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March 14, 2022 – As Russia continues its assault on Ukraine, the U.S. government ramped up anti-Russia economic pressure through several significant economic sanctions and export control actions over the past week. For a summary of the U.S.’s previous Russia-related actions, please see our earlier alerts available here. And to register for our client briefing on the additional U.S./EU sanctions in response to the crisis in Ukraine, click here.
New US Actions
On March 4, 2022, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) published three Frequently Asked Questions (FAQs) under the Russia Harmful Foreign Activities Sanctions program, providing further guidance on General License 8A regarding authorizations for energy-related transactions and Executive Order (“E.O.”) 14024.
On March 7, 2022, the Department of Commerce’s Bureau of Industry and Security (“BIS”) added South Korea to the list of countries to receive an exclusion from the license requirements required under the U.S. Russia/Belarus Sanctions rules, including the foreign direct product rules for Russia/Belarus. South Korea joins the member states of the EU, Japan, Canada, Australia, the United Kingdom, and New Zealand as countries which have committed to implementing similar controls as the United States. BIS noted that providing exclusions to partner countries enhances the multilateral effort to implement strong export controls.
On March 8, 2022, the President issued E.O. 14066, Prohibiting Certain Imports and New Investments With Respect to Continued Russian Federation Efforts To Undermine the Sovereignty and Territorial Integrity of Ukraine. The new E.O. imposed broad prohibitions on Russia, including prohibitions on the importation of certain Russian-origin oil and gas products and new investment in the energy sector in Russia. OFAC also issued Russia-related General License 16, which authorizes transactions related to certain imports prohibited by E.O. 14066 through April 22, 2022. Additionally, OFAC published eight new FAQs providing further guidance on E.O. 14066, and updated the guidance in two FAQs to reflect newly issued E.O. 14066.
On March 11, 2022, the President issued a new executive order entitled Prohibiting Certain Imports, Exports, and New Investment with Respect to Continued Russian Federation Aggression. The new E.O. imposed prohibitions on the export of luxury items to persons located in Russia, such as jewelry and vehicles, and the import of goods from several signature sectors of Russia’s economy, including alcoholic beverages and seafood, and created a broad authority to ban new investment in any sector of the Russia economy. OFAC also issued General License 17, authorizing transactions until March 25, 2022 related to certain imports made pursuant to agreements executed prior to March 11, 2022 that would be otherwise prohibited by the E.O., General License 18, authorizing certain personal remittances, General License 19, authorizing certain transactions related to personal maintenance of U.S. individuals in Russia, and General License 23, which authorizes certain transactions in support of nongovernmental organizations’ activities. OFAC also issued eight FAQs, seven of which provide further guidance on the E.O., and one FAQ which provides guidance on the application of Russia-related sanctions to virtual currency. Finally, OFAC updated FAQ 1,007, an FAQ providing guidance on authorizations for U.S. persons related to activity with Donetsk and Luhansk, to include General License 23.
Contemporaneously with the March 11, 2022, E.O., BIS issued a final rule imposing a ban on the export of luxury goods to Russia. The rule requires a license from BIS for the export, reexport, or in-country transfer of “luxury goods” to (1) Russia or Belarus regardless of the end-user or end-use, or (2) Russian parties on the Specially Designated Nationals List regardless of their location. The rule also creates a new Supplement 5 to 15 C.F.R. Part 746 that identifies the “luxury goods” subject to the license requirement by commodity description, schedule B number, and HTS code. Those goods include, for example, artwork, alcoholic beverages, tobacco, carpets, leather goods, silk goods, and jewelry and precious metals.
New EU Actions
New sanctions targeting Russia of March 9, 2022
On March 9, 2022, the EU imposed further restrictive measures on Russia and Belarus in response to the Russian military aggression against Ukraine with support of Belarus through three EU Council Regulations and three Council Decisions.
1. Individual restrictive measures
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 9, 2022. In total, as of March 13, 2022, 862 individuals and 53 entities have been designated under the EU Ukraine/Russia-related sanctions program.
2. Sectoral sanctions
Council Decision 2022/395 and Council Regulation 2022/394 provide some clarification and fine-tuning to some of the existing sectoral sanctions applicable to Russia’s finance sector. The amendments entered into force on March 10, 2022.
Maritime navigation and radio communication
Defense and security
Note that Council Decision 2022/395 and Council Regulation 2022/394 amended Annex VII to Council Regulation 833/2014, including the goods and technology which might contribute to Russia’s military and technological enhancement or the development of its defense and security sector. The EU has notably clarified that non-controlled items containing one or more components listed in this Annex VII were not subject to the controls under article 2b as well as article 2a of Regulation.
As a reminder, it is prohibited to export, sell or supply and to provide technical assistance, brokering services, financing or financial assistance related to the goods and technology listed in Annex VII in or for use in Russia. For further details on applicable exemptions and authorizations, please see our previous client alert.
New sanctions targeting Belarus of March 9, 2022
Following up on the restrictive measures of March 2, 2022, in response to the involvement of Belarus in Russia’s military aggression against Ukraine (described in our previous client alert), the EU adopted additional sectoral measures targeting Belarus through Council Decision 2022/399 and Council Regulation 2022/398. The new measures and amendments, mostly mirroring the measures already adopted against Russia, entered into force on March 10, 2022.
The new financial restrictions finally include (i) new restrictions for central securities depositories (as defined in Regulation (EU) No 909/2014), (ii) a new prohibition from selling euro denominated transferable securities issued after April 12, 2022, or units in collective investment undertakings providing exposure to such securities, to any Belarusian national or natural person residing in Belarus or any legal person established in Belarus, and (iii) a new prohibition from listing and providing services as of April 12, 2022 on trading venues for the transferable securities of any legal person established in Belarus and with over 50% public ownership.
Defense and security
Council Decision 2022/399 and Council Regulation 2022/398 amended Annex Va to Council Regulation 765/2006, including the goods and technology which might contribute to Belarus’ military and technological enhancement or the development of its defense and security sector. As a reminder, it is prohibited to export, sell or supply and to provide technical assistance, brokering services, financing or financial assistance related to the goods and technology listed in Annex Va in or for use in Belarus. For further details on applicable exemptions and authorizations, please see our previous client alert.
In order to ensure the correct implementation of the measures set out in Regulation 765/2006, as amended by Regulation 2021/907 of June 4, 2021, prohibiting any aircraft operated by Belarusian air carriers, from landing in, taking off from or overflying the territory of the Union, the EU imposed new obligations on the Network Manager for air traffic management network functions of the single European sky.
New EU sanctions are expected in the coming days. After an informal meeting of EU heads of state or government in Versailles on March 10 and 11, 2022, EU leaders adopted a declaration on the Russian aggression against Ukraine, as well as on bolstering defense capabilities, reducing energy dependencies and building a more robust economic base. They also warned that the EU is determined to increase pressure on Russia and Belarus and ready to move quickly with further sanctions.
The new package of sanctions will be designed and implemented in coordination between G7 countries, as their leaders committed on March 11, 2022, to take further measures to:
As EU sanctions against Russia intensify, the European Commission submitted on March 10, 2022, to Member States a draft proposal for a State aid Temporary Crisis Framework to support the EU economy in the context of Russia's invasion of Ukraine. The draft would notably allow Member States to grant temporary liquidity support to all companies affected by the current crisis through guarantees and subsidized loans and aid for additional costs due to exceptionally high gas and electricity prices.