U.S. and EU Announce Export Controls for Belarus and Russia, Additional Sanctions Targeting Russia

March 4, 2022 – On March 2 and March 4, 2022, the Biden Administration rolled out additional export controls and sanctions targeting Russia and Belarus for the invasion of Ukraine. These actions effectively extend to Belarus the new export controls targeting Russia announced last week. They also significantly narrow two widely used license exceptions for Russia for “temporary sojourns” of aircraft and for certain encryption items. They further target Russia’s oil refining sector and identify entities that support Russian military activities.

Additionally, on March 2, 2022, the Biden Administration issued new guidance on some of the sanctions announced last week and amended or issued several general licenses. On March 3, 2022, the Biden Administration implemented another large tranche of new sanctions and issued a new general license.

On March 2, 2022, the EU imposed further restrictive measures on Russia in view of Russia’s “unprovoked and unjustified military aggression against Ukraine” through three EU Council Regulations and three Council Decisions.

Additionally, as announced by the EU, Council Decision 2022/356 and Council Regulation 2022/355 amending Council Regulation 765/2006 and Council Decision 2012/642, significantly expand the current EU sanctions program against Belarus with sectoral sanctions targeting the Belarusian finance and defense sectors, as well as other key sectors. Council Regulation 765/2006 and Council Decision 2012/642 had been last amended on February 18, 2022. These new sanctions entered into force on March 3, 2022, the day following their publication in the Official Journal of the EU. For further details on these actions, please see below.

New U.S. Actions

1. New Export Controls on Belarus and Russia

March 2, 2022

On March 2, 2022, the U.S. Department of Commerce, Bureau of Industry and Security (“BIS”) posted for public inspection a new rule to implement new, stringent export control policies on Belarus, identical to those imposed on Russia on February 24, 2022, to prevent the diversion of items, technologies, and software through Belarus to Russia. (We summarized the Russia export controls in a previous alert.) These export controls aim to limit Russia’s ability to obtain materials needed to support its military aggression against Ukraine through Belarus and reduce both countries’ ability to sustain war.

Specifically, these new export controls:

impose new Commerce Control List (“CCL”)-based license requirements for Belarus;
revise the two foreign “direct product” rules that are specific to Russia and Russian “military end users” to make them also applicable to Belarus and Belarusian “military end users;”
specify a license review policy of denial applicable to all of the license requirements on Belarus that are being added in this rule, with certain limited exceptions;
significantly restrict the use of Export Administration Regulations (“EAR”) license exceptions;
expand the existing “military end use” and “military end user” control scope to include Belarus for all items subject to the EAR other than food and medicine designated EAR99; and
add two additional Belarusian entities to the Entity List as “military end users.”

This rule also imposes a license requirement for nuclear nonproliferation items for exports and reexports to Belarus and removes Belarus from Country Group A:4 under the EAR and adds it to Country Group D, which receives much less favorable treatment under the EAR.

In addition, for Belarus and Russia, this rule significantly limits the availability of the aircraft, vessels, and spacecraft (“AVS”) license exception and the encryption commodities, software, and technology (“ENC”) license exception. Specifically, license exception AVS is amended to exclude “any aircraft registered in, owned, or controlled by, or under charter or lease by Russia or a national of Russia.” License Exception ENC is amended to limit its authorization only to certain civil end-users connected to the U.S. or a Country Group A:4 or A:5 country. The rule additionally narrows the scope of the exemption for mass market items and software classified under ECCNs 5A992 or 5D992 to the same end-users now authorized under License Exception ENC.

The BIS unpublished rule is available in the Federal Register, and will be published on March 8, 2022.

March 3, 2022

On March 3, 2022, BIS took an additional action in response to Russia’s ongoing assault on Ukraine by imposing restrictions on technology exports related to oil and gas extraction equipment that would support Russia’s refining capacity over the long term. The rule builds on existing restrictions BIS put in place on the Russian deepwater oil and gas exploration and extraction industries in 2014 by imposing a policy of denial on such items and applying similarly stringent restrictions on a wide variety of items necessary for refining oil. These new export controls will further limit revenue that could support the military capabilities of Russia.

