In response to the continuing crisis in Ukraine, the United States on 28 April 2014 has imposed new broad sanctions and export control restrictions, affecting both U.S. and non-U.S. companies. The sanctions measures target seven Russian government officials and 17 companies (including several banks) linked to members of what the U.S. Treasury Department described as Russian President Vladimir Putin’s “inner circle.” In addition to adding them to the U.S. Office of Foreign Assets Control (OFAC) specially designated nationals list (SDN List), the U.S. government named 13 of the companies to the U.S. Commerce Department’s entity list (Entity List). Furthermore, the U.S. government previously had imposed a suspension on export license applications filed with the Commerce and State departments and has now decided to take action to deny export license applications and revoke export licenses for high technology items that would contribute to Russia’s military capabilities.
The White House said it was taking these actions because Russia had failed to meet its commitments from a 17 April 2014 meeting in Geneva with the U.S., EU, and Ukraine, and instead had escalated the crisis in eastern Ukraine. More broadly, the White House press release regarding these measures makes it clear that the United States intends to review and implement a range of sanctions and other options in order to hold Russia to the commitments it made in Geneva in early April.
The EU has added 15 names to the list of those subject to sanctions for threatening the territorial integrity, sovereignty, and independence of Ukraine. The sanctions measures, which enter into effect today, 29 April 2014, target high-profile Russian politicians such as a deputy prime minister; deputy chairman of the Duma; Crimean leaders; and leaders of Ukrainian separatist groups in Lugansk and South East Ukraine. These new sanctions do not target companies or businessmen.
The Russian government has initially announced that it will retaliate and will announce its sanctions soon, but such proposals were not approved by President Putin. He publicly said that at the existing stage there was no "need" for sanctions against the U.S. and EU, but "if something of the sort continues, we will certainly have to see carefully who works in the key sectors of the Russian economy and how, including in the energy sector."
- Summary of U.S. actions
Department of Treasury
Pursuant to Executive Order 13661 (which authorizes sanctions on, among others, officials of the Russian government or any individual or entity that is owned or controlled by, that has acted on behalf of, or that provided support to, a senior Russian government official), the U.S. Department of Treasury has applied asset freezes and, if applicable, visa bans, to additional individuals and entities. U.S. persons cannot engage in transactions or dealings with these designated individuals and entities, directly or indirectly, or with entities 50% or more owned by these individuals and entities (this includes contracts, payments, joint ventures, sales, exports, services, and other transactions). Property, which is defined broadly by OFAC, of these individuals and entities that comes within the possession or control of the United States or U.S. persons (including U.S. banks and companies) must be blocked (or “frozen”), and such blocking must be reported to OFAC.
Several Russian government officials were designated in today’s action, including Russian Federation Deputy Prime Minister Dmitry Kozak, Presidential Chief of Staff and close Putin advisor Vyacheslav Volodin, and presidential ally/Director of a state-owned high-technology holding company Sergei Chemezov. Furthermore, the sanctions have impacted the banking sector: InvestCapitalBank and SMP Bank were designated, as they are controlled by Arkady and Boris Rotenberg (who were designated on 20 March 2014), as well as CJSC Zest and JSB Sobinbank, both owned or controlled by Bank Rossiya (which was designated on 20 March 2014). Groups controlled by Gennaddy Timchenko (who was designated on 20 March 2014) were also sanctioned, including the Volga Group, an investment strategy group; Transoil, a rail freight operator; Avia Group and Avia Group Nord, aviation services companies for Russian airports; several Stroytransgaz entities, which operate in the construction sector; and Aquanika, a beverage company. OFAC’s press release includes further information on these entities. We include below the list of newly designated individuals and entities, and the list is also available here. The full list of entities subject to U.S. sanctions is available here.
Department of Commerce
The Commerce Department added 13 companies to its Entity List as follows: Stroytransgaz Holding, located in Cyprus; Volga Group, located in Luxembourg and Russia; and Aquanika, Avia Group LLC, Avia Group Nord LLC, CJSC Zest, Sakhatrans LLC, Stroygazmontazh, Stroytransgaz Group, Stroytransgaz LLC, Stroytransgaz-M LLC, Stroytransgaz OJSC, and Transoil, all located in Russia. The press release is available here. This is in addition to Chernomorneftegaz in Crimea (the company is also known as Chornomornaftogaz and NJSC Chornomornaftogaz), which was added to the Entity List on 11 April 2014. See our Hogan Lovells update here.
