictions, meaning that US sanctions look different from EU and UK sanctions and there can be significant differences. Companies that operate around the world have to pay close attention to individual rules and regulations to ensure compliance with sanctions.
With respect to country-/region-based sanctions, the US government has imposed comprehensive sanctions on doing business in Cuba, Iran, North Korea, Syria, and certain restricted regions of Ukraine (Crimea, Luhansk, and Donetsk). The purpose of comprehensive sanctions is to impose severe punishments on state actors in these countries by denying them access to valuable US goods/services. You might think that this means that Internet companies are therefore barred from providing services to these countries/regions, but that’s where things get complicated. The US government has issued General Licenses, which authorize US companies to engage in certain Internet- and telecommunications-related activities.
While these General Licenses are helpful in that they may authorize peering services, VPN, SSL certificates, and other services incident to the exchange of communications over the Internet, the activities authorized vary across sanctioned jurisdictions. In some countries/regions (e.g., Cuba, Iran, and the Donetsk and Luhansk regions), except for government parties, some free and paid services are authorized, but in other instances (e.g., Crimea and Syria), all authorized services must be available at no cost to the user. Along the same lines, some General Licenses list specific types of services/products that may be provided, while others leave it up to a company to make their own determination whether a product/service is authorized by the terms of the license. Neither the UK nor the EU has issued any Internet-related General Licenses, which has become a particular issue in the context of Russia where there are now significant restrictions in place.
With respect to Iran, the US government recently issued a new General License that broadens the products/services authorized and provides other clarifications to make it easier for companies to provide Internet services to ordinary Iranians. The new General License is encouraging for companies, like Cloudflare, that would like to help support access to the broader Internet for ordinary Iranian citizens. But as with any new policy, it takes time for companies to understand the changes and make decisions about whether to invest additional time and resources to expand services offerings in a high risk country like Iran. Given the significant restrictions that have been imposed on doing business in Iran over the years, there are a number of logistical challenges with seeking to enter a market where so many activities remain prohibited. Moreover, there is always a risk that sanctions policies can change, so companies will take this into account when weighing whether to deploy expensive hardware/equipment or make other long-term investments.
Apart from country-based sanctions, many governments, including the US, UK, and EU maintain list-based sanctions, which prohibit dealings with specific listed parties. Like many multinational companies, Cloudflare screens customers and other third parties to identify links to sanctioned parties. We do not engage in any transactions with or provide services to any parties that have been listed on applicable sanctions lists or any parties that are owned or controlled by such parties and our Terms of Service prohibit sanctioned parties from using our services.
Over the years, the US government has continued to add parties to its sanctions list. Notably, when the US government adds a party to the sanctions list, it will include corresponding identifying information, including possible aliases, physical address, as well as email address and domain names to the extent they are known. The UK has also started adding domains and email addresses, but those domains and email addresses do not always align with what is on the US list, creating further complexities for multinational companies in this space.
While there are a number of sanctions screening providers that will help companies conduct due diligence on third parties they are considering doing business with, email addresses and domains are not automatically screened. This can be challenging for Internet infrastructure companies for whom email addresses and domain names are critical pieces of data when onboarding a customer. With limited automated solutions, companies must invest significant time and resources building proprietary tools that block sanctioned domains and email addresses from signing up for their services.
Cloudflare may also receive abuse reports alleging that domains are operated by sanctioned parties. However, unless a domain is listed on a sanctions list, it can be challenging to determine if a domain is subject to sanctions. Without clear guidance from regulators, companies must develop their own processes for reviewing these reports. While it is important that companies terminate services to domains owned or operated by a sanctioned party, it’s also critical that they do so in a way that is fair and consistent.
Implications for a free and open Internet
Sanctions are an important tool for responding to geopolitical challenges, and they can help impose economic costs on parties that violate international norms, including human rights. However, sanctions can also have unintended consequences when they are not properly deployed. While regulators have learned a number of lessons over the years when imposing sanctions on more traditional sanctions targets, like the financial and energy sectors, the global Internet remains a complicated area that has only recently become a more prominent focus of sanctions. With the technology constantly evolving and a number of different parties involved in maintaining a secure and reliable Internet, it is critical that regulators are clear about their expectations and seek to minimize any chilling effects.
Key stakeholders involved in maintaining a free and open Internet are likely to continue exiting sensitive markets in the absence of clear guidance from regulators. This will only lead to further fragmentation of the global Internet and open the door for authoritarian governments to monitor and control global communications – an outcome that clearly undermines the policy goals of the sanctions. These are complicated issues, and we don’t pretend to have all the answers. But, there are things that regulators can do to mitigate unintended consequences of sanctions policies and promote a free and open Internet. Here are a few key points that we advocate to policymakers:
- Continue partnering with stakeholders to understand practical implications before imposing new sanctions and determine where additional clarifying guidance might be helpful.
- Apply a consistent and coordinated approach to exemptions/authorizations to make it easier for multinational companies to provide services in challenging jurisdictions.
- Provide clear guidelines for Internet-related companies as to when a domain or user may be subject to sanctions (i.e., adding domain names and email addresses to applicable sanctions lists) and ensure consistency across jurisdictions.
An integral part of Cloudflare’s mission to help build a better Internet involves making sure that ordinary individuals have access to a free and secure Internet. While global sanctions will continue to present challenges to Internet infrastructure companies, like Cloudflare, we are committed to both compliance with applicable sanctions and helping to maintain open lines of communication around the world--and we will continue to advocate for policies that do the same.