After reports of humanitarian atrocities and further details of the continued Russian aggression in Ukraine emerged over the weekend, the United States and its allies responded with further sanctions and export controls. “The images we are seeing coming out of Ukraine demonstrate Vladimir Putin’s barbarism, brutality, and blatant disregard for human life. The Department of Commerce, along with the entire Biden-Harris Administration, have taken swift and unprecedented action to ensure that Russia, and its enablers, pay a price for their actions,” said Deputy Secretary of Commerce Don Graves.
On April 6, 2022, President Biden introduced a new Executive Order imposing the following sanctions measures in response:
- Designating additional Russian financial institutions. The Office of Foreign Assets Control of the US Department of the Treasury (OFAC) has designated as SDNs and imposed full blocking sanctions on Sberbank, Russia’s largest financial institution, and Alfa Bank, Russia’s largest private bank. The action has blocked Russia’s largest and most systemically important financial institutions from the US financial system. US persons are prohibited from doing business with either bank and are required to block any property or interests in property that come into their possession.
- Expanding authorization to designate additional Russian persons. The Executive Order gives the Secretary of the Treasury authority to determine Russian sectors to which a new service ban shall apply.
- Prohibiting new investment and provision of certain services in Russia. As more than 600 multinational companies have already voluntarily exited the Russian market, the EO will prompt further exits as it contains a prohibition on new investment in Russia by US persons. The EO also prohibits US persons from providing “any category of services” yet to be determined by the Biden Administration.
- Designating additional Russian elites. OFAC has imposed blocking sanctions against family members of President Putin and Foreign Minister Lavrov, in addition to high-ranking security officials.
Despite the continued expansion of sanctions in response to the Russia’s ongoing aggression in Ukraine, the Biden administration has expressed its “[c]ommitment to supporting sectors essential to humanitarian activities” and as a result has exempted essential humanitarian and related activities including: basic foodstuffs and agricultural commodities, medicine and medical devices, and telecommunications services. Companies are not generally prohibited from operating in these sectors in Russia.
Then, on April 7, 2022, OFAC re-designated United Shipbuilding Corporation (USC), Russia’s largest shipbuilding company. The Department of State designated 28 of USC’s subsidiaries1 as well as eight of its board members pursuant to EO 14024. OFAC also expanded existing sanctions against Public Joint Stock Company Alrosa (Alrosa), the world’s largest diamond mining company, and designated Alrosa as an SDN.
In doing so, OFAC issued the following amended and new General Licenses:
- Amended General License 8B, adding Alfa Bank to the General License, which authorizes energy-related transactions involving entities listed on the GL through 12:01 am EDT, June 24, 2022.
- Amended General License 9C, adding authorization for:
- transactions relating to dealings (including facilitating, clearing, and settling transactions to divest) in debt or equity of Alfa Bank or its subsidiaries issued prior to April 6, 2022 through 12:01 am EDT, June 30, 2022.
- (i) transactions incident and necessary to dealings in debt or equity of Alrosa issued prior to April 7, 2022, through 12:01 am EDT, July 1, 2022; (ii) transactions incident and necessary to facilitating, clearing, and settling trades for Alrosa debt or equity, through 12:01 am EDT, July 1, 2022, provided such trades were placed prior to 4:00 pm EDT, April 7, 2022.
- Amended General License 10C, adding authorization for:
- transactions incident and necessary to the wind down of derivative contracts entered into prior to 4:00 pm EDT, April 6, 2022 that include Alfa Bank or its subsidiaries through 12:01 am EDT, June 30, 2022.
- transactions incident and necessary to the wind down of derivative contracts entered into with Alrosa or its subsidiaries prior to 4 pm EDT, April 7, 2022 through 12:01 pm EDT, July 1, 2022
- General License 21A, authorizing transactions ordinarily incident and necessary to the wind down of, including the processing and payment of salaries, severance, and expenses; payments to vendors and landlords; and closing of accounts Sberbank CIB USA, Inc. or Alrosa USA, Inc. through 12:01 am EDT, June 7, 2022.
- General License 22, authorizing wind down of transactions involving PJSC Sberbank or its subsidiaries through 12:01 am EDT, April 13, 2022.
- General License 23, authorizing wind down of transactions involving JSC Alfa Bank or its subsidiaries through 12:01 am EDT, May 6, 2022.
- General License 24, authorizing transactions incident and necessary to the wind down of transactions involving Alrosa and its subsidiaries through 12:01 am EDT, May 7, 2022.
- General License 25, authorizing (i) all transactions incident and necessary to the receipt or transmission of telecommunications involving Russia; and (ii) the re/exportation, sale, supply, directly or indirectly, from the United States or by US persons, wherever located, to Russia, of services, software, hardware, or technology incident to the exchange of communications over the internet, such as instant messaging, videoconferencing, chat and email, social networking, sharing of photos, movies, and documents, web browsing, blogging, web hosting, and domain name registration services.
On April 7, 2022, the Bureau of Industry and Security of the US Department of Commerce issued Temporary Denial Orders (TDOs) against Aeroflot, Azur Air, and UTair, terminating the right of these airlines to participate in transactions subject to the Export Administration Regulations, including exports and reexports from the United States, due to ongoing export violations related to comprehensive export controls on Russia imposed by the Commerce Department. The TDOs are issued for 180-days and may be renewed.
Also on April 7, 2022, the US Senate voted unanimously to pass two bills:
- HR 7108, as amended, suspends normal trade relations treatment for Belarus and Russia.
- HR 6968, as amended, bans the import of all products classified under Chapter 27 of the Harmonized Tariff Schedule of the United States from Russia into the US.
These two bills will become law once President Biden signs it, which is expected to happen soon.
US persons are strongly advised at this time to review their Russia-related contracts, projects, transactions, and holdings, and take necessary steps to ensure compliance with US sanctions and export controls laws, regulations, and orders.