Notable Trade Controls from Russia and Belarus in Response to Ongoing Conflict in Ukraine – March/Early April Updates | Lowenstein Sandler LLP
As an update to Lowenstein’s previous alert, “Notable United States Sanctions and Export Controls Against Russia and Belarus in Response to the Ongoing Conflict in Ukraine”, below is an overview additional and notable US trade controls imposed on Russia and Belarus since February 28. 2022.
On March 8, 2022, the White House issued Executive Order 14066, prohibiting 1) the import into the United States of Russian “crude oil”; oil; petroleum fuels, oils and products of their distillation; liquefied natural gas; coal; and coal products”; 2) American people to make new investments in the Russian energy sector; and 3) any activity by a U.S. person that would facilitate any of the above, such as approving, financing, or guaranteeing any import of Russian petroleum or coal products into the United States or any new investment in the Russian energy sector by any person. Simultaneously, with respect to agreements involving the above activities that were entered into prior to March 8, 2022, the United States Office of Foreign Assets Control (OFAC) issued General License 16, authorizing a liquidation period ending on April 22, 2022, for activities usually incidental and necessary to import crude oil into the United States; oil; petroleum fuels, oils and products of their distillation; liquefied natural gas; coal; and coal products.
On March 11, 2022, the White House issued Executive Order 14068, which 1) prohibits the importation of Russian fish, seafood, and related preparations; Russian alcoholic beverages; and Russian non-industrial diamonds, and allows certain US agencies to expand this list; and 2) prohibits the direct or indirect export, re-export, sale or supply of certain luxury goods (to be determined by US agencies) to Russia; new investments in certain sectors of the Russian economy (to be determined by US agencies); and the direct or indirect export, re-export, sale or supply of US dollar denominated notes to Russia or the Russian government. General License 17A provides a narrow exclusion until June 23, 2022 for the importation of fish, seafood and preparations originating in Russia, provided that such products are imported into the United States pursuant to a written contract entered into before the 11th of March. 2022. Other limited general licenses also apply.
On March 24, 2022, OFAC added dozens of Russian defense industrial base companies to its list of Specially Designated Nationals (SDN list). On March 31, 2022, OFAC 1) issued a decision that the aerospace, electronics and marine sectors of the Russian economy are subject to sanctions under Section 1(a) (i) Decree 14024 and that, therefore, the Treasury may designate any person or entity determined to operate or have operated in these sectors; and 2) added 21 entities and 13 individuals, including sanctions busting networks, malicious cyber actors, and Russia’s largest chipmaker, Joint Stock Company Mikron, to the SDN list. Additionally, on April 5, 2022, OFAC sanctioned Russia’s Hydra Market, a major darknet market, and associated virtual currency addresses based on its support of cybercrime.
On April 6, 2022, the White House announced that President Biden would issue a new Executive Order, “Ban New Investments and Certain Services to the Russian Federation in Response to Continued Aggression by the Russian Federation.” This order prohibits any new investment in the Russian Federation by U.S. persons, wherever located, as well as the export, re-export, sale or supply, directly or indirectly, from the United States, or by an American person, wherever located. , of any category of services as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State, to any person located in the Russian Federation. The announcement also included naming members of the Russian Security Council and people seen as enablers of Russian President Putin; family members supporting the Russian president and foreign minister; and two of Russia’s largest banks, Sberbank and Alfa-Bank, their subsidiaries and any entities 50% or more owned by these companies. OFAC has issued additional blanket licenses authorizing transactions typically associated with liquidation activities with these entities.
In addition to taking the actions described above, throughout this period OFAC has added a number of individuals and entities to its Restricted Party Lists and issued various general licenses authorizing specific activities that would otherwise be prohibited.
2. Export controls
On March 2, 2022, the U.S. Department of Commerce, through its Bureau of Industry and Security (BIS), extended to Belarus the strict export controls previously issued against Russia on February 24, 2022, in response to Belarusian actions aimed at enabling Russia’s invasion of Russia. Ukraine. This expansion included a denial policy on sensitive items that support Belarus’ defense, aerospace and marine industries; subject Belarus to the two new Foreign Direct Product (FDP) rules issued for Russia; impose a ban on U.S. commercial exports to Belarusian military end users or for Belarusian military end uses; and expanded export licensing requirements for commercial items categorized under Categories 3-9 of the Export Administration Regulations (EAR) with limited exemptions and a denial policy.
On March 4, 2022, the BRI targeted the Russian oil refinery sector. The new rules extend existing 2014 restrictions on certain exports supporting Russian exploration or production from deepwater, Arctic Sea or shale projects that may produce oil or gas by 1) imposing a policy of denial and 2) further restricting the export of items to Russia. necessary for oil refining. In addition, the BRI added 91 parties that provided support to Russian security services, military, defense or military/defense R&D sectors to its list of entities.
On March 11, 2022, to implement the prohibitions of Executive Order 14068 (described above), BIS issued parallel rules restricting the export of luxury goods destined for 1) Russia or Belarus, and 2) designated Russian or Belarusian oligarchs or malicious actors, wherever located. Applicable luxury goods can be found in the new Supplement No. 5 to Part 746 of the EAR. A limited number of licensing requirements may apply.
On March 18, 2022, in response to violations of its February 24, 2022 rule prohibiting the export, re-export, or in-country transfer of aircraft under EAR jurisdiction to or within Russia, the BRI has published a list of nearly 100 offending aircraft. In its press release, BIS warned the public that “the provision of any form of service to these aircraft requires authorization” and that any such service would be considered a further violation of EAR General Prohibition 10. . The general prohibition ten prohibits “[p]transact knowing that a breach has occurred or is about to occur.1 The scope of prohibited services is broad and would include the sale, transfer or financing of such infringing aircraft.
On March 30, 2022, BIS updated this list, adding 73 aircraft and removing those that have received BIS clearance to be flown out of Russia. Note that this list is not exhaustive and may be supplemented or modified at any time. Additionally, Prohibition 10 restrictions are not limited to activities with listed aircraft, and U.S. nationals should take care to avoid servicing any aircraft that violate the EAR prohibitions.
On April 1, 2022, the BRI added 120 entities to its list of entities to support the Russian and Belarusian military.
3. Other relevant actions
On March 2, 2022, Attorney General Merrick B. Garland announced a U.S. interagency enforcement initiative, Task Force KleptoCapture, which will focus on sanctions enforcement, export controls, and economic countermeasures that were imposed in response to Russia’s actions in Ukraine.
On March 7, 2022, the BRI added South Korea to the list of countries excluded from Russia/Belarus license requirements. These exclusions support the formation of coalitions and a multilateral approach to resist Russian aggression. These exclusions are based on the determination that the partner country has relevant export controls substantially similar to those of the United States.
Many US states have implemented or proposed their own restrictions on government contracts with Russian entities. In addition, some states have imposed certification and disclosure requirements on public contractors regarding ties to Russia or Belarus, and others have taken even greater measures, such as requiring state entities to divest money and assets of Russian entities or those supporting the Russian invasion of Ukraine.2
On imports, the Biden administration announced in March that it would work with Congress to revoke the Permanent Normal Trade Relations (PNTR) status of Russia and Belarus. Stripping Russia and Belarus of their PNTR status would subject imports originating in Russia and Belarus to increased tariffs, well above the rates currently applicable to those countries and most other nations. On March 17, 2022, the United States House of Representatives overwhelmingly passed the Russia and Belarus Suspension of Normal Trade Relations Act. The bill is now in the Senate, where it has bipartisan support and is likely to pass.