U.S. Government Increases Pressure on Russia with Creation and Expansion of Sectoral Sanctions Identifications List, Export Restrictions and Designation of Additional SDNs

On July 16, 2014, the Obama administration, acting under Executive Order 13662, imposed “sectoral” sanctions prohibiting U.S. persons from engaging in certain financial transactions with key Russian companies in the banking and energy industries. OFAC immediately issued its Sectoral Sanctions Identifications (SSI) List, identifying individuals and entities operating in targeted sectors of Russia’s economy. The sanctions are primarily designed to limit designees’ access to new financing. The SSI List is separate from OFAC’s more restrictive SDN List, and presence on the SSI List does not necessarily entail SDN listing. Consequently, only certain specified transactions with those on the SSI List are prohibited, while the property and interests in property of those on the SSI List are not automatically blocked.

Beyond issuing the new sectoral sanctions, OFAC also designated additional individuals and entities as SDNs, and BIS added these new SDNs (11 Ukrainian and Russian entities) to its Entity List. The BIS action means that exports, re-exports or foreign transfers to designated entities of items subject to the Export Administration Regulations (EAR) will require a license, with a presumption of denial.

On July 29, 2014, a series of new sanctions measures were implemented against Russia, including a prohibition on exports of certain goods and technology to Russia’s energy sector, suspension of credit that encourages exports to Russia and financing for economic development projects in Russia, and designation of an additional defense company on the SDN List and three Russian banks to the SSI List.

The U.S. actions were developed in coordination with European Union (EU) sanctions also issued on the same day. These trade penalties will similarly place restrictions on new equity and debt transactions with major-state owned banks, but may also hit banks not yet targeted by the United States. The EU has also placed restrictions on energy-related exports intended for oil exploration and production, similar to the restrictions that the U.S. has discussed. Furthermore, like the United States, the EU has suspended financing for development projects in Russia.

Read the July 16th OFAC and BIS announcements, the July 29th OFAC and BIS announcements, and additional information on the individuals and companies on the SSI List. Also, see Akin Gump articles for more information about the July 16th and July 29th sanctions.

Find additional news reports at Bloomberg and The New York Times.

Export Control Reform: Administration Publishes Changes to Regulations Controlling Exports of Military Electronics

Companion final rules issued by the departments of State and Commerce in late June, pursuant to President Obama’s Export Control Reform initiative, transfer less sensitive items from Category XI (pertaining to military and advanced electronics) of State’s U.S. Munitions List (USML) to Commerce’s Commerce Control List (CCL). The updated regulations move to the CCL military electronics, software and technology for certain applications (“certain wing folding systems, certain superconducting and cryogenic equipment, and related items...”). The final rules will be effective December 30, 2014.

Read press releases from the State Department and BIS, and see the Federal Register for additional information.

OFAC Issues Final Rules Outlining the South Sudan and Central African Republic (CAR) Sanctions Regulations

OFAC issued final rules in early July implementing President Obama’s April 2014 and May 2014 Executive Orders blocking the property and interests in property of individuals and entities who threaten the peace, stability and security of, or who target civilians through acts of violence in, South Sudan and CAR, respectively. The OFAC South Sudan- and CAR-related regulations will be supplemented in the future with more detail, possibly including additional interpretive guidance and general license information.

Read the OFAC summaries from July 2 and July 7South Sudan and CAR Executive Orders and Federal Register publications from July 1 and July 7.