Key Takeaways:
- OFAC sanctions entities and vessels who violated Russian Oil Price Cap policy, in addition to adding various entities and individuals aiding Russia's war efforts to the SDN List.
- Targeting those assisting Russia with its military endeavors, State Department sanctions almost 100 companies and individuals, while BIS includes 13 entities on its Entity List.
- EU Commission proposes ban on import of Russian diamonds as well as strengthening Russian oil price cap.
U.S. authorities have been active in November 2023, reinforcing and expanding sanctions targeting Russia's war effort in Ukraine. Multiple agencies added sanctions targeting entities involved in Russia's military supply chain, particularly related to UAV (drone) production, and imposed sanctions targeting actors deemed to be evading the Russian Oil Price Cap regime. Meanwhile, the E.U. announced it would be tightening the price cap and proposed imposing sanctions on the Russian diamond industry which would have economic consequences within the E.U. as well.
On November 2, 2023, the U.S. Department of State ("State Department"), in collaboration with the U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC"), announced various sanctions (the "November 2 Sanctions") targeting entities and individuals assisting Russia in its war against Ukraine. Specifically, the State Department sanctioned almost 100 entities and individuals to stymie Russia's production of energy and the procurement of arms, and further reduce its revenue. Simultaneously, OFAC included numerous individuals and companies on its Specially Designated Nationals and Blocked Persons ("SDN") List and issued related general licenses. OFAC focused on individuals and entities that help sustain Russia's war efforts including certain companies in Turkey, China, and the United Arab Emirates ("UAE") engaged in helping Russia evade sanctions imposed by the U.S. and its allies. On the same day, the U.S. Department of Commerce's Bureau of Industry and Security ("BIS") added 13 entities to its Entity List (15 CFR parts 730-774), based on its determination that they were aiding Russia's military efforts. These sanctions are detailed below.
On November 16, 2023, OFAC sanctioned (the "November 16 Sanctions") maritime companies and ships found to have transported Russian oil above the price cap set by the Price Cap Coalition (G7, Australia, and EU), as covered in our previous alerts. A few days prior, the European Commission proposed new export and import bans targeting diamonds, as well as other proposed regulations and sanctions.
Department of State Sanctions Close to 100 Individuals and Entities
On November 2, 2023, the State Department designated several individuals—as well as their family members—and entities, pursuant to Executive Order 14024, given the assistance they have provided to Russia in support of its war on Ukraine. In making these additions to the SDN List, the State Department focused on certain sectors. First, it sought to restrict Russia's energy production and export capacity by, for instance, sanctioning Limited Liability Company Arctic LNG 2 ("Arctic LNG"), an entity heavily involved in a significant Russian liquified natural gas project.
Second, the State Department designated certain persons and companies operating in Russia's metals and mining sector. These include, among others, Joint Stock Company Russian Titanium Resources and its President, Anatoliy Nikolaevich Tkachuk.
Third, the State Department also targeted entities and individuals who participated in "a network procuring items in support of the production of the KUB-BLA and Lancet suicide drones being used by the Russian military in Ukraine." Such entities and individuals consist of, for example, Limited Liability Company Zala Aero and A Level Aerosystems CST, as well as the owner of both companies, Aleksandr Vyacheslavovich Zakharov.
Fourth, addressing a group of companies that has been providing certain technology, including dual-use microelectronics, to Russia's defense sector, the State Department designated certain entities operating in the Russian electronics and technology industries. For instance, Baltelektron Limited Liability Company and Limited Liability Company Advanta Electro.
Fifth, the State Department designated a few entities actively involved in Russia's defense sector and/or who supported Russia's war efforts. This list included companies that were helping Russia evade sanctions such as Joint Stock Company Plastmass Plant.
Sixth, certain construction companies with operations in parts of Ukraine that are currently occupied by Russia were designated as well. One of them, Public Legal Company Military Construction Company, is owned by the government of Russia, while the others are privately owned (e.g., LLC ABZ Belyi Rast).
In addition to the designations based on the sectors named above, the State Department sanctioned personal assets and investment vehicles owned by members of the Trotsenko family, which is suspected to be affiliated with Vladimir Putin.
BIS Adds UAV Manufacturers and Developers to Entity List
Effective November 2, 2023, the following entities are now part of BIS' Entity List:
A. Russia
- Aeroscan Limited Liability Company
- Alfakomponent
- BIC-Inform LLC
- Hartis DV LLC
- ID Solution LLC
- OOO OMP
- Orelmetallpolimer LLC
- Spel LLC
- Spetstehnotreyd LLC
- STC Orion LLC
- Technical Center Windeq LLC
- ZALA Aero Group
B. Uzbekistan
- Mvizion LLC
According to BIS, these 13 entities—which it classified as military end users—were "added for supporting Russia's military through the procurement, development, and proliferation of Russian unmanned aerial vehicles." As a result, these entities require a license from BIS for the export of any item subject to the Export Administration Regulations. License applications are subject to a policy of denial, "apart from food and medicine designated as EAR99, which will be reviewed on a case-by-case basis."
OFAC SDN List Designations
On November 2, 2023, OFAC announced numerous sanctions aimed at disrupting Russia's military supply chain. Through additional SDN List designations, OFAC sought to interfere with Russia's global supply chains, limit its domestic production of military equipment, hinder its technological developments, and target its financial services industry.
To disrupt Russia's international supply chain, OFAC designated companies (and certain executives) in Turkey, China, and UAE who "continue to send high-priority dual-use goods to Russia, including critical components that Russia relies on for its weapons systems." These include: Beijing Jiahehengde Technology Company Ltd. (China); Beijing Shangyixianda Technology Company Ltd (China); Bosphorus Gate Dis Ticaret Limited Sirketi (Turkey); Jacbac Technology Dis Ticaret Limited Sirketi (Turkey); Alfa Logistics FZCO (UAE); Dubai Sea Breeze UAE (UAE). The full list of sanctioned persons is available here.
