The U.S. has imposed a far-reaching package of sanctions against Russia in response to their invasion of Ukraine. The U.S. has also adopted sanctions against Belarus for enabling Russia's invasion.
Multiple regulations must be reviewed to determine whether activities or prospective activities related to Russia and Belarus are lawful. These include restrictions on the types of items that may be exported to Russia and Belarus without an export license, and various sanctions against the banking industry and other individuals and entities in Russia and Belarus requiring companies to screen all parties involved in any related transaction.
Exporters and importers will have to adjust or enhance their compliance processes to determine what activities are prohibited under these new, complex restrictions.
An overview of the recent sanctions is provided below. It is important to note that this is an evolving situation, the list below may not capture all issues, and additional measures are expected. In addition, none of the below constitues legal advice and we strongly recommend you work with international trade counsel to understand the implications of these regulations on your activities. For assistance with this process, contact ST&R attorney Kristine Pirnia.
Trade Sanctions on Russia (Export Restrictions)
Expansion of Russian Industry Sector Sanctions
Effective May 9, BIS has issued a final rule that further expands the scope of the Russian industry sector sanctions to another 205 six-digit HTSUS numbers and 478 corresponding ten-digit Schedule B numbers. Information from the White House indicates that covered items include auto parts, chemicals, wood products, industrial engines, boilers, motors, fans, ventilation equipment, bulldozers, and many other items with industrial and commercial applications. Read more about the expansion of these sanctions.
Foreign Direct Product Rules, License & Review, Entity List & Military End-Use Controls
The Bureau of Industry and Security imposed these sanctions, effective February 24, 2022. They include foreign direct product rules, new license requirements, a license review policy, license exceptions, Entity List updates, and military end-use controls. Read more detail on these sanctions.
On March 18, 2022, BIS identified 100 aircraft that violated US export control laws by flying into Russia since March 2, 2022. Aircraft manufactured in the US or in a foreign country with more than 25% U.S. content are subject to licensing if destined for Russia. BIS put on notice that any service provided to these aircraft requires authorization.
Export Restrictions Against Russia's Oil Sector
These Bureau of Industry and Security sanctions, effective March 3, 2022, expand existing restrictions on exports, reexports, and transfers (in-country) to Russia of items used in Russia's energy sector. Read more detail on these sanctions.
Additions to Entity List
Effective March 3, 2022, BIS added to the Entity List entities that have been involved in, contributed to, or otherwise supported Russian security services, military and defense sectors, and military and/or defense research and development efforts. Read more detail on these sanctions.
Legislation to Revoke Permanent Normal Trade Relations
On April 8, 2022, President Biden signed legislation into law revoking Russia's permanent normal trade relations (PNTR) status. The legislation was approved by the House on March 17 and the Senate on April 7. The withdrawal of PNTR treatment subjects US imports from Russia to substantially higher import duties, effectively closing off the US market to many of those products.
Ban on Importing Russian Oil, Liquefied Natural Gas and Coal
President Biden issued an executive order prohibiting (1) imports of crude oil, certain petroleum products, liquefied natural gas, coal, and coal products from Russia, (2) new investment in Russia’s energy sector by U.S. persons, wherever located, and (3) any approval, financing, facilitation, or guarantee by a U.S. person, wherever located, of a transaction by a foreign person that would be prohibited under this EO if performed by a U.S. person or within the U.S. Read more about this ban.
Ban on Importing and Exporting Certain Luxury Items; New Investment
Presiden Biden issued an executive order March 11, 2022 that prohibits imports and exports of many luxury items from Russia, as well as any new investment in any sector of the Russian economy. Read more detail about this executive order.
On April 6, 2022, Biden announced a new executive order prohibiting (1) new investment in Russia by U.S. persons wherever located, (2) the exportation, reexportation, sale, or supply, directly or indirectly, from the U.S., or by a U.S. person, wherever located, of any category of services as may be determined by Treasury in consultation with State, to any person located in the Russia, and (3) any approval, financing, facilitation, or guarantee by a U.S. person, wherever located, of a transaction by a foreign person where the transaction by that foreign person would be prohibited by this section if performed by a U.S. person or within the U.S.
Prohibition on Russian Vessels
On April 21, 2022, Biden issued a proclamation prohibiting Russian-affiliated vessels from entering US ports, effective April 28, 2022. The prohibition applies to all such vessels except (1) those used in the transport of source material, special nuclear material, and nuclear byproduct material for which the Department of Energy, in consultation with State and Commerce, determines that no viable source of supply is available that would not require transport by Russian-affiliated vessels; and (2) those requesting only to enter US ports due to force majeure, solely to allow seafarers of any nationality to disembark or embark for purposes of conducting crew changes, emergency medical care, or for other humanitarian need.
