On September 15, President Biden signed an Executive Order (EO) with the first ever formal Presidential direction to the Committee on Foreign Investment in the United States (CFIUS or the Committee). The EO emphasizes the risks that the Committee should consider when reviewing covered foreign company purchases of U.S. businesses. The EO is intended reemphasize existing CFIUS concerns that countries are increasingly stepping up efforts to obtain the “sensitive personal data” of U.S. persons and technology critical to U.S. national security, with a focus on export-controlled know-how. The new measures from the EO are outlined below.

Supply Chain Resilience. The EO directs the Committee to consider a covered transaction’s effect on supply chain resilience and security, both within and outside of the defense industrial base. The underlying message is that CFIUS should look broadly at supply chain effects of proposed acquisitions and not just focus on direct national security effects. The concept of the U.S. supply chain writ large as a CFIUS national security concern is relatively new and could lead to CFIUS reviews of more proposed transactions.

U.S. Technological Superiority. The EO identifies sectors crucial to the U.S.’s global technological advantage, including, but not limited to, microelectronics, artificial intelligence, biotechnology and biomanufacturing, quantum computing, advanced clean energy, climate adaptation technologies, and the agricultural industrial base. The EO directs the Committee to consider whether or not a transaction would compromise the manufacturing capabilities, services, critical mineral resources, or technologies of the listed sectors.

Industry Investment. The EO also directs the Committee to consider the risks arising from a covered transaction in the context of multiple acquisitions or investments in a single sector or in related sectors in order to safeguard any given sector from compromise / control by an adversarial foreign entity.

Cybersecurity. The EO directs the Committee to consider whether a covered transaction may provide a foreign person, or a third-party, with access to conduct malicious cyber activities, in addition to the cybersecurity posture, practices, capabilities, and access of all parties to the transaction that could afford a foreign person, or third-party, the ability to achieve such activities.

Sensitive Personal Data. The EO directs the Committee to consider whether a covered transaction involves a U.S. business with access to U.S. persons’ sensitive data, and whether the foreign investor has the ability to exploit such information to the detriment of national security, including through the use of commercial or other means.

This EO instructs CFIUS to pay attention to many areas that are already the focus of Committee activity – as reflected in the Committee’s regulations and in much of itsrecent activity. That said, the instruction on supply chains will encourage CFIUS to think more broadly in that area.  The EO is also intended as a message to U.S. acquisition targets and to non-U.S. companies thinking about acquisitions, including Chinese companies that have been contemplating a stricter CFIUS landscape, that scrutiny of proposed transactions in the key areas listed will be enhanced even further. The EO is also a message that can be referenced in forthcoming mid-term election races that this administration is intent on protecting U.S. national security as defined very broadly by this EO.


Today, the U.S. Treasury, State, and Commerce Departments announced new sanctions and export control restrictions on Russia and Belarus, targeting parties in and activities related to the technology, quantum computing, finance, and advanced manufacturing sectors.  The Commerce Department’s Bureau of Industry and Security (BIS), in particular, expanded and updated a number of Russia- and Belarus-related sanctions measures under the Export Administration Regulations (EAR), including new controls on a number of common EAR99 items related to the chemicals, fluid handling, quantum computing, advanced manufacturing, and other industries.

Technology & Quantum Computing Sanctions

The Treasury Department’s Office of Foreign Assets Control (OFAC) added a number of Russian technology, space, and electronics companies and technical institutes to its List of Specially Designated Nationals (SDNs), including Limited Liability Company Group of Companies Akvarius (Akvarius), a large Russian electronics manufacturer.  Transactions ordinarily incident and necessary to the wind down of pre-existing dealings with Akvarius are authorized pursuant to a new General License No. 51 until October 15, 2022, but transactions involving the other new SDNs are now prohibited absent a specific license from OFAC.