Primarily to curb Russia's domestic production of items used to sustain its war against Ukraine, OFAC also designated several more firms—and associated executives/owners—operating in the manufacturing, technology, transportation, aerospace, and construction sectors of the Russian economy including: (1) OOO Absolyut Shar; (2) Cybercom Limited; (3) Gazpromneft Science and Technology Centre Limited Liability Company; (4) Promkomplekt Sintez; (5) NT Service; and (6) Central Institute of Aviation Motors.
In a similar vein, to inhibit Russia's technological progression, OFAC targeted "Russia-based entities and individuals that finance, research, develop, or import advanced technology." In doing so, it added, among others, Sistema Public Joint Stock Financial Corporation ("Sistema"), a large publicly-traded conglomerate operating in Russia's defense, financial, and technology sectors, to the SDN List, in addition to some of Sistema's subsidiaries (among others).
Moreover, with the objective of targeting Russia's financial services industry, OFAC "sanctioned seven Russia-based banks, an executive of one of those banks, and one Russia-based financial infrastructure entity," specifically:
- Commercial Bank Absolut Bank PAO, a commercial bank focused on high-tech development.
- Blanc Bank Limited Liability Company, an investment bank.
- Home Credit & Finance Bank Limited Liability Company, a private commercial bank.
- Joint Stock Company Post Bank, a commercial bank.
- Joint Stock Company Russian Regional Development Bank, a commercial bank.
- Joint Stock Company Russian Standard Bank, a private commercial bank.
- Publichnoe Aktsionernoe Obshchestvo Kommercheski Bank Russki Regionalny Bank Regionalny Bank, a commercial bank, and its Chairman, Dmitry Ivanovich Zharikov.
All property and interests of the individuals and entities added to OFAC's SDN List—by OFAC or otherwise—are considered blocked and must be reported to OFAC. And all entities owned 50% or more by an SDN are generally treated as if they were also on the SDN List (known as the "50 Percent Rule") even if they are not expressly listed. Transactions by U.S. persons, or within the U.S., involving blocked property or persons are prohibited, unless authorized by a specific or general OFAC license.
Additionally, OFAC's November 16 Sanctions imposed SDN List designations on three entities and associated vessels "that used Price Cap Coalition service providers while carrying Russian crude oil above the Coalition-agreed price cap." Specifically, OFAC designated three United Arab Emirates shipping companies, Kazan Shipping Incorporated, Progress Shipping Company Limited, and Gallion Navigation Incorporated, and their respective ships, the Kazan, the Ligovsky Project, and the NS Century.
General Licenses
Along with these latest sanctions, OFAC issued five related general licenses. The November 16 Sanctions have one corresponding General License ("GL") 77, which expires at 12:01 AM (EST) on February 14, 2024. GL 77 allows certain transactions ordinarily incident and necessary to: (1) the safe docking and anchoring in port of any of the vessels blocked pursuant to the November 16 Sanctions; (2) the preservation of the health or safety of the crew of any of the blocked vessels; or (3) emergency repairs of any of the blocked vessels or environmental mitigation or protection activities relating to any of the blocked vessels. GL 77, however, expressly describes several transactions that are not authorized, irrespective of the other provisions contained therein.
The November 2, 2023 Sanctions have four related GLs, all of which expire on January 31, 2024, at 12:01 AM (EST). GL 13G, which extends until January 31, 2024, the authorization provided in GL 13F, for U.S. persons or entities controlled by U.S persons (either directly or indirectly) "to pay taxes, fees, or import duties, and purchase or receive permits, licenses, registrations, certifications, or tax refunds," even if prohibited by Directive 4 under E.O. 14024, "provided such transactions are ordinarily incident and necessary to the[ir] day-to-day operations in the Russian Federation."
GL 74 authorizes dealings involving East-West United Bank ("EW Bank") that are "ordinarily incident and necessary to the wind down of transactions" or "necessary to the processing of funds," while GL 75 authorizes, among other things, transactions "that are ordinarily incident and necessary to the divestment or transfer, or the facilitation of the divestment or transfer, of debt or equity" of Arctic LNG, Sistema, or EW Bank. That said, both GL 74 and 75 contain provisions prohibiting certain transactions notwithstanding the authorizations contained therein.
Finally, GL 76A describes how all transactions "that are ordinarily incident and necessary to the wind down of any transaction involving" Sistema, Arctic LNG, or Saint Petersburg Stock Exchange (or any entity in which one or more of them own, directly or indirectly, individually or in the aggregate, a 50 percent or greater interest) are authorized, "provided that any payment to [them] is made into a blocked account in accordance with the Russian Harmful Foreign Activities Sanctions Regulations."
European Commission Proposal
On November 11, 2023, in a statement from the EU's Foreign Affairs Council's High Representative, Josep Borrell, the European Commission announced a new sanctions proposal. The proposal—which requires unanimous approval by the 27 nations comprising the European Commission to be in force—includes new export and import regulations, including a ban on the import of diamonds of Russian origin, starting on January 1, 2024. This, reportedly, is part of a larger effort to find a way to prevent the import of Russian gems from third countries via a tracking mechanism.
In addition, endeavoring to strengthen the deterrent effect of the price cap on Russian oil, the proposal seeks additional transparency from shipping companies engaged in the seaborne transport of Russian oil, by requiring them to describe shipping and insurance expenses regarding any Russian oil cargo they transport. While the proposal will likely take weeks to negotiate, if it is approved, it would "also 'sanction over 120 additional individuals and entities for their role in undermining sovereignty and territorial integrity of Ukraine.'"
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