U.S. economic sanctions against Russia, Iran, and North Korea have been expanded under a new law signed Aug. 2 by President Trump after passing both the House and Senate with overwhelming support. This law is expected to significantly expand the lists of entities with which U.S. persons are limited or prohibited from doing business. In addition, these prohibitions could be extended to a substantial number of other entities due to the Office of Foreign Assets Controls’ so-called 50 percent rule, which provides that any entity owned 50 percent or more by a listed entity is subject to the same prohibitions as the listed entity. Finally, the law limits the president’s ability to remove entities from the sanctions lists by requiring Congress to review any proposed removals.
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The new law is likely to result in a substantial number of Russian entities being added to OFAC’s specially designated nationals or sectoral sanctions identifications lists because it requires the imposition of economic sanctions on (1) persons that engage in a significant transaction with a person that is part of, or operates on behalf of, the defense or intelligence sectors of the Russian government; (2) entities identified as engaging in activities that undermine cybersecurity; and (3) parties that have knowingly exported, transferred, or otherwise provided material support to Syria’s acquisition of arms.
The law also allows (but does not require) sanctions on entities investing in or selling, leasing, or providing items for Russian pipelines as well as persons making certain investments of $10 million or more that unjustly benefit Russian officials.
Further, the law expands sanctions previously imposed on specified persons operating in certain sectors of the Russian economy as follows.
- allows for sanctions on state-owned entities in the railway sector (previously limited to those in the financial services, energy, metals and mining, engineering, and defense sectors)
- lowers from 30 days to 14 days the maximum maturity period of new debt assumed by a specified entity in the Russian finance sector
- lowers from 90 days to 60 days the maximum maturity period of new debt assumed by a specified entity in the Russian energy sector
- expands the prohibition on U.S. persons providing goods, services (except financial services), or technology in support of exploration or production for new deepwater, Arctic offshore, or shale projects that have the potential to produce oil to any such project, wherever located, and to any specified entity or any entity that has a 33 percent or more controlling or ownership interest in such a party
A number of Chinese banks and other entities are likely to be added to a U.S. restricted party list, such as the SDN list or the Financial Crimes Enforcement Network list, under a provision imposing sanctions against entities that facilitate or support certain trade or investments in North Korea.
The law also (1) expands the U.S. ban on imports of goods manufactured in North Korea to significant goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part by the labor of North Korean nationals or citizens and (2) allows the imposition of sanctions on foreign persons employing North Korean labor.
New sanctions are imposed on parties contributing to Iran’s ballistic missile program, parties related to the Iranian Revolutionary Guard Corps, Iranian entities involved in human rights abuses, and foreign entities that materially contribute to the direct or indirect supply, sale, or transfer of arms to Iran. These sanctions will likely be in the form of adding a party to one or more U.S. government restricted party lists, which will generally prohibit U.S. persons from dealing with the listed entity.