The BIS unpublished rule is available in the Federal Register, and will be published on March 8, 2022.

March 4, 2022

On March 4, 2022, BIS took further action in response to Russia’s assault on Ukraine’s sovereignty by adding 91 new parties in 10 countries to the Commerce Department’s Entity List. These 91 entities have been determined by the U.S. Government to be acting contrary to the foreign policy or national security interests of the United States. A full list of the entities by country is available in the text of the rule.

The BIS unpublished rule is available in the Federal Register, and will be published on March 9, 2022.

2. Blocking Sanctions on Russian defense entities

March 2, 2022

The U.S. Department of State plans to impose sanctions that target Russia’s defense sector to further restrict its ability to engage in warfare. In total, 22 Russian defense-related entities are being designated, including firms that make combat aircraft, infantry fighting vehicles, electronic warfare systems, missiles, and unmanned aerial vehicles for Russia’s military. The names of these 22 entities have not yet been released.

3. Banning Russian Aircraft

The United States is closing off American air space to all Russian flights. This includes aircraft certified, operated, registered, or controlled by any person connected with Russia. This also includes revoking all Russian airlines’ (both passenger and cargo) ability to operate to and from U.S. destinations, as well as refusing entry of any Russian-operated aircraft into U.S. airspace.

4. Sanctions

March 2, 2022

On March 2, 2022, the U.S. Department of the Treasury’s (“Treasury”) Office of Foreign Assets Control (“OFAC”) updated and issued new general licenses and provided further guidance on its recent actions. Pursuant to the Russian Harmful Foreign Activities Sanctions program, OFAC amended two existing general licenses to apply to the recently issued Russian Harmful Foreign Activities Sanctions Regulations and issued two new general licenses. Specifically, OFAC issued General License No. 9A, amending General License No. 9, to additionally authorize transactions related to the receipt of interest, dividend, and maturity payments related to the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation (collectively, “Russian Central Banking Institutions”) through May 25, 2022. OFAC also issued General License No. 10A, amending General License No. 10, to additionally authorize certain transactions related to the wind-down of derivative contracts, repurchase agreements, or reverse repurchase agreements with the Russian Central Banking Institutions through May 25, 2022. The amendments to General License No. 9A and 10A aim to ensure that the subsequently published Directive 4 prohibitions related to the Russian Central Banking Institutions (published February 28, 2022) do not impede the effectiveness of the general licenses in the event that the Russian Central Banking Institutions are involved in the activity authorized by the general licenses.

OFAC further issued General License No. 13, which authorizes certain administrative transactions (such as the payment of taxes, fees, or import duties, and purchase or receive permits, licenses, registrations, or certifications) prohibited by Directive 4 under E.O. 14024 through June 24, 2022, and issued General License No. 14, which authorizes certain clearing and settlement transactions involving the Russian Central Banking Institutions prohibited by Directive 4 under E.O. 14024. These general licenses aim to ensure that certain administrative and regulatory transactions with the Russian Central Banking Institutions may continue despite the new prohibitions outlined in Directive 4.

Additionally, OFAC published 12 new Frequently Asked Questions (“FAQs”), which provide additional guidance on OFAC’s recent Ukraine-/Russia-related sanctions actions, including information on Executive Order (“E.O.”) 14065, the general licenses recently issued under E.O. 14065, Directive 4 issued under E.O. 14024, and more. OFAC also amended 15 FAQs which provide, among other things, additional guidance on OFAC’s recent Russian Harmful Foreign Activities Sanctions actions, including information on how the relevant general licenses are applied, guidance for U.S. persons with respect to blocked Russian financial institutions, and information on Directive 1A issued under E.O. 14024.