In addition to the new designations, OFAC issued a ban on the export, reexport, sale, or supply of quantum computing services to any person in Russia pursuant to a new Determination under E.O. 14071.  OFAC considers prohibited quantum computing services to be any of the following when related to quantum computing, quantum computers, electronic assemblies thereof, or cryogenic refrigeration systems related to quantum computing:

“[I]nfrastructure, web hosting, or data processing services; custom computer programming services; computer systems integration design services; computer systems and data processing facilities management services; computing infrastructure, data processing services, web hosting services, and related services; repairing computer, computer peripherals, or communication equipment; other computer-related services; as well as services related to the exportation, reexportation, sale, or supply, directly or indirectly, of quantum computing, quantum computers, electronic assemblies thereof, or cryogenic refrigeration systems related to quantum computing[.]”

The ban excludes services provided to certain U.S.-owned or controlled entities located in Russia, as well as services provided in connection with the wind down or divestiture of entities located in Russia that are not owned or controlled by a Russian person.

The quantum computing services ban becomes effective on October 15, 2022.  In addition to the ban on quantum-related services, OFAC issued a separate Determination under E.O. 14024 allowing the agency to designate as an SDN any party it identifies as operating or having operated in Russia’s quantum computing sector, effectively immediately.

Banks That Join Russia’s MIR National Payment System Risk U.S. Sanctions

OFAC issued guidance today warning that non-U.S. banks could be added to the U.S. SDN List if they enter into new or expanded agreements involving the use of the MIR National Payment System outside of Russia.  Recent media reports have suggested that banks in Turkey may be particularly at risk of U.S. sanctions for their involvement in expanding the use of the payment system in Turkey, but financial institutions in central Asia and other regions also face risks if they are involved in expanding the use of MIR outside of Russia.

Expanded Export Controls

BIS made a number of important updates to its Russia- and Belarus-related export controls.  These include, among other things, the following changes:

  • Expansion to Belarus: The amendment expands the EAR’s “Russian Industry Sector Sanctions” to also generally apply to exports, reexports, and transfers to Belarus.
  • EAR99 fluid handling equipment, chemicals, and biologics:  The new rules prohibit the export, report, and transfer of a number of common EAR99 items that could be used for chemical or biological weapons production to Russia or Belarus without a license from BIS.  The newly controlled items, which are described in a new Supp. No. 6 to Part 746, include very common fluid handling equipment used in a range of industrial applications, such as reaction vessels, fermenters, agitators, heat exchangers, condensers, pumps (including single seal pumps), valves, storage tanks, containers, receivers, and distillation or absorption columns regardless of materials of construction.  Other controlled EAR99 items include certain biologics, chemicals, laboratory equipment.
  • Quantum computing & advanced manufacturing:  The amendment imposes a license requirement on the provision of certain EAR99 quantum computers and associated assemblies, components, and additive manufacturing equipment and related items to Russia and Belarus without a license from the Commerce Department.  EAR99 technology related to the production, development, and use of these items is also now controlled.
  • Expansion of Supp. No. 4 controls on EAR99 industrial items:  Today’s amendment adds 57 EAR99 industrial items to Supp. No. 4, including certain heat pumps, fork-lift trucks, sawing and cutting machines, and locomotives, among others, barring their sale to Russia without prior approval.  In addition, Supp. No. 4 is being expanded to apply to all items modified or designed as components, parts, accessories, or attachments of items listed in the supplement, even if those constituent items are not specifically included in the supplement, subject to certain exceptions.
  • Military and military-intelligence end users: The Commerce Department amended the EAR to allow the agency to designate end-users outside of Russia, Belarus, or other countries listed in sections 744.21 and 744.22 of the EAR as military end users (MEU) or military-intelligence end users.   While the MEU List is normally not exhaustive, the new rule limits application of military and military-intelligence related licensing requirements with respect to users outside of Russia and Belarus to those specifically identified on BIS’s Entity List.  The limitation reflects BIS’s understanding of the substantial compliance burden that would be imposed on exporters, reexporters, and transferors of having to independently identify the presence of Russian or Belarusian MEU or military-intelligence end users on a worldwide basis.
  • Dollar-value thresholds for luxury goods:  To better align U.S. controls with those implemented by allies, the new rule implements dollar value thresholds for controls related to exports, reexports, or transfers of certain luxury goods to Russia.  Previously, the restrictions generally applied regardless of the value of the goods at issue.

