U.S. Department of Commerce Places Export Restrictions on 29 Parties; State Department Announces Sanctions on Russian Defense Companies; EU to Extend Russia-Related Sanctions.

A. BIS Adds 29 Entities to Entity List

On September 2, 2015, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) issued a final rule amending the Export Administration Regulations (EAR) by adding 29 parties to its Entity List, a restricted-party list identifying foreign persons that engage in activities contrary to U.S. national security and/or foreign policy interests. This latest action was taken in accordance with Executive Orders 13660, 13661, 13662 and 13685 to “ensure the efficacy of existing sanctions on [Russia] for violating international law and fueling the conflict in Ukraine.”

For 14 of the 29 entities added to the Entity List, BIS imposes a general license requirement for all items subject to the EAR. Accordingly, all exports, re-exports and transfers (in-country) of all restricted items to these companies require a license from BIS, and BIS will also consider such license requests with a presumption of denial. This BIS action essentially conforms the Entity List with actions against the same entities previously taken by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), designating these entities as “Specially Designated Nationals” (SDNs) under Executive Orders 13660, 13661 and 13685.

The 14 entities subject to this general license requirement are:

  • Private Joint-Stock Company Mako Holding
  • Airfix Aviation Oy
  • IPP Oil Products (Cyprus) Limited
  • Set Petrochemicals Oy Southeast Trading Oy
  • Southport Management Services Limited
  • Open Joint Stock Company Kontsern
  • Izhmash Izhevsky Mekhanichesky Zavod JSC
  • State Enterprise Evpatoria Sea Commercial Port
  • State Enterprise Feodosia Sea Trading Port
  • State Shipping Company Kerch Sea Ferry
  • State Enterprise Kerch Sea Commercial Port
  • State Enterprise Sevastopol Sea Trading Port
  • State Enterprise Yalta Sea Trading Port

The other 15 entities added to the Entity List are identified as subsidiaries of Rosneft, which is already subject to BIS export restrictions and OFAC sectoral sanctions. For these 15 entities, the BIS listing imposes a license requirement for exports or re-exports of U.S.-origin items subject to the EAR for uses that correspond with activities barred under U.S. sectoral sanctions in accordance with Executive Order 13662. Specifically, BIS now imposes a license requirement for the export, re-export or transfer (in-country) to these companies of all items subject to the EAR when the exporter knows or is unable to determine whether the item will be used directly or indirectly in exploration for, or production of, oil or gas in Russian Deepwater, Arctic offshore locations, or shale formations in Russia.

The 15 entities subject to this license requirement are:

  • CJSC Vankorneft
  • Neft-Aktiv LLC OJSC Achinsk Refinery
  • OJSC Angarsk Petrochemical Company
  • OJSC Kuybyshev Refinery
  • OJSC Novokuybyshev Refinery
  • OJSC Orenburgneft
  • OJSC RN Holding
  • OJSC Samotlorneftegaz
  • OJSC Syzran Refinery
  • PJSC Verkhnechonskneftegaz
  • Rosneft Trade Limited
  • Rosneft Trading S.A.
  • RN-Komsomolsky Refinery LLC
  • RN-Yuganskneftegaz LLC

B. State Department Places Sanctions on Russian Defense Companies

In addition to the Commerce Department’s action, on September 2, 2015 the U.S. Department of State published a notice in the Federal Register identifying 23 companies based in China, Iran, North Korea, Russia, Sudan, Syria, Turkey and the United Arab Emirates that are now subject to sanctions under Section 3 of the Iran, North Korea and Syria Nonproliferation Act (the “Act”), including a number of Russian defense sector companies. The Act is designed to penalize entities and individuals that deal in goods, services or technology with Iran, North Korea or Syria, which are subject to multilateral missile and weapons of mass destruction export control trade restrictions. 

Among others affected, this action adds to the list of targeted companies the Russian arms export agency Rosoboronexport, as well as four Russian defense industry enterprises: Instrument Design Bureau (KBP) Tula, Joint Stock Company Katod, JSC Mic NPO Mashinostroyenia and Russian Aircraft Corporation (RAC) MiG. Based on this listing, which has a two-year duration subject to extension, U.S. government agencies are generally barred from:

  1. procuring or entering into any contract for the procurement of any goods, technology, or services from listed entities
  2. providing assistance to or permitting participation of listed entities in projects subject to any U.S. government assistance program
  3. sales or authorization for sale to the listed parties of items subject the U.S. Munitions List, as well as defense articles, defense services or design and construction services under the Arms Export Control Act (and terminating any such services)
  4. approval or provision of export licenses in connection with the listed entities for items subject to control under the U.S. Export Administration Act and the Export Administration Regulations (and suspending existing licenses).

In initial response to these measures, Russia’s Foreign Ministry (the “Ministry”) described these sanctions, together with the new Entity List restrictions imposed by the U.S. Commerce Department on September 2, as tools designed “to punish” Russia for pursuing its national interest and for its involvement in Crimea. The Ministry further indicated that Russia is considering a possible response with still unspecified possible retaliatory measures.

C. EU to Extend Russia-Related Sanctions

On September 2, 2015, EU ambassadors agreed to extend for an additional six months the asset freeze and travel bans directed at Russian and Ukrainian persons and entities deemed to be involved in action against Ukraine’s territorial integrity. The EU sanctions, which have the stated purpose of putting economic pressure on Moscow to implement the Minsk ceasefire agreement with Ukraine by the end of the year, are otherwise due to expire on September 15. Formal EU action extending the sanctions restrictions to March 2016 is expected shortly, by or before that date. 

D. Additional Information

For more information regarding the 29 entities added to the BIS Entity List, see the Final Rule here.

For more information on the State Department sanctions, see the Federal Register Notice here  and news coverage here and here.

For additional information on the anticipated extension of EU Russia-related sanctions, see news coverage here and here.