The leader of Russia’s political opposition, Alexei Navalny, died in a Siberian prison on February 16, just over a week before the two-year anniversary of Russia’s full-scale invasion of Ukraine on February 24. Both Navalny’s death and the anniversary of the invasion were cited as the motivations behind the latest rounds of sanctions against Russia. Members of our global sanctions team in our offices in the US, UK, Sweden, Australia, and Canada summarize the latest developments and their implications below. The latest sanctions have added hundreds of parties (both individuals and entities) to the US, EU, UK, Australian and Canadian sanctions lists. These sanctions include numerous parties located outside of Russia. Overall, this increases the risk of encountering restricted parties in the course of conducting business both within and outside of Russia. These developments also underscore the importance of robust corporate compliance programs that include screening and due diligence procedures designed to address these different jurisdictions’ rules, as well as processes and training to identify and address sanctions evasion red flags.
US Developments
OFAC Actions
- SDN Developments
The United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) and the US Department of State (“State”) together added more than 500 parties to the Specially Designated Nationals List (the “SDN List”). Targets include parties within several sectors, including Russia’s core financial infrastructure, including investment firms financial technology (fintech) companies; as well as Russia’s energy, mining, and transportation sectors. The sanctions also target parties outside of Russia for engaging in sanctions evasion, Russia’s and Iran’s unmanned aerial vehicles (“UAVs”) network, and Russia’s military-industrial base and flagship defense companies. These designated parties are listed in various OFAC press releases and items (see here, here, here, and here) and this State press release.
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.
- General Licenses
OFAC issued six new general licenses, as follows:
- General License No. 88A authorizes, subject to conditions, the wind down of any transaction involving one or more of the blocked entities listed in the general license through 12:01 a.m. eastern daylight time, April 8, 2024.
- General License No. 89 authorizes, subject to conditions, the wind down of any transaction involving one or more of the blocked financial institutions listed in the general license through 12:01 a.m. eastern daylight time, April 8, 2024.
- General License No. 90 authorizes, subject to conditions, transactions related to the divestment or transfer, or the facilitation of the divestment or transfer, of debt or equity issued or guaranteed by any of the blocked entities listed in the general license to a non-US Person through 12:01 a.m. eastern daylight time, April 8, 2024.
- General License No. 91A authorizes, subject to conditions, certain transactions with the blocked entities and vessels listed within the general license through 12:01 a.m. eastern daylight time, May 23, 2024.
- General License No. 92 authorizes, subject to conditions, the delivery and offloading of cargo from vessels that are blocked due to their ownership, directly or indirectly, a 50 percent or greater interest, by Joint Stock Company Sovcomflot through 12:01 a.m. eastern daylight time, April 8, 2024.
- General License No. 93, authorizes, subject to conditions, transactions involving vessels that are blocked due to their ownership, directly or indirectly, a 50 percent or greater interest, by Joint Stock Company Sovcomflot. There is currently no expiration date.
- Frequently Asked Questions
OFAC issued three new Frequently Asked Questions (“FAQs”), as follows:
- FAQ 1,164 provides a high-level summary of OFAC’s two recent determinations related to the imports of certain categories of diamonds and diamond jewelry and unsorted diamonds. The FAQ provides relevant Harmonized Tariff Schedule references and a list of illustrative examples of products subject to the prohibitions.
- FAQ 1,165 clarifies the two different categories of diamonds and the different dates their respective prohibitions take effect. Effective March 1, 2024, the importation of non-industrial diamonds that were mined, extracted, produced, or manufactured wholly or in part in the Russian Federation with a weight of 1.0 carat or greater, even if such diamonds have been substantially transformed into other products outside of the Russian Federation, will be prohibited. Effective September 1, 2024, the same restrictions apply to Russian non-industrial diamonds with a weight of 0.5 carats or greater.
- FAQ 1,166 states that the Diamond Jewelry Determination prohibits the importation and entry into the United States of diamond jewelry and unsorted diamonds of Russian Federation origin, as well as diamond jewelry and unsorted diamonds that were exported from the Russian Federation. This prohibition comes into effect on March 1, 2024.
OFAC also reissued FAQs 886, 887, 1,019, 1,022, 1,025, 1,092, and 1,154.