In addition to these updates, the amendment makes a number of corrections and clarifications to the EAR, including to license exceptions related to consumer communications devices and the news media, exceptions related to certain transfers of 5A992 and 5D992 items involving U.S.- or allied country-based companies, recordkeeping requirements, certain licensing policies, the General Prohibitions, the Commerce Country Groups, and the application of the Foreign Direct Product Rule.

Please contact our sanctions and export team with any questions regarding these developments.

On September 8, the U.S. Office of Foreign Assets Control (OFAC) extended a general license authorizing certain administrative transactions involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation. The new General License 13B authorizes U.S. persons and entities owned or controlled by U.S. persons to pay taxes, fees, or import duties, and purchase or receive permits, licenses, registrations, or certifications provided that those transactions are ordinarily incident and necessary to day-to-day operations in Russia.

A previous version of the general license was set to expire on September 30, 2022.  As with prior versions of the general license, General License 13B does not authorize debits from accounts of the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation.  Nor does GL 13B authorize any transactions otherwise prohibited by the Russian Harmful Foreign Activities Sanctions Regulations (RuHSR), including transactions involving any person blocked pursuant to the RuHSR, unless separately authorized.

Yesterday, the U.S. Bureau of Industry and Security (BIS) issued an interim rule imposing new export controls on four emerging and foundational technologies.  The new rules control two substrates of ultra-wide gap semiconductors; Electric Computer-Aided Design (ECAD) software specially designed for the development of integrated circuits with Gate-All-Around Field-Effect Transistor (GAAFET) structure; and Pressure Gain Combustion (PGC) technology for national security and antiterrorism reasons, which means that exports of the items to most countries will require an export license or the use of a license exception.  Release of controlled technology to most foreign nationals will similarly require authorization under U.S. export control rules.

The amendment reflects new multilateral controls agreed upon by the United States and other members of the Wassenaar Arrangement at the 2021 Plenary.

Semiconductor Substrates: BIS’s interim rule amends the Export Administration Regulations (EAR) by imposing licensing requirements on exports of certain Gallium Oxide and diamond semiconductor substrates used in the production of sophisticated devices capable of operating under severe conditions, such as under higher voltages and temperatures.  Because of the significant potential for military application of these technologies, the new rule controls the substrates under ECCNs 3C001.d-.f, 3C005.a-.b, and 3C006.

ECAD Software Specially Designed for GAAFET Structure: BIS imposed licensing requirements on certain ECAD software that are particularly suited to the efficient design of GAAFET circuits by controlling ECAD Software “specially designed” for the “development” of integrated circuits having any GAAFET structure that meets parameters set forth under the newly established ECCN 3D006.  BIS has delayed the implementation of the new controls on ECAD software for 60 days to allow time for industry to provide comments on the new proposed controls.  Industry comments are due no later than September 14, 2022.

Gas Turbine Technologies:  While BIS has not identified any engines currently in production that utilize PGC technology, the interim rule notes that PGC technology’s novel use of techniques likeresonant pulsed combustion, constant volume combustion, and denotation to increase the efficiency of gas turbine engines provides military advantages in a variety of applications. The new interim rule adds paragraph 9E003.a.2.e.to the EAR to control the production and development of combustors that use PGC technology.

Saving Clause:  
The new rule contains a saving clause that allows for certain exports that are on dock for loading, laden aboard an exporting carrier, or en route aboard a carrier to a port of export on August 30, 2022 pursuant to actual orders to a foreign destination so long as they have been exported, reexported, or transferred before midnight on September 14, 2022.  The saving clause does not apply to export transactions controlled under 3D006, which is subject to a delayed effective date.  For shipments subject to 3D006 controls, the interim rule establishes a saving clause for orders that are similarly in-transit on October 14, 2022, so long as the export, reexport, or transfer is completed before midnight on November 14, 2022.

Please contact our export control and sanctions compliance team if you have any questions about these developments.

Continue Reading U.S. Implements New Export Controls on Emerging and Foundational Technologies, Targeting Semi-Conductors and Gas Turbine Technologies

Today, the United States imposed another round of sanctions on Russia, targeting Russian elites, universities, and technological institutions.