Because of these Entity List designations, any person or entity (including non-U.S. entities) that is providing goods, software, or technology subject to the Export Administration Regulations (EAR) to these companies would require licenses to export or re-export such items (even when the items subject to the EAR are already located outside the United States and are being transferred to the Entity List entities). Interactions with any subsidiaries (either joint ventures or direct equity ownership stakes) of these entities would also raise red flags and require further due diligence to confirm that U.S. items are not being diverted and that the subsidiary is a bona fide legally distinct entity from its parent. If the subsidiary entity is controlled by one of the Entity List entities as a result of its level of ownership and/or its involvement in the company’s business activities, the Entity List’s licensing requirements and policies specific to the designated companies apply to the subsidiary company as well.
Commerce has announced that, effective immediately, it will deny pending applications for licenses to export or re-export high technology items subject to the EAR to Russia or occupied Crimea that contribute to Russia’s military capabilities. The department will also be revoking existing export licenses that meet these conditions. In addition, Commerce will be assessing all other pending applications on a case-by-case basis to determine if the items would contribute to Russia’s military capabilities. Commerce likely will identify various export control classification number (ECCN) entries to target for denial or revocation, including, for example, certain microelectronics, specialty materials, tooling machines, and other items.
Use of license exceptions in the EAR, such as License Exception ENC for encryption items, is still permissible at this time, provided that the parties are not on the Entity List, the SDN List, or any other restricted parties list. Change in the use of license exceptions would require formal government amendments to the regulations, presidential order, or other formal means. Companies should carefully review transactions that may involve Russian military interests, directly or indirectly, and exercise due caution. Today’s export restrictions follow the 25 March 2014 announcement from the Department of Commerce that it would be halting the issuance of new licenses for exports or re-exports of goods and services to Russia until further notice.
Department of State
The State Department also announced that, effective immediately, it will deny pending applications for export or re-export of any high-technology defense articles or services regulated under the International Traffic in Arms Regulations (ITAR) to Russia or occupied Crimea that contribute to Russia’s military capabilities. The department is taking actions to revoke any existing export licenses meeting these conditions, and all other pending applications and existing licenses (including those related to launches of commercial satellites using Russian launch vehicles) will receive a case-by-case evaluation to determine their contribution to Russia’s military capabilities. The press release is available here.
Today’s export restrictions follow the 27 March 2014 announcement from the Department of State that it would be halting the issuance of new licenses for exports or re-exports of goods and services to Russia until further notice.
- Summary of EU actions
By Council Implementing Regulation (EU) 433/2014, the EU has extended an asset freeze and visa ban to 15 additional persons responsible for actions that undermine or threaten the territorial integrity, sovereignty, and independence of Ukraine as set out in Council Regulation 269/2014 (EU Ukraine Sanctions).
Overall trade, including energy, between the EU and the Russian Federation continues not to be affected by these new measures. However, the EU will consider additional measures if the security situation in Ukraine further deteriorates.
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United States – Specially Designated Nationals List Update
The following individuals have been added to OFAC's SDN List:
BELAVENCEV, Oleg Evgenyevich (a.k.a. BELAVENTSEV, Oleg); DOB 15 Sep 1949; Russian Presidential Envoy to the Crimean District; Member of the Russian Security Council (individual) [UKRAINE2].
CHEMEZOV, Sergei (a.k.a. CHEMEZOV, Sergey Viktorovich); DOB 20 Aug 1952; POB Cheremkhovo, Irkutsk, Russia (individual) [UKRAINE2].
KOZAK, Dmitry; DOB 07 Nov 1958; POB Kirovograd, Ukraine; Deputy Prime Minister of the Russian Federation (individual) [UKRAINE2].
MUROV, Evgeniy Alekseyevich (a.k.a. MUROV, Evgeny; a.k.a. MUROV, Yevgeniy; a.k.a. MUROV, Yevgeny); DOB 18 Nov 1945; POB Zvenigorod, Moscow, Russia; Director of the Federal Protective Service of the Russian Federation; Army General (individual) [UKRAINE2].
PUSHKOV, Aleksei Konstantinovich (a.k.a. PUSHKOV, Alexei); DOB 10 Aug 1954; Chairman of State Duma Committee on International Affairs (individual) [UKRAINE2].