March 3, 2022

On March 3, 2022, OFAC further increased pressure on Russia by sanctioning numerous Russian elites and their family members, identifying certain property of these persons as blocked, and sanctioning Russian intelligence-directed disinformation outlets. Specifically, OFAC blocked three Russian elites, two of their spouses, three of their adult children, six of their companies, one of Russia’s largest privately-owned aircraft, and one of the world’s largest superyachts. Included in these designations is Alisher Burhanovic Usmanov (“Usmanov”), one of Russia’s wealthiest billionaires. Concurrently with Usmanov’s designation, OFAC issued General License No. 15, authorizing transactions related to any entity owned 50 percent or more, directly or indirectly, by Usmanov that is not listed on OFAC’s Specially Designated and Blocked Persons List, but stopping short of authorizing any transactions with Usmanov himself. It is likely OFAC issued General License 15 to protect identified U.S. or allied interests in certain non-designated entities majority owned by Usmanov that otherwise would have been blocked under OFAC’s 50% rule.

OFAC also designated 26 Russia- and Ukraine-based individuals and seven Russian entities in connection with the Government of the Russian Federation’s disinformation campaigns. This action follows OFAC’s previous sanctions actions on January 20, 2022 and April 15, 2021, which related to Russian attempts to destabilize Ukraine and influence U.S. elections, respectively. These sanctions imposed by OFAC target major players in Russia’s disinformation campaign.

New EU Actions

Additional sanctions against Russia of March 2, 2022

1. Individual restrictive measures

The EU added 22 individuals to the EU restricted parties list pursuant to Council Regulation 2022/353 and Council Decision 2022/354. The new designated individuals are high-ranking members of the Belarusian military deemed to have played a role in the decision making and strategic planning processes that led to the Belarusian involvement in Russia’s aggression against Ukraine. These additional designations were decided pursuant to the EU sanctions program related to Russia’s invasion of Ukraine under one of the new criteria added on February 25, 2022, by Regulation 2022/330. These individuals are subject to an asset freeze and a prohibition from making funds and economic resources available as well as a travel ban in the EU as of March 2, 2022.

In total, as of March 4, 2022, 702 individuals and 53 entities have been designated under the EU Ukraine/Russia-related sanctions program.

2. Sectoral sanctions

Finance

Council Decision 2022/346 and Council Regulation 2022/345 introduce new restrictive measures on Russia’s financial sector.

Exclusion of certain Russian banks from the SWIFT system – It is prohibited to provide specialized financial messaging services used to exchange financial data (SWIFT) to (i) the legal persons, entities or bodies listed in Annex XIV or (ii) any legal person, entity or body established in Russia and directly or indirectly owned more than 50% by a party listed in Annex XIV. The banks designated in Annex XIV, as of March 4, 2022, are Bank Otkritie, Novikombank, Promsvyazbank, Bank Rossiya, Sovcombank, Vnesheconombank (VEB), and VTB Bank. Their exclusion from the SWIFT system is effective on March 12, 2022.
New investment ban on projects co-financed by the Russian Direct Investment Fund – It is now prohibited to invest, participate or otherwise contribute to projects co-financed by the Russian Direct Investment Fund.
- An authorization can however be granted by competent Member State authorities for investment, participation in or contribution to such projects due under contracts concluded before March 2, 2022.
New prohibition on euro denominated banknotes – It now prohibited to sell, supply, transfer or export euro denominated banknotes to Russia or to any natural or legal person, entity or body in Russia (including the government and the Central Bank of Russia) or for use in Russia. Two exemptions are provided for:
- the personal use of natural persons travelling to Russia or members of their immediate families travelling with them; and
- the official purposes of diplomatic missions, consular posts or international organizations in Russia enjoying immunities in accordance with international law.

Media

Council Decision 2022/351 and Council Regulation 2022/350 introduced restrictions on state-owned outlets RT/Russia Today and Sputnik's broadcasting in the EU in response to Russia’s “systematic information manipulation and disinformation […] applied as an operational tool in its assault on Ukraine.” The sanctions entered into force on March 2, 2022.

Broadcasting ban and suspension – It is now prohibited for operators to broadcast or to enable, facilitate or otherwise contribute to broadcast, any content by the legal persons, entities or bodies listed in Annex XV, including through transmission or distribution by any means such as cable, satellite, IP-TV, internet service providers, internet video-sharing platforms or applications, whether new or pre-installed. As of March 4, 2022, Annex XV targets the following outlets: RT- Russia Today English, RT- Russia Today UK, RT - Russia Today Germany, RT - Russia Today France, RT- Russia Today Spanish and Sputnik. Consequently, broadcasting licenses or authorizations, as well as transmission and distribution arrangements, with the parties listed in Annex XV are suspended.

