On December 2, 2021, the EU, UK, US, and Canada all imposed additional coordinated sanctions on Belarus as a punitive action against the government led by President Alexander Lukashenko, which has been accused of human rights violations and creating a migrant crisis at Belarusian borders. As further described below, the sanctions included the designation of a number of parties (individuals and entities), whilst certain individuals will also be subject to travel bans preventing them entering or transiting the EU and UK. The US has also introduced financial sectoral sanctions, similar to those already imposed by the EU, UK and Canada. These sanctions follow a several rounds of previous sanctions against Belarus, including most recently the coordinated measures between the US, Canada, and the UK in August 2021 (see our prior blog post available here).
Following its previous round of sanctions against the Belarus in June 2021 (see here), the EU has designated a further 17 individuals and 11 entities in Belarus. The additional designations target high-ranking political officials as well as certain Belarusian airline companies, tour operators and hotels (including Belavia Airlines and Cham Wings among others) deemed to have “participated in the instrumentalisation of migration for political purposes.” In addition, the EU has targeted the state-owned oil company Belorusneft and tyre manufacturer Belshina, among others. This brings the total number of designated parties to 209 in the EU (183 individuals and 26 entities).
The UK has imposed fresh sanctions on eight Belarusian individuals as well as an asset freeze on OJSC Belaruskali – a major Belarusian producer and exporter of potassium chloride (potash) fertiliser (Belaruskali had already been designated by the US in August 2021). Notably, there is minimal overlap between the UK and EU designations – further evidence that the UK’s post-Brexit sanctions regime is no longer completely aligned with the EU’s regime (although it is possible the UK may expand its sanctions going forwards to match the additional designations in the EU). The latest sanctions bring the total number of designations under the UK Belarus sanctions regime to 118 (108 individuals and ten entities), in addition to designated Belarusian parties under the UK’s Global Human Rights Regime.
The US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) escalated sanctions against Belarus, as summarized on OFAC’s Recent Actions page here and in the Treasury Department press release available here (“Press Release”). OFAC also published ten new FAQs providing guidance on the scope of the sanctions and updated one preexisting FAQ. Below is a summary of these developments:
- Directive 1: OFAC issued Directive 1 pursuant to Executive Order (“EO”) 14038 of August 9, 2021. Directive 1 prohibits US Persons from dealings in new debt with a maturity of greater than 90 days issued on or after December 2, 2021 by the Ministry of Finance (“Ministry”) or the Development Bank of Belarus (“DBB”). Directive 1 does not prohibit any other activities involving the Ministry of Finance or the DBB or their property or interests in property. The Press Release states that these sanctions “demonstrate close coordination with partners and allies to restrict the Lukashenka regime’s access to international capital markets.” OFAC provided guidance on the scope of Directive 1 in FAQs 940, FAQ 941, FAQ 942, FAQ 943, FAQ 944, FAQ 945, FAQ 946, FAQ 947 and FAQ 948. Importantly, FAQ 941 confirms that the prohibitions apply to both the primary and secondary markets. FAQ 943 clarifies that the prohibitions on new debt under Directive 1 do not extend to entities owned 50% or more by the Ministry or DBB.
- New Specially Designated Nationals (“SDNs”): OFAC designated an additional 20 individuals, 12 entities, and three aircraft on the Specially Designated Nationals and Blocked Persons List (“SDN List”). These designations target the country’s defense, security, tourism, and potash sectors (including key companies such as Kidma Tech OJSC, OJSC Belarusian Potash Company (“BPC”), and Agrorozkvit LLC (“Agrorozkvit”)), as well as individuals with close ties to Lukashenko. A full list of those added to the SDN List is available here. In addition to blocking sanctions, US Persons are broadly prohibited from engaging in transactions with SDNs as well as any entity owned 50% or more by one or more SDNs. Note that transactions in US dollars virtually always involve US Persons as they are “cleared” through the US financial system. Even where there is no US Person involvement, non-US persons who deal with SDNs may themselves be at risk of being designated under the so-called “secondary” sanctions.
- Belarus General License 5:OFAC issued Belarus General License 5 (“GL 5”), which authorizes certain transactions and activities that are ordinarily and necessary to the wind-down of transactions involving BPC, Agrorozkvit, or any entity 50% or more owned by BPC and/or Agrorozkvit. GL 5 expires April 1, 2022. OFAC addresses the scope and limitations of GL 5 in FAQ 939, including a clarification that GL 5 does not authorize direct transactions with Belaruskali OAO (“Belaruskali”), which was previously added to the SDN List on August 9, 2021.
- FAQ on General License 4: OFAC updated FAQ 918 concerning the scope of Belarus General License 4 (“GL 4”). GL 4, which was issued on August 9, 2021, authorizes transactions ordinarily incident and necessary to the wind down of certain transactions involving Belaruskali. GL 4 expires on December 8, 2021.
Effective December 2, 2021, the Government of Canada has broadened the list of listed persons under the Special Economic Measures (Belarus) Regulations (the “Regulations”) to include an additional 24 individuals and seven entities. These additional designations were made in coordination with the United States, the United Kingdom and the European Union. Among the legal entities newly designated as listed persons are certain defense-related companies as well as the state-run tour operator, Tsentrkurort, and the Presidential Sports Club.
An unofficial copy of the Regulations Amending the Special Economic Measures (Belarus) Regulations which identifies the additional individuals and entities named as listed persons to the Regulations is accessible here.
These sanctions are a further example of co-ordination between the EU, UK, US and Canada. In this regard, Switzerland may follow the EU and add additional sanctions in due course. However, important differences remain between the regimes and companies will need to carefully analyse how the sanction may impact their business. As always, companies will need to ensure effective screening to identify and mitigate any direct or indirect dealings with the sanctioned parties (including, under EU, UK, and US sanctions, assessing any dealings with parties owned by designated parties and for the EU and UK, parties controlled by designated parties). Companies will also need to monitor for further developments as it is possible additional designations may be imposed in due course. We will be hosting an upcoming snap webinar on the latest developments and what it could mean for your business- stay tuned for further updates.
The authors acknowledge the assistance of Vivian Tse with the preparation of this blog post.