Effective August 27, 2018, the U.S. Department of State implemented additional economic sanctions targeting Russia. Prompted by the chemical nerve agent attack last March in the United Kingdom against former Russian spy Sergei Skripal and his daughter, the new sanctions principally focus on the export of sensitive U.S. goods. While the August 27 determination excludes certain types of commercial activities, under the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (“CBW Act”), the Department is on track to impose additional sanctions that will take effect on or about November 24, 2018.
Imposition of sanctions under the CBW is rare, and surprising as the impetus for new Russia sanctions. Yet the action fits within a growing panoply of sanctions imposed in recent months and under active consideration in Congress and the Executive Branch. On-going cyber-attacks linked to Russia, aggressive Russian interventions in Central Europe and the Middle East, and unfolding political and legal events in the United States seem certain to ensure that new CBW Act sanctions in November will not be the only actions disrupting bilateral relations in the coming months.
On March 4, 2018, Mr. Skripal and his daughter were poisoned with a nerve agent. Later that month, the UK government accused the Russian government of orchestrating the attempted murder, and it levied various punitive measures, including the expulsion of numerous Russian diplomats. Members of the European Union followed suit.
The CBW Act requires the President to determine “whether a country has used chemical or biological weapons in violation of international law or has used lethal chemical or biological weapons against its own nationals.” If the President makes such an affirmative determination, then the CBW Act further mandates imposition of two, progressively restrictive rounds of sanctions on the offending country:
- Upon the effective date of the determination and with certain exceptions, the President must terminate foreign assistance, authorization of exports controlled by the Arms Export Control Act, foreign military sales financing and other U.S. government credit and financial assistance, and authorization for exports of national security-controlled goods and technology; and
- Within three months following the initial determination, the President must impose additional sanctions unless he certifies to Congress that (1) the country is no longer using chemical or biological weapons in violation of international law or against its own nationals, (2) officials of that country have provided reliable assurances that no such activities will occur in the future, and (3) the country will permit on-site inspections by United Nations observers or other internationally recognized, impartial observers, or that other reliable means exist to ensure that that government is not using chemical or biological weapons in violation of international law and is not using lethal chemical or biological weapons against its own nationals. With specified exceptions, the additional sanctions must include at least three of six enumerated sanctions: (i) opposition to assistance from multilateral financial institutions, (ii) a prohibition on U.S. bank loans, (iii) a general export ban, (iv) a general import embargo, (v) a downgrade of diplomatic relations, and (vi) a ban on air travel between the two countries.
The statute authorizes the President to waive certain sanctions in the national security interests of the United States.
The Russia CBW Act Sanctions
Sanctions immediately effective
On August 8, 2018, the U.S. Department of State announced that sanctions would be imposed on Russia pursuant to that Act in response to the Skripal attack. The first round of sanctions against Russia, which are mandatory 15 days after the determination is notified to Congress, became effective on August 27. Consistent with the statute, the State Department suspended foreign assistance (except for humanitarian assistance and food/agricultural aid), arms sales and licenses for the export of items on the United States Munition List, and foreign military financing. The Commerce Department barred new contracts to export any goods or technology on the National Security Control List to Russia, and all U.S. Government agencies are directed to deny any request for credit, credit guarantees, or other financial assistance submitted by the Russian government as of August 27. These sanctions will be in effect for at least one year.
As explained above and noted by a State Department official, a second round of sanctions will take effect 90 days after the determination, unless the President submits the required certification to Congress. Finding a basis to make that certification will not be easy: Individually and collectively, the three prongs of the required certification present formidable challenges to U.S. diplomacy with regard to Russia.
For both the first- and second-round sanctions, the President can suspend implementation only by certifying to Congress that waiver is “essential to the national security interests of the United States” or that “there has been a fundamental change in the leadership and policies of the government of that country.” The State Department announced its intent to waive one of the mandatory sanctions (financial assistance) and one of the second-round sanctions (air travel).
The State Department waived the financial assistance sanction and restrictions on licenses in support of government space cooperation and commercial space launches. The State Department has also waived application of the export controls sanction for goods and technology eligible for certain routine transactions facilitating commerce.
The State Department also waived the export controls sanction for the following classes of exports and reexports, explaining that licenses will continue to be issued on a case-by-case basis, in accordance with the preexisting licensing policy for Russia:
- Deemed exports and reexports to Russian nationals;
- Exports and reexports to wholly-owned U.S. subsidiaries in Russia;
- Exports and reexports in support of government space cooperation and commercial space launches; and
- Exports and reexports for commercial end-users’ civil end-uses in Russia.
The third waiver concerns exports and reexports to state-owned and state-funded entities. The administration will continue to review applications for new licenses to these entities, but it will apply a “presumption of denial.”
Other Russia Sanctions
These new CBW Act measures add to existing sanctions targeting Russia, which have steadily expanded since the Obama Administration first responded to the 2014 Russian annexation of Crimea. The Trump Administration has continued the Obama Administration’s strategy of targeting discrete sectors of the Russian economy (most notably defense, energy, and finance) and important individuals, rather than implementing a comprehensive trade and investment embargo.
Other recent restrictions include the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) announcement on August 21, 2018, that U.S. individuals and entities would be barred from transacting with Russian individuals and agencies who attempted to evade U.S. sanctions by procuring a variety of underwater equipment and diving systems for Russian government agencies. The same day, OFAC announced similar restrictions on certain Russian entities and their affiliated vessels for violations of U.S. sanctions barring the transfer of refined petroleum products to North Korean vessels.
Congress is also considering additional sanctions targeting Russia. Recent news reports suggest that bipartisan legislation currently pending in both houses of Congress—the Defending Elections from Threats by Establishing Redlines Act of 2018 (“DETER Act”)—is receiving renewed interest from key congressional leaders. The bill would, among other things, require automatic sanctions to be imposed against Russia if the Director of National Intelligence determines that it interfered in U.S. elections. Notably, the DETER Act would not allow the President to waive sanctions—unlike the CBW and most other sanctions regimes. Another recent bipartisan bill garnering media attention is the Defending American Security from Kremlin Aggression Act of 2018, introduced by a coalition of senators on August 1, 2018. This bill attempts to address election interference, but also sweeps further than the DETER Act, by including measures aimed at strengthening NATO, combating cybercrime, and imposing additional Russian sanctions. Among other things, the bill would broaden restrictions on companies’ ability to invest in oil and other energy projects in Russia and bar U.S. persons and companies from engaging in any transactions with eight named Russian financial institutions.
The implications of these developments is that while U.S. firms can continue to conduct business in Russia, they must be mindful of the many restrictions that exist and the likelihood of additional sanctions. The new measures required by the CBW—particularly in the likely second round—will have a potentially significant impact on the export and import of goods between the United States and Russia.