Blocking Sanctions

The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) added the following notable Russian elites to the List of Specially Designated Nationals (SDN), subjecting them to full U.S. blocking sanctions:

  • Andrey Grigoryevich Guryev, Russian billionaire oligarch and son, Andrey Andreevich Guryev, of PhosAgro PJSC, a leading fertilizer company;
  • Viktor Filippovich Rashnikov, a Russian billionaire oligarch of Russia’s iron and steel industry;
  • Alina Maratovna Kabaeva, former member of the State Duma; and
  • Natalya Valeryevna Popova, a prominent official of Russia’s technology sector.

Guryev, Rashnikov, and Kabaeva are also subject to EU asset freeze restrictions.  OFAC, in tandem with the State Department, also designated a number of Russian businesses and institutions as SDNs, including prominent Russian educational and technological institutions:

  • Skolkovo Foundation;
  • Skolkovo Institute of Science and Technology;
  • Technopark Skolkovo Limited Liability Company;
  • Joint Stock Company Promising Industrial and Infrastructure Technologies;
  • Joint Stock Company Penzensky Nauchno Issledovatelsky Elektrotekhnichesky Higher Education Institution;
  • JSC Zelenograd Nanotechnology Center;
  • Federal State Budgetary Scientific Institution Research and Production Complex Technology Center;
  • JSC Scientific Research Institute Submicron; and
  • Academician A.L. Mints Radiotechnical Institute Joint Stock Company.

Business with—and any dealings in the property or interests in property of—parties subject to U.S. blocking sanctions are broadly prohibited absent prior authorization from OFAC.  U.S. persons must also report any property or interests in property of the blocked parties in their possession or control to OFAC within 10 business days.

Guidance and General Licenses

With today’s designations, OFAC also issued general licenses and published new guidance on the intended scope of the sanctions.  The general licenses authorize, among other things, certain transactions related to civil aviation safety, the winding down or pre-existing transactions with certain newly listed parties, and the divestment of holdings in recently blocked entities.

Importantly, OFAC indicates in new FAQs that the agency currently does not view PhosAgro PJSC as subject to blocking sanctions via application of the 50 percent rule, and stresses that agricultural and medical trade are not the focus of the U.S. sanctions on Russia.

Please contact our sanctions and export team with any questions regarding these latest developments.

Last week, the European Union imposed its seventh round of sanctions on Russia, imposing a range of new restrictive measures.  The new sanctions include a ban on dealings in Russian-origin gold, updates to existing sanctions to bolster the effectiveness of those measures, and an expanded list of parties subject to an EU asset freeze.

Ban on Russia-Origin Gold & Gold Jewelry

The EU’s “maintenance and alignment” sanctions package imposes a ban on Russia-origin gold that broadly prohibits the direct or indirect import, transfer, or purchase of listed Russian-origin gold products (including jewelry) after July 22, 2022.  The ban covers gold and jewelry that are processed in third countries and incorporate listed Russian-origin gold products.

Other “Maintenance and Alignment” Sanctions

The European Union took a number of other steps to strengthen existing sanctions against Russia, including the following:

  • Expansion of items that are controlled for export to Russia as potentially contributing to Russia’s military capabilities and defense sector;
  • Extension of port access ban to lock access;
  • Permissions relating to the standard setting activities of the International Civil Aviation Organization;
  • Exemption from prohibitions against transactions with Russian public entities that are necessary to ensure access to judicial, administrative or arbitral proceedings;
  • Expansion on prohibition against acceptance of deposits to include entities established in third countries and majority owned by Russians, requirement that acceptance of deposits for non-prohibited cross-border trade be subject to prior authorization by competent authorities;
  • Extension of exemption to prohibitions against transactions with certain Russian state-owned entities that are necessary for the transport of agricultural and oil products to third countries; and
  • Clarification that third countries and their nationals may purchase pharmaceutical and medical products from Russia.

Asset Freeze Restrictions

The EU’s latest package of sanctions expanded its list of designations to include additional 48 individuals and 9 entities.  The latest expansion notably includes asset freeze restrictions on Sberbank.

