On November 2, 2023, the United States government issued new Russia-related sanctions targeting more than 200 individuals and entities. OFAC also issued three new Russia-related General Licenses and reissued another one, and the US Department of Commerce Bureau of Industry and Security (“BIS”) added 13 entities to the Entity List.
The US Department of the Treasury Office of Foreign Assets Control (“OFAC”) and the US Department of State added a range of targeted individuals and entities in Russia, Turkey, the United Arab Emirates, China, and other countries to the Specially Designated Nationals List (the “SDN List”) for a wide range of Russia-related activities, including involvement in sanctions evasion and support for Russia’s military, and for producing, exporting, or importing the high-priority goods (including certain integrated circuits) the United States and its partners have identified as being used in Russian weapons systems.
The designated entities include Sistema Public Joint Stock Financial Corporation (“Sistema”), a major publicly traded Russian holding company with ties to the country’s defense, financial and technology industries, and its Luxembourg-based subsidiary East-West United Bank. Limited Liability Company Arctic LNG 2, the operator of Russian liquefied natural gas project Arctic LNG 2 Project, and Public Joint Stock Company Saint Petersburg Exchange (“Saint Petersburg Exchange”), a Russia-based brokerage, were also designated as SDNs.
US Persons are generally prohibited from dealing, directly or indirectly, with SDNs, entities that are owned 50% or more by one or more SDNs, and their property or property interests. Non-US persons can be held liable for “causing” violations by US Persons involving transactions with SDNs and can also be subject to secondary sanctions risks for providing “material support” to SDNs. Secondary sanctions risks include the risk of being designated as an SDN.
New and Amended OFAC General Licenses
OFAC issued three new General Licenses, and reissued another one, as follows:
- General License 74 authorizes transactions ordinarily incident and necessary to the wind down of transactions involving East-West United Bank or any entity it owns 50% or more of. The license also authorizes US Persons to reject, rather than block, and return to the originator or originating financial institution or their successor-in-interest certain transactions necessary to the processing of funds involving the bank. Those activities are authorized through 12:01 a.m. Eastern Standard Time on January 31, 2024.
- General License 75 authorizes transactions ordinarily incident and necessary to the divestment or transfer of debt and equity of Sistema, East-West United Bank, Limited Liability Company Arctic LNG 2, or any entity they own 50% or more of. Those transitions are authorized through 12:01 a.m. Eastern Standard Time on January 31, 2024.
- General License 76A authorizes transactions ordinarily incident and necessary to the wind down of transactions involving Sistema, Saint Petersburg Exchange, Limited Liability Company Arctic LNG 2, or any entity they own 50% or more of. Those transitions are authorized through 12:01 a.m. Eastern Standard Time on January 31, 2024.
- General License 13G, replacing General License 13F, authorizes certain transactions involving the Central Bank of Russia, the National Wealth Fund of Russia, and the Ministry of Finance of Russia through 12:01 a.m. Eastern Standard Time on January 31, 2024.
Additions to the Entity List
BIS added 13 entities to the Entity List for supporting Russia’s military through the procurement, development, and proliferation of Russian unmanned aerial vehicles (“UAVs”). Twelve are located in Russia and one is located in Uzbekistan.
These entities are subject to license requirements for all items subject to the Export Administration Regulations (“EAR”), and most licenses will be reviewed under policy of denial. As military end users, these entities are also subject to the Russia/Belarus-Military End User Foreign Direct Product rule set out in Section 734.9(g) of the EAR.
The authors acknowledge the assistance of Ryan Orange with the preparation of this blog post.