BIS Actions
- Entity List Additions
The US Department of Commerce’s Bureau of Industry and Security (“BIS”) added nearly 100 parties to the Entity List, with the bulk of them being located in Russia. Other additions to the Entity List are located in China, India, Kyrgyzstan, South Korea, Turkey and the United Arab Emirates. These parties were added to the Entity List for their supporting of Russia’s defense industrial base, including by illegally shipping US goods to Russia. 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.
- Updated List of Common High Priority Items
Working with the EU, UK, and Japan, BIS also updated their list of common high priority items with an additional five items identified as critical to Russia’s war effort, weapons systems and military development. The list highlights to businesses that there is a particularly high risk these items may be the target of sanctions circumvention and possible diversion to Russia. Companies can expect that these items will be an enforcement priority in these jurisdictions.
New Business Advisory
The United States government issued a new business advisory titled “Risks and Considerations for Doing Business in the Russian Federation and Russia-Occupied Territories of Ukraine.” This advisory is a joint product of the Departments of Commerce, the Treasury, and State and provides information for businesses regarding the risks of Russia’s conduct in Ukraine. The advisory provides summary information on the state of the market and related concerns, and on topics including US sanctions and export controls, import prohibitions, anti-money laundering and corruption concerns, among other items. Companies that operate in or have value chains linked to the Russia should review the advisory as they could face significant operational, legal, economic, and reputational risks associated with their Russian business operations and relationships.
EU Developments
Additional listings
The European Council and the European Commission announced the designation of 194 parties, including 106 individuals and 88 entities. These new designated persons are listed in the EU Council Implementing Regulation (EU) 2024/853. The additional listings include:
- More than 140 companies and individuals from the Russian military-industrial complex, which among other things manufacture missiles, drones, anti-aircraft missile system, military vehicles, high-tech components for weapons, and other military equipment.
- Ten Russian companies and individuals involved in the Democratic People’s Republic of Korea (DPRK) armaments to Russia. The listings also target the Defence Minister of the DPRK, as well as several Belarusian companies and individuals providing support to the Russian armed forces.
- A logistic company (and its director) involved in a scheme to circumvent the EU sanctions, as well as a third Russian actor involved in another procurement scheme.
- Six judges and ten officials in the occupied territories of Ukraine.
- 15 individuals and two entities that were involved in the forced transfer and in the deportation and the military indoctrination of Ukrainian children, including in Belarus.
Under EU sanctions law, no funds or economic resources can be made available, directly or indirectly, to or for the benefit of a sanctioned party. In general, provided that there is an EU nexus, it is prohibited to make dealings with persons that are sanctioned directly, or that are sanctioned indirectly by virtue of ownership (more than 50%) or control.
Import-export controls and restrictions
The European Council, through Council Regulation (EU) 2024/745, 27 new entities to the list of entities associated to Russia’s military-industrial complex (Annex IV of (EU) Regulation 833/2014). These entities will be subject to tighter export restrictions concerning dual use goods and technologies, as well as goods and technology which might contribute to the technological enhancement of Russia’s defence and security sector. Some of the listed entities are located outside of the EU, in third countries such as India, Sri Lanka, China, Serbia, Kazakhstan, Thailand, and Türkiye. Some of the entities have been involved in the circumvention of EU sanctions, others are Russian entities involved in the development, production and supply of electronic components (particularly used in connection with drone production) for Russia’s military and industrial complex.
Furthermore, the new export control restrictions included expanding the list (in Annex VII, part B of the (EU) Regulation 833/2014) of restricted items which could contribute to the technological enhancement of Russia’s defence and security sector by adding components for the development and production of unmanned aerial vehicles (UAV).
Lastly, the EU included additional products, such as electrical transformer, in Annex XXIII of the (EU) Regulation 833/2014 EU and thus imposed further restrictions on exports of goods which contribute in particular to the enhancement of Russian industrial capabilities.
Iron and steel
The EU added the UK to the list of partner countries in Annex XXXVI of the (EU) Regulation 833/2014, for the importation of iron and steel as referred to in Article 3g(1). The UK is added to this list as the UK applies restrictive measures, and control measures, on imports of iron and steel from Russia, that are substantially equivalent to those of the EU.