As a reminder, all funds and economic resources belonging to designated individuals and entities shall be frozen under EU law, and those subject to EU jurisdiction are forbidden from making funds directly or indirectly available to designated targets.

Today, the United States, in coordination with other G7 countries, announced new sanctions, export controls, and import restrictions on Russia.  The latest U.S. package of measures include sanctions targeting Russia’s defense sector, Entity List designations, increased tariffs on a broad range of Russian goods, and an import ban on Russian gold.

New Sanctions

Various U.S. agencies imposed sanctions on transactions involving individuals and entities connected to Russian aggression in Ukraine.

The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) and U.S. State Department imposed blocking sanctions on dozens of individuals and entities supporting Russia’s defense sector.  The designations target major state-owned defense companies, defense research organizations, and military operations in Ukraine implicated in international human rights violations.

OFAC designated 29 individuals and 70 entities, including the Russian defense-conglomerate, State Corporation Rostec (Rostec).  The State Department sanctioned 29 individuals and 45 entities, including re-designation of Russia’s Federal Security Service (a.k.a. the FSB).

U.S. persons are prohibited from engaging in any direct or indirect dealings with SDNs without prior authorization from OFAC.  All property or property interests of an SDN are also “blocked,” which means that any SDN property or property interest within the possession or control of a U.S. person must be formally frozen and reported to OFAC.

Today, OFAC also issued several general licenses authorizing transactions with certain newly designated SDNs, including:

  • General License No. 39 authorizing transactions to wind-down activities with Rostec, as well as any entity in which Rostec owns, directly or indirectly, a 50 percent or greater interest, by August 11, 2022;
  • General License No. 40 authorizing transactions involving specified SDNs related to the provision, export, or reexport of goods, technology, and services to ensure civil aviation safety;
  • General License No. 41 authorizing transactions for the manufacture, sale, and maintenance of agricultural equipment produced by SDNs Nefaz Publicly Traded Company (Nefaz) or Public Joint Stock Company, Tutaev Motor Plant (Tutaev Motor Plant), or any entity in which Nefaz or Tutaev Motor Plant owns, directly or indirectly, individually or in the aggregate, a 50 percent or greater interest; and
  • General License No. 42 authorizing limited transactions related to requesting, receiving, utilizing, paying for, or dealing in licenses, permits, certifications, or notifications from the FSB.

The U.S. Commerce Department’s Bureau of Industry and Security (BIS) announced the addition of 36 entities from nine countries to its Entity List for evading newly imposed export controls on Russia.  The export, reexport, or transfer of U.S. origin goods, software, and technologies to those designated on BIS’s Entity List are generally not permissible absent prior authorization from BIS, which will rarely be granted.

Tariffs and Import Restrictions

Pursuant to the United States’ suspension of permanent normal trade relations with Russia and Belarus, the Biden Administration issued a proclamation yesterday increasing tariffs on more than 570 groups of Russian products.  The 35 percent ad valorem duties are effective 12:01 a.m. eastern daylight time on July  27, 2022, and apply to a wide variety of products, including steel and aluminum, minerals, chemicals, wood and paper products, aircraft and parts, and automotive parts, among many others.  The heightened duties will apply irrespective of antidumping and countervailing duties, or other fees or extractions applicable to the Russian products.

Ban on Gold Imports

Finally, OFAC imposed an import ban on Russian-origin gold, effective immediately.  Russian-origin gold includes gold produced, manufactured, extracted, or processed in Russia but not gold that has been incorporated or substantially transformed into a foreign-made product.  See OFAC FAQ 1019.  There is a narrow exception related to imports of Russian-origin gold located outside of Russia prior to imposition of the import ban.  As with OFAC’s prior restrictions on the gold market, a newly amended FAQ reiterates that gold market participants, including persons that process or facilitate gold-related transactions, could face sanctions for circumventing or engaging in prohibited gold-related transactions.  See OFAC FAQ 1029.