Trade Sanctions on Belarus
Bureau of Industry & Security Sanctions, effective March 2, 2022
BIS has issued a final rule rendering Belarus subject to the same sanctions imposed on Russia as of Feb. 24, 2022. Read more detail on these sanctions.
Financial Sanctions on Russia
Sanctions on Russia's Central Bank and Russian Financial Institutions
OFAC Directive 4: Russia-Related Sovereign Transactions Directive under EO 14024, prohibiting US persons from engaging in transactions with the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation. This action immediately froze any assets of Russia's Central Bank held in the US or by US persons, wherever located.
OFAC Directive 2: Russia-Related CAPTA Directive imposes correspondent and payable-through account sanctions on Public Joint Stock Company Sberbank of Russia, which holds about a third of all bank assets in Russia. Beginning on March 26, 2022, all US financial institutions must close any Sberbank correspondent or payable-through accounts to reject any future transactions involving Sberbank or its foreign financial institition subsidiaries. These sanctions apply to Sberbank and any foreign financial institutions that are 50% or more owned, directly, or indirectly, by Sberbank. These entities have been added to OFAC's CAPTA List. On April 6, 2022, Treasury announced expanded sanctions on Sberbank, imposing full blocking sanctions on the bank.
OFAC Directive 1A: Russia-Related Sovereign Debt Directive extends existing sovereign debt prohibitions to cover participation in the secondary market for bonds issued after March 1 2022, by the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation.
OFAC Directive 3: Russia-Related Entities Directive prohibits US persons or persons within the US from taking on new debt longer than 14 days maturity or new equity with 13 listed entities, including on Russia’s largest private bank (Alfa-Bank). On April 6, 2022, Treasury further sanctioned Alfa-Bank, imposing full blocking restrictions on the bank.
Russia-Related Determination adds three new sectors of the Russian economy under Section l(a)(i) of the OFAC Determination Pursuant to EO 14024: aerospace, electronics and marines,. This allows Treasury to impose sanctions on any individual or entity determined to operate or have operated in any of those sectors, effective March 31, 2022,
OFAC Public Guidance to Avoid Sanctions Evasion was issued to "cut off avenues for potential sanctions evasion" by Russia's Central Bank. The guidance makes clear that actions pursued on behalf of Russia's Central Bank to act as the Central Bank's agent and help raise resources are prohibited. OFAC also advises that General License 8A does permit "U-turn transactions," where payments related to energy are processed through non-sanctioned, third-country financial institutions, enabling the continuation of transactions that support the flow of energy to the market.
Russian Harmful Foreign Activities Sanctions Regulations
OFAC has issued the Russian Harmful Foreign Activities Sanctions Regulations to implement Executive Order 14024 of April 15, 2021. These regulations, which are effective as of March 1, include provisions on prohibited transactions, licenses, authorizations, licensing policy, penalties, reports, and procedures. Read more about these regulations.
Sanctions Targeting Russian Businesses and Individuals
A number of Russian entities and individuals have been added to the Specially Designated Nationals and Blocked Persons List (SDN List). Generally speaking, entities and individuals on the SDN list face comprehensive bans, blocking of assets, and restrictions on trade and financial transactions. Typical sanctions entail the blocking of all property and interests in property of the sanctioned entities / individuals as well as of any entities that are owned, directly or indirectly, that are in the US or in the possession or control of US persons.
Other Sanctions and Actions on Russia
Review of Russia's Market Economy Status
In a May 13 Federal Register notice, the Department of Commerce announced that it is launching a review of Russia’s market economy status for purposes of assessing antidumping and countervailing duties. Commerce argued that there may be important changes in the economic conditions in Russia linked with the six factors governing NME determinations. If Commerce determines Russia an NME, it could apply higher antidumping and countervailing duties on Russian imports.
The US Department of Transportation issued a directive March 2, 2022, suspending existing, proposed, and prospective scheduled passenger and all-cargo operations of all foreign air carriers of the Russian Federation to and from the U.S. This suspension extends to all Russian foreign civil aircraft operators to navigate aircraft in the US. Any pre-approved charter operations were deemed disapproved effective March 2, 2022.
Interagency Enforcement Group & Task Force
On March 2, the US Department of Justice launched the Task Force KleptoCapture, an interagency law enforcement task force dedicated to enforcing the sanctions, export restrictions, and economic countermeasures that the US and its allies have imposed.
In addition, the US and its allies issued a joint statement on March 17 launching the Russian Elites, Proxies, and Oligarch (REPO), a multilateral task force dedicated to aligning actions for sanctioning individuals who have illegally profited off their ties to the Russian state. The US DOT will reward information leading to the seizure of assets linked with foreign government corruption through the Kleptocracy Asset Recovery Rewards Program. A list of targeted individuals who are priorities for the US can be found here.