On November 2, 2023, the Department of the Treasury’s Office of Foreign Assets Control (OFAC), the Department of State, and the Department of Commerce’s Bureau of Industry and Security (BIS) announced a combined effort to designate and sanction numerous additional Russian individuals and entities who have been determined to be assisting in the war against Ukraine and for efforts to evade U.S. sanctions and export controls on Russia. The Department of State and OFAC sanctions target Russia’s future energy production and revenue, metals and mining sector, defense procurement, and those involved in supporting the Russian government’s war effort. BIS’ actions focus on sanctioning entities supporting Russia’s military through the procurement, development, and proliferation of Russian unmanned aerial vehicles (UAVs).
OFAC and State Sanctions
OFAC stated that entities based in China, Türkiye (Turkey), and the United Arab Emirates (UAE) continue to send high-priority dual-use goods to Russia, including critical components that Russia relies on for its weapons systems (see Update of September 26, 2023 on “high-priority” items restricted for Russia). Despite continuing to work with these countries to address concerns, OFAC has sanctioned and placed on the Specially Designated Nationals (SDN) List multiple individuals and companies from these three countries that “have become hubs for exporting, reexporting, and transshipping to Russia foreign-made technology and equipment.” Most of these newly designated entities operate in the technology, electronics, and transportation sectors.
Sanctioned Turkish companies include those engaged in suppling high-quality foreign-made microelectronics, lithium-ion batteries, integrated circuits, machines for metalworking and machining tools, machines for reception, conversion and transmission of data, and trucking services. UAE companies include those providing logistics to ship machines for the reception, conversion, and transmission of data, aircraft and aviation parts, integrated circuits, machines for metalworking and machining tools. Several financial, engineering and investment firms in the UAE and their officers and/or owners have also been placed on the SDN List.
OFAC and the State Department have also targeted and designated a significant number of Russia-based industrial firms (as well as various related owners and officers) that produce, import, distribute, and repair industrial machinery, machine tools, spare parts, additive manufacturing (including 3D printing) equipment, ball bearings, and other industrial equipment and materials.
Significantly, the agencies have placed on the SDN List Russia’s largest publicly-traded diversified holding company and a major entity involved in the development, operation, and ownership of Russia’s key Arctic LNG 2 liquified natural gas (LNG) project. In addition, OFAC continued its effort to identify and sanction entities operating in the financial services sector of the Russian by sanctioning seven Russia-based banks and one Russia-based financial infrastructure entity. Persons involved in several “sanctions evasion networks” and procurement networks were also sanctioned for their ongoing efforts to procure U.S.-origin goods and technology for Russia.
Additional detail and identifying information on these individuals and entities is available here. A helpful Treasury Department press release is available here. A helpful State Department press release is available here.
As a result of these actions, all property and interests in property of the persons and entities placed on OFAC’s SDN List that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. In addition, any entities that are owned, directly or indirectly, 50% or more by one or more blocked persons are also blocked. All transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or blocked persons are prohibited unless authorized by a general or specific license issued by OFAC, or exempt. These prohibitions include the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person and the receipt of any contribution or provision of funds, goods, or services from any such person.
New Russia General Licenses
With these latest additions to the SDN List, OFAC has issued related General Licenses to allow certain limited activities.
- Russia General License (GL) 74 – Authorizes transactions ordinarily incident and necessary to the wind down of transactions involving East-West United Bank until January 31, 2024. It also allows U.S. person to reject, rather than block, and return funds involving this bank until January 31, 2024.
- Russia GL 75 – Authorizes all transactions prohibited by Executive Order (EO) 14024 that are ordinarily incident and necessary to the divestment or transfer, or the facilitation of the divestment or transfer, of debt or equity of the certain blocked entities, placed on the SDN List on November 2, 2023, to a non-U.S. person through January 31, 2024.
- Russia GL 76 – Authorizes all transactions prohibited by EO 14024 that are ordinarily incident and necessary to the wind down of any transaction involving several of the blocked entities, placed on the SDN List on November 2, 2023, through January 31, 2024. UPDATE: On November 8, OFAC issued a revised General License (GL) 76A, “Authorizing the Wind Down of Transactions Involving Certain Entities Blocked on November 2, 2023.” This action amends Russia-related GL 76 to clarify that the license applies to Public Joint Stock Company Saint Petersburg Exchange. The November 2, 2023 GL listed the entity’s name as Saint Petersburg Stock Exchange. This GL is otherwise unchanged.
Certain transactions remain unauthorized under these general licenses and therefore require close analysis.
Revised Russia General License 13G
OFAC also extended previous Russia-related General License (GL) 13F by issuing a revised GL 13G, “Authorizing Certain Administrative Transactions Prohibited by Directive 4 under Executive Order 14024,” which states that U.S. persons are authorized to pay taxes, fees, or import duties and purchase or receive permits, licenses, registrations, or certifications, to the extent such transactions are prohibited by Directive 4, provided such transactions are ordinarily incident and necessary to such persons’ day-to-day operations in the Russian Federation. Directive 4 prohibits any transaction involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation, including any transfer of assets to such entities or any foreign exchange transaction for or on behalf of such entities. Previous GL 13F was set to expire on November 8, 2023; the new GL 13G is set to expire on January 31, 2024.
BIS Adds Companies to Entity List
On November 2, 2023, the Department of Commerce’s Bureau of Industry and Security (BIS) also issued a Final Rule placing 13 entities to the Entity List for supporting Russia’s military through the procurement, development, and proliferation of Russian unmanned aerial vehicles (UAVs). Twelve entities being added are located in Russia and one is located in Uzbekistan. BIS determined that their activities are contrary to the national security and foreign policy interests of the United States, and also determined that all 13 entities qualify as “military end users” for export control purposes. The entities are now subject to a license requirement for all items subject to the Export Administration Regulations (EAR) and a license review policy of denial.
The effective date for the rule is November 2, 2023. Shipments of items removed from eligibility for a License Exception or export, reexport, or transfer (in-country) without a license (NLR) as a result of these Entity List designations that were en route aboard a carrier to a port of export, reexport, or transfer (in-country), on November 2, 2023, pursuant to actual orders, may proceed to that destination under the previous eligibility for a License Exception or export, reexport, or transfer (in-country) without a license (NLR) before December 4, 2023. Any such items not actually exported, reexported or transferred (in-country) before midnight, on November 2, 2023, require a license from BIS.
A helpful BIS press release is available here.