SECHIN, Igor; DOB 07 Sep 1960; POB St. Petersburg, Russia (individual) [UKRAINE2].
VOLODIN, Vyacheslav; DOB 04 Feb 1964; POB Alexeyevka, Khvalynsk district, Saratov, Russia; First Deputy Chief of Staff of the Presidential Executive Office (individual) [UKRAINE2].
The following entities have been added to OFAC's SDN List:
AQUANIKA (a.k.a. AQUANIKA LLC; a.k.a. LLC RUSSKOYE VREMYA; a.k.a. OBSHCHESTVO S OGRANICHENNOI OTVETSTVENNOSTYU RUSSKOE VREMYA; a.k.a. RUSSKOE VREMYA OOO; a.k.a. RUSSKOYE VREMYA LLC), 47A, Sevastopolskiy Ave., of. 304, Moscow 117186, Russia; 1/2 Rodnikovaya ul., Savasleika s., Kulebakski raion, Nizhegorodskaya oblast 607007, Russia; website http://www.aquanika.com; alt. website http://aquanikacompany.ru; Email address: [email protected]; Registration ID 1075247000036 [UKRAINE2].
AVIA GROUP LLC (a.k.a. AVIA GROUP LTD), Terminal Aeroport Sheremetyevo Khimki, 141400 Moskovskaya obl., Russia; website http://www.avia-group.su/ [UKRAINE2].
AVIA GROUP NORD LLC, 17 A, Stratoyava St., Saint Petersburg, Russia; website http://www.ag-nord.ru[UKRAINE2].
CJSC ZEST (a.k.a. ZEST LEASING), pr. Medikov 5, of. 301, St. Petersburg, Russia; 2 Liter a Pl. Rastrelli, St. Petersburg 191124, Russia; website http://www.zest-leasing.ru; Registration ID 1027809190507; Government Gazette Number 44323193 [UKRAINE2].
INVESTCAPITALBANK (a.k.a. INVESTKAPITALBANK; a.k.a. OJSC INVESTCAPITALBANK; a.k.a. OPEN JOINT STOCK COMPANY INVESTCAPITALBANK), 100/1, Dostoevskogo Street, Ufa, Bashkortostan Republic 450077, Russia; SWIFT/BIC INAKRU41; Website http://www.investcapitalbank.ru; License 2377 [UKRAINE2].
JSB SOBINBANK (a.k.a. SOBINBANK), 15 Korp. 56 D. 4 Etazh ul. Rochdelskaya, Moscow 123022, Russia; 15/56 Rochdelskaya Street, Moscow 123022, Russia; SWIFT/BIC SBBARUMM; websitehttp://www.sobinbank.ru; Registration ID 1027739051009; Government Gazette Number 09610355 [UKRAINE2].
SAKHATRANS LLC (a.k.a. OBSHCHESTVO S OGRANICHENNOI OTVETSTVENNOSTYU SAKHA (YAKUTSKAYA) TRANSPORTNAYA KOMPANIYA; a.k.a. SAKHATRANS OOO), 14 ul. Molodezhnaya Rabochi Pos. Vanino, 682860 Vaninski, Raion Khabarovski Krai, Russia [UKRAINE2].
SMP BANK (a.k.a. BANK SEVERNY MORSKOY PUT; a.k.a. SMP BANK OPEN JOINT-STOCK COMPANY), 71/11 Sadovnicheskaya Street, Moscow 115035, Russia; SWIFT/BIC SMBKRUMM; website www.smpbank.ru; email address: [email protected] [UKRAINE2].
STROYGAZMONTAZH (a.k.a. LIMITED LIABILITY COMPANY STROYGAZMONTAZH; a.k.a. STROYGAZMONTAZH CORPORATION; a.k.a. "SGM"), 53 prospekt Vernadskogo, Moscow 119415, Russia; website www.ooosgm.com; alt. website www.ooosgm.ru; email address: [email protected] [UKRAINE2].
STROYTRANSGAZ GROUP (a.k.a. STROYTRANSGAZ; a.k.a. "STG GROUP"), 3 Begovaya Street, Building #1, Moscow 125284, Russia; website www.stroytransgaz.ru [UKRAINE2].