UK Developments
New Sanctions Against Russia
On 22 February 2024, the UK Government announced more than 50 new designations targeting individuals and businesses deemed to be supporting Russia’s war in Ukraine and key sources of Russian revenue. These designations are intended to mark two years on from Russia’s invasion of Ukraine.
Newly designated individuals and entities are subject to an asset freeze and trust services sanctions. Among those sanctioned are:
- companies linked to manufacturing munitions (such as rocket launch systems, missiles, explosives, and other critical goods used in military equipment);
- key Russian importers and manufactures of machine tools;
- oil traders;
- two diamond companies; and
- five senior executives or owners of Russia’s top producers of copper, zinc and steel.
These new designations form part of wider UK action, which this week include new measures to strengthen the existing Oil Price Cap and five new items added by the UK, EU and US to the Common High Priority list, a list of controlled items that are critical to Russia’s war effort. The G7’s coordinated diamond ban will also come into force on 1 March 2024.
On 21 February 2024, the UK became the first country to impose sanctions on Russia in response to Alexei Navalny’s death. Under the UK’s Global Human Rights Sanctions Regulations, six individuals have been sanctioned for their alleged responsibility for activity that violated the right not to be subjected to cruel, inhuman or degrading treatment or punishment and the right to life. These individuals who headed up the penal colony where Navalny died are now subject to a UK asset freeze and travel ban.
UK Sanctions Strategy
Meanwhile, the UK has released its first sanctions strategy (“Deter, Disrupt and Demonstrate – UK sanctions in a contested world”).
This strategy document outlines how the government seeks to use sanctions as a foreign and security policy tool, and specifically discusses the ways in which the government intends to:
- undermine Russia’s ability to fund and wage its war against Ukraine, including by reducing the circumvention of sanctions;
- address threats and malign activity through geographic and thematic sanctions regimes;
- build international coalitions and take coordinated action with allies and partners to maximize the impact of sanctions while strengthening engagement with business, financial institutions and other stakeholders; and
reinforce sanctions implementation and enforcement by assisting UK businesses understand how to comply with sanctions and by penalizing non-compliance.
Australia Developments
Australia imposed financial sanctions and travel bans on 55 individuals, and targeted financial sanctions on 37 entities. These sanctions are targeted at Russia’s defense, energy, media and minerals sectors, as well as targets involved in Russia’s procurement networks in Belarus, Iran and North Korea.
Canada Developments
Additional listings
Global Affairs Canada announced the designation of 163 parties, including ten individuals and 153 entities, that support the Russian military through finance, logistics and sanctions evasion. These new designated persons are listed in Schedule 1 of the Special Economic Measures (Russia) Regulations (the “Russia Regulations”). The additional listings include:
- Individuals and entities that are a part of the Russian military-industrial complex, providing research and development, production, repairs, and other goods and services to Russia’s Ministry of Defence;
- Individuals and entities working on agreements with Iran to evade sanctions (or are related to or associates of individuals undertaking such actions);
- Individuals and entities providing logistical and material support to Russia’s oil sector;
- An aide to President Vladimir Putin; and
- Senior officials of private and state-owned companies registered in Russia and Cyprus.
Schedule 1 of the Russia Regulations imposes a dealings prohibition against the individuals and entities listed, effectively freezing any assets they hold in Canada. Individuals listed are also rendered inadmissible to Canada under the Immigration and Refugee Protection Act.
Canada also aligned the Russia Regulations with the recently expanded authority under its implementing statute, the Special Economic Measures Act, to list any persons (individuals or entities) outside of Canada who are not Canadian.
Export controls and restrictions
Global Affairs Canada also announced a prohibition on the export to Russia of designated goods that could be used to make weapons and serve the war against Ukraine. The export ban will apply to explosives and detonators that are used in the mining and construction industry as well as an additional 20 controlled items that are known to be used by Russia to produce and manufacture weapons. The items prohibited are classified under the World Customs Organization Harmonized Commodity Description and Coding System and are listed under Schedule 7 of the Russia Regulations.
The authors acknowledge the assistance of Ryan Orange with the preparation of this blog post.
