On April 19, 2021, OFAC effectively reactivated longstanding sanctions against nine Belarussian companies and their subsidiaries, revoking a general license that had authorized transactions involving those entities since 2015. These sanctions may impact a significant number of Belarussian companies, as several of the listed entities are large conglomerates.
US sanctions on Belarus were first imposed in 2006 under Executive Order 13405, with similar EU sanctions beginning in 2004, in response to concerns about the electoral process and human rights abuses in Belarus. However, in 2015, OFAC had issued a general license broadly authorizing transactions with these nine companies and their subsidiaries, but without actually lifting the underlying sanctions. This limited and conditional sanctions relief in 2015 was part of a coordinated US/EU policy brought about by an improved political and human rights climate in Belarus at the time. Until now, this general license had regularly been extended since it was first issued in 2015 (as we previously discussed, along with a more detailed history of this sanctions program).
In this action, OFAC has replaced General License No. 2G, which had set forth the limited authorization to engage in certain types of transactions with these nine companies and entities of which they owned 50% or more, with General License No. 2H, which now only authorizes transactions that are “ordinarily incident and necessary to the wind down” of activities with such entities until June 3, 2021. Until that date, activity inconsistent with the “wind down” of pre-existing business may be prohibited, and after that date all transactions or dealings involving these companies or their “interests in property” (including entities of which they own 50% or more) will be prohibited (absent OFAC authorization) if US persons are involved. Even if no US persons are involved, there may still be US sanctions risks in light of the authority in Executive Order 13405 to impose sanctions on any person determined “to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of” activities that are sanctionable under that order or persons sanctioned under that order, or “to be owned or controlled by, or acting or purporting to act for or on behalf of, directly or indirectly,” any such person.
The nine companies listed in these general licenses are:
- Belarusian Oil Trade House
- Belneftekhim USA, Inc.
- Belshina OAO
- Grodno Azot OAO
- Grodno Khimvolokno OAO
- Lakokraska OAO
- Naftan OAO
- Polotsk Steklovolokno OAO
The previous requirement to file detailed reports with the US State Department regarding any transactions in excess of $50,000 with these companies or their subsidiaries remains in place in connection with the currently authorized “wind down” activities. This reporting requirement underscores that stakeholders should exercise caution in relying on this “wind down” authorization.
The US government has indicated since the initial issuance of this general license in 2015 that it could be modified or revoked should political or human rights conditions in Belarus deteriorate, underscoring the risk in engaging in activity relating to Belarus under this conditional and limited form of sanctions relief. Absent a significant improvement in the political environment and human rights situation in Belarus, we expect these sanctions to remain in place, and stakeholders should be prepared for the possibility that additional sanctions may be imposed on Belarus.
The US government, in coordination with the EU and other partners, has been ramping up sanctions against Belarus in recent months in the wake of the August 9, 2020 elections in Belarus that were widely criticized as being fraudulent, as well as the ensuing crackdown against protesters, journalists, opposition candidates, and others. This recent sanctions escalation began in October 2020, when the US imposed the first new sanctions under its Belarus authorities since 2011. The US took additional action in December 2020. However, this particular action is generally speaking the most consequential taken to-date for industry, as the other actions in the past few months have primarily targeted government officials and bodies, as opposed to commercial enterprises.
The US Secretary of State in his remarks about this new sanctions action highlighted the detention of political prisoners in Belarus and stated that the “nine state-owned enterprises affected by this action finance and support the Lukashenka regime, facilitating its violent repression of the Belarusian people and repeated rejection of the rule of law.” This statement of policy underscores the risk that other commercial enterprises viewed as providing funds or other support to the regime could potentially be targeted in the future.
We will continue to monitor developments in Belarus and related US sanctions policy.