Today, the US Department of State issued a press release indicating that the US Government will be imposing new sanctions on Russia for the use of a “Novichok” nerve agent in an attempt to assassinate UK citizen Sergei Skripal and his daughter Yulia Skripal, based on its August 6, 2018, determination under the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (“CBW Act”) that the Russian Government has used chemical or biological weapons in violation of international law or has used lethal chemical or biological weapons against its own nationals.  The CBW Act requires the President to impose sanctions on a foreign country with respect to which such a determination has been made.

Key takeaway: The impact of the initial CBW Act sanctions (which will be imposed on or around August 22, 2018) on US and non-US companies doing business in or with Russia may be limited given existing US export controls.  However, if imposed without waivers, the possible additional CBW Act sanctions that could become effective in late November 2018 (which may include broad US export and import bans, prohibitions on US banks loaning money to the Russian Government, and a suspension on air transportation to and from the United States for air carriers directly or indirectly owned by the Russian Government) would represent a significant escalation in US Russia sanctions substantially impacting both US and non-US companies doing business in or with Russia.  The CBW Act does have certain contract sanctity provisions such that the impact of the possible additional sanctions with respect to existing contracts may be more limited.

Initial Sanctions

The initial new sanctions will take effect upon publication of a notice in the Federal Register, expected on or around August 22, 2018.  Such initial sanctions under the CBW Act must include termination of foreign aid assistance, limits on arms sales and financing of arms, denial of US Government credit or other financial assistance, and prohibition on certain exports including national security-sensitive goods and technology.

Notably, application of these initial sanctions can be waived in whole or in part if the President (i) determines that such waiver is in the national security interests of the United States or that there has been a fundamental change in the leadership and policies of Russia and (ii) makes certain certifications/reports to Congress in advance of such waiver. While not certain, given that the US Department of State’s press release mentions the 15-day congressional notification period, it may be that the initial sanctions will be subject to at least partial waivers. In addition, there are already significant export controls with respect to arms and national-security sensitive goods in place with respect to Russia such that, even assuming full application of these sanctions occurs, such additional export controls will likely be of limited additional impact.

Issuance of at least partial waivers of CBW Act sanctions is not unprecedented. For example, when CBW Act sanctions were imposed on Syria in 2013, the application of such sanctions was partially waived with respect to activities in furtherance of US policies regarding the Syrian conflict.

Possible Significant Additional Sanctions

Additional significant sanctions are possible unless, within 3 months after making the determination under the CBW Act (likely on or around November 22, 2018), the President certifies to Congress that Russia (i) is no longer using chemical or biological weapons in violation of international law or using lethal chemical or biological weapons against its own nationals, (ii) has provided reliable assurances that it will not in the future engage in any such activities, and (iii) is willing to allow on-site inspections by UN or other observers.  The additional sanctions required by the CBW Act in this instance are three or more of the following:

  • Export ban with respect to all goods and technology except for food and agricultural commodities.
  • Import ban: a ban on importation into the United States of articles grown, produced, or manufactured in Russia.
  • Air transportation ban: suspension of authority of air carriers directly or indirectly owned by the Russian government to engage in air transportation to or from the United States.
  • Bank loan prohibition: US banks could be prohibited from making any loan or providing credit to the Russian Government except with respect to the purchase of food and agricultural commodities
  • Multilateral development bank assistance: the United States would oppose loans or financial or technical assistance to Russia by international financial institutions.
  • Diplomatic relations: downgrade or suspension of diplomatic relations between the United States and Russia.

Importantly, such sanctions are subject to the same waiver process as the initial sanctions, such that it is possible that, even if imposed, the application of the sanctions could be wholly or partially waived.

Please watch this space for further developments on both the initial and possible additional sanctions.

Author

Paul Amberg is a partner in Baker McKenzie’s Amsterdam office, where he handles international trade and compliance issues. He advises multinational companies on export controls, trade sanctions, antiboycott rules, customs laws, anticorruption laws, and commercial law matters. Paul helps clients assess and address compliance risks presented by export controls, trade sanctions, antiboycott rules, customs laws, and anticorruption laws. His practice especially focuses on internal reviews, voluntary disclosure filings, and enforcement actions brought by, the US Government in relation to the Export Administration Regulations (EAR), International Traffic in Arms Regulations (ITAR), trade and economic sanctions programs, and US customs laws.

Author

Andrea practices international commercial law with a focus on cross-border transactions including post-acquisition integration IP migrations and technology licensing. She also advises companies on export controls, sanctions, customs and international corporate compliance. Andrea also has an active pro bono practice, including helping organizations with international constitutional matters and victims of domestic abuse.