Nicaraguan lawmakers pass bill forcing local banks to ignore foreign sanctions

(Reuters) - Nicaragua's parliament on Monday approved a law that seeks to nullify foreign sanctions issued against President Daniel Ortega's vice president and wife Rosario Murillo, several of their children and some 50 high-ranking state officials.

The legislation, although unable to curb the impact of sanctions outside the country, aims to nullify their reach within Nicaragua by forcing local banks and other institutions to ignore them. 

It was unanimously approved by all 91 pro-government deputies in the Central American nation's ruling Sandinista Front-dominated parliament after Ortega sent the bill to parliament last week.   

Walmaro Gutierrez, a deputy from Ortega's Sandinista party who has been sanctioned by the United States since 2020, said the law enshrines the country's sovereignty and independence.

"We are tired of having the sword of Damocles always hanging over us or a boot always pressing against our neck," he said.

The law will become effective once it is published in the official gazette, which could happen within days.

The "law to protect Nicaraguans from foreign sanctions and aggressions" declares sanctions imposed by foreign states, groups of states and organizations that violate international law as "null and void without any legal effect."

It rules that no person or entity can suspend goods or services to sanctioned individuals or companies or they could face fines, a temporary or definitive suspension of operations and potential imprisonment under treason charges.

Treason is often punished by around 10 years in prison, but prominent government critic Bishop Rolando Alvarez was stripped of his citizenship and sentenced to 26 years last year. He was later expelled to the Vatican. 

The United States, European Union, Switzerland and Canada have sanctioned some 50 top officials, including Murillo, some of Ortega's children and police and army chiefs, accusing them of serious human rights violations during the repression of anti-government protests in 2018.

Ortega has since cracked down on dissent. More than 200 political prisoners were freed last year and expelled to the United States, including five jailed former presidential hopefuls.

Government critics warned the legislation pins Nicaragua's financial system "up against the wall" as banks would be obliged to ignore foreign sanctions and reactivate accounts and transactions for those sanctioned.

"They have put a gun to bankers' heads," Nicaraguan economist Enrique Saenz told Reuters, warning banks would have to choose between risking their credit lines or legal reprisals and "falling into a spiral of unpredictable consequences."

Companies managing some 40% of Nicaraguan exports destined for the United States would also be at risk, he said, and the reform could batter the country's borrowing capacity.

The vote comes days after Nicaragua's parliament approved a constitutional reform that expands Ortega and Murillo's influence, granting more power over the media, naming them co-presidents and increasing the presidential term to six years.

Separately on Monday, Ortega sent another reform to parliament to extend the terms of police and army chiefs to six years. It is scheduled to be voted on in the coming days.

(This story has been refiled to correct the dateline to Nov. 25)

(Reporting by Gabriela Selser; Writing by Sarah Morland; Editing by Stephen Eisenhammer, Brendan O'Boyle and Jonathan Oatis)