U.S., EU Intensify Economic Sanctions Against Russia
The United States and the European Union have implemented additional economic sanctions against Russia in response to what they claim are continued and deliberate efforts to destabilize eastern Ukraine. Officials said these sanctions could be amended, suspended or repealed if Russia acts to ease tensions. According to press reports, Moscow has responded by threatening to expand its restrictions on imports from the U.S. and EU, which already cover many agricultural products, to include used cars, textile and apparel goods, and other consumer products.
Debt Financing. The Treasury Department determined that persons operating within Russia’s defense and related materiel sector may now be subject to targeted sanctions under Executive Order 13662 and subsequently prohibited transactions by U.S. persons or within the U.S. involving new debt of greater than 30 days maturity issued by a major Russian conglomerate that operates in this sector. Treasury has also (1) added Russia’s largest bank to the list of entities to which U.S. persons may not provide equity or certain long-term debt financing, (2) tightened existing debt financing restrictions by reducing from 90 days to 30 days the maturity period for new debt issued by the six Russian banks subject to these restrictions, and (3) prohibited transactions in, the provision of financing for, or other dealings in new debt of greater than 90 days maturity issued by two additional Russian energy companies.
Defense Firms. Treasury has designated and blocked the assets of five Russian state-owned defense technology firms for operating in the arms or related materiel sector in Russia. As a result, any assets of these entities that are within U.S. jurisdiction must be frozen, and transactions by U.S. persons or within the U.S. involving these entities are generally prohibited.
Exports for Oil Projects. Treasury has prohibited the provision, exportation or reexportation of goods, services (except financial services) or technology by U.S. persons or from the U.S. in support of exploration or production for Russian deepwater, Arctic offshore or shale projects that have the potential to produce oil to five additional Russian energy companies involved in these types of projects. U.S. persons have until Sept. 26 to wind down applicable transactions with these entities pursuant to a general license that Treasury’s Office of Foreign Assets Control issued Sept. 12.
Entity List. The Bureau of Industry and Security announced Sept. 11 the addition of five entities operating in Russia’s defense sector to the Entity List. This step imposes a license requirement for the export, reexport or foreign transfer of items subject to the Export Administration Regulations to the designated entities, with a presumption of denial. BIS will also require licenses for exports of an additional group of items destined to military end-uses or end-users in Russia.
In addition, BIS added five Russian energy companies to the Entity List to impose a license requirement for the export, reexport or foreign transfer of items subject to the EAR to those companies when the exporter, reexporter or transferor knows those items will be used directly or indirectly in exploration for, or production from, deepwater, Arctic offshore or shale projects in Russia. License applications for such transactions will be reviewed with a presumption of denial.
Capital Restrictions. Restrictions on Russia's access to EU capital markets have been strengthened by prohibiting (a) the provision of loans by EU nationals and companies to five major Russian state-owned banks and (b) trade in new bonds, equity or similar financial instruments with a maturity exceeding 30 days that are issued by those banks. The same restrictions have been extended to three major Russian defense companies and three major energy companies. Providing services related to the issuing of the above financial instruments (e.g., brokering) is included in the prohibition.
Oil Projects. Certain services necessary for deep water oil exploration and production, arctic oil exploration or production, and shale oil projects in Russia (e.g., drilling, well testing or logging services) may no longer be supplied.
Dual-Use Goods. The ban on the direct or indirect sale, supply, transfer or export of dual-use goods and technology for military use in Russia has been extended to nine mixed defense companies.