On May 19, 2023, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the Department of State sanctioned and placed on the Specially Designated Nationals (SDN) List over 225 individuals, entities, vessels and aircraft. These actions came at the same time the G7 member countries were meeting and jointly announced both continued support for Ukraine and a coordinated effort to increase sanctions and pressure on Russia. In a related G7 statement, the member countries noted that joint efforts will continue to include “working together to prevent evasion and circumvention of these coordinated sanctions and economic measures. G7 members will also work to further curtail Russia’s use of the international financial system to further its war efforts, and will continue to reduce Russia’s oil and energy revenues.”
The designations are a continuing effort to target those attempting to circumvent or evade sanctions and other economic measures against Russia. OFAC notes that these efforts to evade or circumvent sanctions are sometimes directed by Russia’s intelligence services and defense companies, who stand to benefit from the procurement of hard-to-get goods. As such, many of the designations continue to target known “covert procurement programs” in over twenty jurisdictions that have helped Russia continue to procure: (1) sensitive technologies and equipment for Russia’s intelligence serves and military; (2) military materials and gear; (3) semiconductor and nanotechnology production equipment; (4) testing systems for the microelectronic industry; (5) materials for Russian laboratories focused on nuclear weapon design and development as well as research on advanced conventional weapons technologies; and, (6) electronic components.
The designations also target third-party intermediaries or transhipment points seeking to circumvent restrictions, disguising the involvement of persons on the SDN List or entities on the Department of Commerce’s Entity List in transactions, and obscuring the true identities of Russian end-users, as noted in FAQ 1092.
The new designations also target “training grounds for Russia’s future energy specialists, the Russian research institutes where new extraction technologies are developed, Russian companies that facilitate drilling and mining operations, and firms that attract and advise on investment in Russia’s energy industry.” Five Russia-based Federal State Budget Educational Institutions involved in Russia’s energy sector have been placed on the SDN List. In addition, several Russian energy-related research institutions have been added to the list, including numerous private and state-owned research entities. Several Russian drilling and mining equipment companies have been designated. The new SDN designations also include both Russian-based and foreign investment entities that have been involved in Russia’s energy sector. The State Department separately identified and sanctioned numerous entities involved in expanding Russia’s future energy production and export capacity across a range of industries where Russia has strategic dependencies, and other entities involved in the metals and mining sector of Russia’s economy.
The State Department separately designated numerous additional Russian officials, elites, and other individuals and entities involved in Russia’s military establishment and defense industry. In addition, the Foreign Intelligence Service of the Russian Federation(SVR), the Russian Government’s intelligence agency, has itself been designated and placed on OFAC’s SDN List.
As a result of these actions, all property and interests in property of the persons placed on OFAC’s SDN List above that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. In addition, any entities that are owned, directly or indirectly, 50% or more by one or more blocked persons are also blocked. All transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or blocked persons are prohibited unless authorized by a general or specific license issued by OFAC, or exempt. These prohibitions include the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person and the receipt of any contribution or provision of funds, goods, or services from any such person.
New Russia-related General Licenses
In adding certain entities to the SDN List, OFAC has issued several new Russia-related General Licenses (GL)
- GL 66, “Authorizing the Wind Down of Transactions Involving Public Joint Stock Company Polyus” through 12:01 a.m. eastern daylight time, August 17, 2023.
- GL 67, “Authorizing Certain Transactions Related to Debt or Equity of, or Derivative Contracts Involving, Public Joint Stock Company Polyus” through 12:01 a.m. eastern daylight time, August 17, 2023. This GL authorizes the divestment or transfer of debt or equity ins this company purchased prior to May 19, 2023. It also authorizes facilitating, clearing and settling trades of covered debt or equity that were placed prior to 4:00 p.m. eastern daylight time, May 19, 2023. It covers transactions necessary to the wind down of derivative contracts entered into prior to 4:00 p.m. eastern daylight time, May 19, 2023.
- GL 68, “Authorizing the Wind Down of Transactions Involving Certain Universities and Institutes” through 12:01 a.m. eastern daylight time, July 18, 2023. This GL identifies five Russian Federal State Budgetary Educational Institutions and covers any entity in which one of these institutions own, directly or indirectly, individually or in the aggregate, a 50 percent or greater interest.
Certain transactions remain unauthorized under these general licenses and therefore require close analysis.