New sanctions package targeting Belarus of March 2, 2022

As announced by the EU, Council Decision 2022/356 and Council Regulation 2022/355 amending Council Regulation 765/2006 and Council Decision 2012/642, significantly expand the current EU sanctions program against Belarus with sectoral sanctions targeting the Belarusian finance and defense sectors, as well as other key sectors. Note that Council Regulation 765/2006 and Council Decision 2012/642 were last amended on February 18, 2022. These new sanctions entered into force on March 3, 2022, the day following their publication in the Official Journal of the EU.

1. Defense

Council Decision 2022/356 and Council Regulation 2022/355 broaden the existing export control restrictions on dual-use items and add new restrictions for items which might contribute to Belarus’ technological enhancement of its defense and security sector. These new restrictions targeting Belarus are, for the most part, mirroring the new measures adopted against Russia.

Extension of dual-use items related restrictions – It is now prohibited to export, sell or supply, and to provide technical assistance, brokering services, financing or financial assistance related to, dual-use goods and technology (Annex I to Regulation 2021/821) in or for use in Belarus. The new sanctions broaden the dual-use restrictions already in place by removing the previous condition for the restriction to apply that the dual-use items were or may be intended for military end-use or a military end-user.
New defense and security sector related-restrictions – It is now prohibited to export, sell or supply, and to provide technical assistance, brokering services, financing or financial assistance related to, goods and technology which might contribute to Belarus’ military and technological enhancement, or the development of the defense and security sector, as listed in Annex Va of Council Regulation 2022/355, in or for use in Belarus.
- Several exemptions (not requiring authorizations) are provided for the export and provision of services related to dual-use items and items listed in Annex Va, for non-military use or end-user, intended for specific purposes (e.g:, humanitarian, medical, communication, etc.). For some of them, the exporter must however declare the transfer to Customs and notify its national competent authority within 30 days from the date of the first export.
- Export authorizations can be granted by the competent authority for exports of dual use items and items listed in Annex Va, provided they are for a non-military use and for a non-military end-user, (i) after having determined that the export is intended for specifically approved purposes (e.g.: intergovernmental cooperation, maritime safety, diplomatic representations, etc.), or (ii) where they are due under contracts concluded before March 3, 2022, or ancillary contracts necessary for the execution of such contracts, provided that such authorization is requested before May 1, 2022.
  - However, in both cases, no authorization can be granted for exports of dual use items and items listed in Annex Va or related services if the competent authority has reasonable grounds to believe that (i) the end-user might be a military end-user, (ii) the end-user might be an entity listed in Annex V, (iii) the items are intended for a military end-use, or (iv) the items are intended for the aviation or space industry. As of March 4, 2022, only the Belarus Ministry of Defense is on this Annex V.
    - Note that, by way of derogation, the competent authority may only authorize exports of dual use items and items listed in Annex Va or related services provided to the Belarus Ministry of Defense (listed in Annex V) after having determined that they are (i) necessary for the urgent prevention or mitigation of an event likely to have a serious and significant impact on human health and safety or the environment, or (ii) due under contracts concluded before March 3, 2022, or ancillary contracts necessary for the execution of such contracts, provided that such authorization is requested before May 1, 2022.
- The competent authorities may annul, suspend, modify or revoke authorizations previously granted if they deem that such action is necessary for the effective implementation of the regulations.