STROYTRANSGAZ HOLDING (a.k.a. STG HOLDING LIMITED; a.k.a. STG HOLDINGS LIMITED; a.k.a. STROYTRANSGAZ HOLDING LIMITED; a.k.a. "STGH"), 33 Stasinou Street, Office 2 2003, Nicosia Strovolos, Cyprus [UKRAINE2].
STROYTRANSGAZ LLC (a.k.a. OOO STROYTRANSGAZ), House 65, Novocheremushkinskaya, Moscow 117418, Russia [UKRAINE2].
STROYTRANSGAZ OJSC (a.k.a. OAO STROYTRANSGAZ), House 58, Novocheremushkinskaya St., Moscow 117418, Russia [UKRAINE2].
STROYTRANSGAZ-M LLC, 26th Meeting of the Communist Party Street, House 2V, Novy Urengoy, Tyumenskaya Oblast, Yamalo-Nenetsky Autonomous Region 629305, Russia [UKRAINE2].
THE LIMITED LIABILITY COMPANY INVESTMENT COMPANY ABROS (a.k.a. LLC IC ABROS), 2 Liter a Pl. Rastrelli, St. Petersburg 191124, Russia; Government Gazette Number 72426791; Telephone: 7812 3358979 [UKRAINE2].
TRANSOIL (a.k.a. LIMITED LIABILITY COMPANY TRANSOIL; f.k.a. OBSHCHESTVO S ORGANICHERNNOI OTVETSTVENNOSTYU TRANSOIL; a.k.a. TRANSOIL LLC; a.k.a. TRANSOYL SNG LTD.), 18A Petrogradskaya nab., St. Petersburg 197046, Russia; website http://www.transoil-spb.ru; alt. website http://transoil.com; email address: [email protected]; Registration ID 1037835069986 [UKRAINE2].
VOLGA GROUP (a.k.a. VOLGA GROUP INVESTMENTS; f.k.a. VOLGA RESOURCES; f.k.a. VOLGA RESOURCES GROUP), 3, rue de la Reine L-2418, Luxembourg; Russia [UKRAINE2].
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European Union – New designations subject to targeted actions:
BELAVENTSEV Oleg Yevgenyvich, Plenipotentiary Representative of the President of the Russian Federation into the so-called “Crimean Federal District,” non-permanent member of the Russian Security Council, listed on 29 April 2014.
BOLOTOV, Valeriy, one of the leaders of the separatist group “Army of the South-East,” which occupied the building of the Security Service in the Lugansk region, listed on 29 April 2014.
GENNADEVICH, Tsyplakov Sergey, one of the leaders of ideologically radical organization People's Militia of Donbas, listed on 29 April 2014.
GERASIMOV, Valery Vasilevich, Chief of the General Staff of the Armed Forces of the Russian Federation, First Deputy Minister of Defence of the Russian Federation, General of the Army, listed on 29 April 2014.
KOVATIDI, Olga Fedorovna, member of the Russian Federation Council from the annexed Autonomous Republic of Crimea, listed on 29 April 2014.
KOZAK Dmitry Nikolayevich, Deputy Prime Minister, responsible for overseeing the integration of the annexed Autonomous Republic of Crimea into the Russian Federation, listed on 29 April 2014.
MENYAILO, Sergei Ivanovich, acting governor of the Ukrainian annexed city of Sevastopol, listed on 29 April 2014.
NEVEROV, Sergei Ivanovich, Deputy Chairman of State Duma, United Russia, listed 29 April 2014.
PROKOPIV, German, active leader of the “Lugansk Guard,” listed on 29 April 2014.
PURGIN, Andriy, head of the “Donetsk Republic,” listed on 29 April 2014.
PUSHYLIN, Denys, one of the leaders of the Donetsk People's Republic, listed on 29 April 2014.
SAVELYEV Oleg Genrikhovich, Minister for Crimean Affairs, listed on 29 April 2014.
SERGUN, Igor Dmitrievich, Director of GRU (Main Intelligence Directorate), Deputy Chief of the General Staff of the Armed Forces of the Russian Federation, Lieutenant-General, listed on 29 April 2014.
SHVETSOVA, Ludmila Ivanovna, Deputy Chairman of State Duma, United Russia, listed on 29 April 2014.
STRELKOV (Ihor Strielkov), Igor, identified as staff of Main Intelligence Directorate of the General Staff of the Armed Forces of the Russian Federation (GRU), involved in incidents in Sloviansk, listed on 29 April 2014.