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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:
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.
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.
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.
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
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.
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.
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.
2. Key sectors of the Belarusian economy
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.