2. Key sectors of the Belarusian economy

Extension of tobacco products restrictions – In addition to the sale, supply, transfer and export of goods used for the production or manufacturing of tobacco products listed in Annex VI of Council Regulation 765/2006, it is now prohibited to provide technical assistance, brokering services, financing or financial assistance, as well as insurance and re-insurance related to those listed products, in or for use in Belarus.
- The previous exemption applicable to the execution of contracts concluded before June 25, 2021 is removed.
Extension of petroleum products restrictions – The existing prohibition to import, purchase, transport and provide related technical assistance, brokering services, financing or financial assistance, as well as related insurance and re-insurance, related to petroleum and gaseous hydrocarbon products originating in, exported from or located in Belarus is extended to a broader category of “mineral products”, as listed in Annex VII of Council Regulation 765/2006 (only the following category of goods was added to the existing list: Oils and other products of the distillation of high temperature coal tar and similar products in which the weight of the aromatic constituents exceeds that of the non-aromatic constituents).
- The prohibition is not applicable to purchases in Belarus required in order to meet the essential needs of the purchaser or of humanitarian projects in Belarus.
  - The previous exemption applicable to the execution of contracts concluded before June 25, 2021 is removed.
Extension of potash restrictions – In addition to the import, purchase or transfer from Belarus, whether or not originating in Belarus, of potash as listed in Annex VIII of Council Regulation 765/2006, it is now prohibited to provide technical assistance, brokering services, financing or financial assistance as well as insurance and re-insurance related to those listed products.
- The previous exemption applicable to the execution of contracts concluded before June 25, 2021 is removed.
New restrictions on wood, cement, iron, steel and rubber products – The EU introduced a new prohibition to import, purchase, transport, and provide technical assistance, brokering services, financing or financial assistance as well as insurance and re-insurance related to these products (listed in Annexes X, XI, XII and XIII of Council Regulation 765/2006) originating in, exported from or located in Belarus.
- The new prohibition is not applicable to the performance until June 4, 2022 of contracts concluded before March 2, 2022, or ancillary contracts necessary for the perforemance of such contracts.
New restrictions on machinery – It is now prohibited to sell, supply, transfer or export, and to provide technical assistance, brokering services, financing or financial assistance as well as insurance and re-insurance related to machinery (as defined in Annex XIV of Council Regulation 765/2006) in or for use in Belarus.
- Several exemptions are provided for the export and provision of services related to the listed machinery, for non-military use or end-users, intended for specific purposes (e.g: humanitarian, medical, communication, etc.). For some of them, the exporter must however declare the operation to Customs and notify its national competent authority within 30 days from the date of the first export.
- Another exemption is provided for the performance until June 4, 2022, of contracts concluded before March 2, 2022, or ancillary contracts necessary for the performance of such contracts.

3. Finance

Extension of restrictions on loans and credit – The existing prohibition on new loans or credit with a maturity exceeding 90 days after June 29, 2021 for specified parties listed in article 1k of Council Regulation 765/2006 (including, but not limited to, the Republic of Belarus, its Government, its public bodies, corporations, agencies, or entities listed in Annex IX), is extended.
- The previous exemption applicable to drawdowns or disbursements made under a contract concluded before June 25, 2021 is removed, but the other exemptions and derogations (requiring an authorization) remain in place.
Extension of restrictions on insurance and re-insurance services – The existing prohibition to provide insurance or re-insurance to specified parties listed in article 1l of Council Regulation 765/2006 (including, but not limited to, the Republic of Belarus, its Government, its public bodies, corporations or agencies), is extended.
- The previous exemption applicable to the performance of contracts concluded before June 25, 2021 is removed, but the other exemptions remain in place.

Future Actions

The U.S. Department of the Treasury publicly committed to sharing financial intelligence and other evidence with the U.S. Department of Justice to support criminal prosecutions and seizure of assets targeting Russian elites. The Departments of the Treasury and Justice plan to continue working with international partners and allies to impose costs on Russia that will further isolate Russia from the international financial system, as committed to in the joint statement by leaders on February 26, 2022.

On the EU side, discussions are ongoing concerning the possible imposition of a fourth package of sanctions against Russia. The Foreign Affairs Ministers of the EU met on March 4,2022 with the representatives from the UK, Canada, and the U.S. also attending. These measures could include (i) additional exclusions from SWIFT, (ii) the closure of EU ports to Russian ships, (iii) select import bans (steel, timber, aluminum and possibly coal are reportedly under consideration), and/or (iv) measures regarding trust funds.