How does the US fine foreign companies for trading with sanctioned countries, when said companies have no link with the US?

Question

Hi there,

So i was going through our industry and company course, and today I learnt that the US state can fine companies (as it did to commerzbank) for carrying out activities, deals and projects in sanctioned countries? How can a state fine a companion from another country for its business dealings?

In: Economics

Answer 1

Because the US is so large and powerful that it can do basically whatever it wants.

Lets say you own a bakery in Canada. You bank with a Canadian Bank and sell to other Canadians in your local area. No American connections right?

Well, not quite. Lets say the US wants to sanction your bakery. The very first thing they do is they send a notice to all the American banks that says, no one can do business with anyone that does business with my bakery.

Initially this does not bother me, I don’t really do much business with Americans. But then my oven breaks and I need a new Oven. But my Oven is manufactured in the US, so I can’t buy one.

I need flower. I buy flower from my local flower mill, but they buy wheat from the US. They refuse to sell me flower because they are scared that the US wheat dealers won’t sell to them in the future.

Then Visa calls and says I can’t take VISA cards anymore. The next day MasterCard and Amex both do the same. I now can’t take any credit cards, but at least I can take debit (much more popular in Canada).

My Bank is CIBC the Canadian Imperial Bank of Commerce one of the largest banks in Canada. They call me and say they are closing my business accounts. The reason, they do a lot of business with American companies and other american banks and the American sanctions against me will interfere with that business. That business is much larger than my business so they are saying goodbye to me as a customer.

There are a number of other large banks in Canada, all of them refuse me service. I manage to get a local credit union to take my business but they don’t do merchant processing so I now can’t take debit at all.

So now I have a bakery with no oven, no flower and can only take cash payments. My customers are all angry because who the fuck uses cash during COVID and all of my baked goods are nasty without flower. I go out of business.