While the principal focus of media reports regarding US and European actions against Russia has been on President Obama’s Executive Orders and similar EU efforts blocking Russian oligarchs and officials, as well as a Russian bank, US and UK export control agencies also have gotten into the act.
The US Department of Commerce, Bureau of Industry and Security (BIS) recently announced on its website that as of March 1, 2014, it has placed a “hold” on export license applications for dual use items destined for Russia. Based on the text of the announcement, it appears that persons can continue to make exports and reexports of items subject to the EAR to Russia pursuant to previously approved licenses. BIS also has the authority to revoke or modify existing licenses. For now it does not appear to be exercising that authority, although individual exporters could be contacted. Also unaffected are unlicensed shipments - those involving items that do not require a license for export or reexport to Russia, including any exports/reexports covered by a license exception. Again, depending on developments, BIS can take further action to restrict such exports or reexports.
The US Department of State, Directorate of Defense Trade Controls (DDTC) likewise announced on March 27, 2014 that it is suspending the review and issuance of export licenses/agreements for exports of defense articles and defense services to Russia. In the past, when designating so-called proscribed countries, DDTC has suspended approved licenses (e.g., for Venezuela) and in other cases advised that issued licenses were still valid and were not being abrogated (e.g., for Sri Lanka). No reference is made to existing authorizations in the announcement regarding Russia, but DDTC may address the subject in the near future. Given the nature of Russian activity vis-a-vis Ukraine, one might anticipate that DDTC will be more aggressive in curtailing existing authorizations, although that is likely to depend on Russia’s actions in eastern Ukraine, as well as in Crimea, in the coming days and weeks.
To date, neither the US Nuclear Regulatory Commission nor the Department of Energy has made any public announcement regarding export controls on civil nuclear materials, technology, or related services destined for Russia.
The UK Export Control Organization has taken similar action to BIS and DDTC, but its approach differs somewhat from that of those US regulatory authorities. On March 18, 2014, UK Foreign Secretary William Hague advised the House of Commons that “[t]he UK will now with immediate effect suspend all extant licenses and application processing for licenses for direct export to Russia for military and dual use items destined for units of the Russian armed forces or other state agencies which could be or are being deployed against Ukraine.” He further announced that the UK would “suspend licenses for exports to third countries for incorporation into equipment for export to Russia where there is a clear risk that the end product will be used against Ukraine.” In his statement, Mr. Hague called on other EU Member States to adopt similar measures.
It is not clear if other EU Member States will follow the United Kingdom’s example. At the moment, other Member States appear to be proceeding cautiously, although circumstances can change.
In sum, the current situation in Ukraine and further moves by Russia are leading to a gradualized severance of economic and military linkages between the West and Russia. The full impact on trade, commerce, and investment is yet to be seen. Exporters, investors, and financial institutions should keep an eye on the typical sanctions-styled actions of the US, the EU Member States, and others, and also should recognize that other governmental agencies are likely to adopt policies that are consistent with the heightened sanctions. Furthermore, interested stakeholders should monitor developments in the legislative branches of concerned governments, especially the United States, where the US Congress has become a much more active player in US sanctions policy over the last five years.