 

On Monday, June 6, 2022, President Biden invoked the Defense Production Act of 1950 (“DPA”) with the intent to accelerate domestic manufacturing in the renewable energy sector.  In addition to furthering the Administration’s clean energy agenda, Deputy Secretary of Defense Dr. Kathleen Hicks explained this action will strengthen U.S. national security, noting the vulnerability of fossil fuel supply lines during conflict and the military capability gains expected to flow from the Defense Department’s transition toward clean energy technologies.  Title III of the DPA empowers the President to mitigate industrial base shortfalls and supply chain risks and expand U.S. production capabilities to promote national defense.  Recently, Presidents Biden and Trump have invoked this emergency authority to address COVID-19 pandemic related vaccination and supply chain issues.  This executive action has the potential to impact contractors and their supply chains in the domestic renewable energy sector and the energy industry writ large.

Invoking the DPA, President Biden authorized the Department of Energy (“DOE”) to take action to accelerate domestic production of clean energy technologies.  President Biden’s exercise of DPA authority includes five presidential determinations targeted toward key areas in the renewable energy industry:

  • Solar panel inputs, including photovoltaic modules and components thereof;
  • Building insulation, especially for older, less efficiently retrofitted buildings;
  • Heat pumps used to efficiently heat and cool buildings;
  • Equipment used to make and use clean electricity-generated fuels, such as electrolyzers, fuel cells, and related platinum group metals; and
  • Transformers and other critical power grid infrastructure.

In its DPA-supported projects, the Biden administration will “strongly encourage” observance of “strong labor standards,” such as project labor agreements and community benefits agreements offering competitive wages and employment terms.[1]  The Administration will also “strongly encourage” projects involving environmental justice outcomes tailored to low-income communities and areas affected by historic “legacy pollution.”

In five memoranda addressed to the Secretary of Energy issued on June 6, 2022, and published in the Federal Register on June 9, 2022, President Biden invoked Title III of the DPA, which authorizes the President to direct certain activities in order to “create, maintain, protect, expand, or restore” domestic industry capabilities essential to national defense.  50 U.S.C. § 4533(a)(1) (2022).  To achieve this, Title III authorizes the President to order government purchases of or commitments to purchase critical resources or technology, subsidize domestically-produced materials to ensure its availability, or order installation and purchasing of supplies for government and privately owned industrial facilities to expand their production capacity in order to aid the national defense.[2]  In issuing each memorandum, President Biden waived certain DPA statutory requirements after determining that action is necessary to avoid a shortage in the subject critical resource or technology that would severely impair national defense capability.  See 50 U.S.C. § 4533(7)(B) (2022).  Nonetheless, each memorandum addresses the three-pronged determination required by section 303(a)(5) of the DPA and discussed further below.

The stated purpose in each memorandum is to ensure a “robust, resilient, and sustainable domestic industrial base” necessary for a clean energy economy, which President Biden determined is essential to “national security, a resilient energy sector, and the preservation of domestic critical infrastructure.”[3]  According to the DOE, this DPA action will advance the Administration’s goals to reduce U.S. reliance on foreign energy supply—specifically, imports from Russia and China—and promote energy independence, reduce energy use, lessen reliance on fossil fuels and address climate change, create jobs, and decrease energy costs for American families.  The DOE also notes high levels of U.S. and global demand for renewable energy technology and the expectation that this demand will continue to increase.  Without this DPA action, the DOE predicts domestic supply capabilities would be insufficient, vulnerable to supply chain disruptions, and overly reliant on imports.  Consequently, per section 303(a)(5) of the DPA, each memorandum asserts President Biden’s determination with regard to each of the five targeted areas:

  • (1) the stated sector of the domestic energy industry is essential to national defense;
  • (2) President Biden’s exercise of section 303 authority is necessary to ensure that the domestic industry can timely supply and satisfy the domestic need for the stated technology; and
  • (3) purchases, purchase commitments, or other action under section 303 of the DPA are the most cost effective, expedient, and practical means of achieving the stated purpose for each measure.

The Administration also announced its plan, in collaboration with the DOE, to convene industry, labor, environmental justice, and other stakeholders to discuss means to maximize the impacts of this action.  In February 2022, the DOE also issued a comprehensive assessment (“America’s Strategy to Secure the Supply Chain for a Robust Clean Energy Transition”) and reports and fact sheets addressing thirteen key areas in the domestic renewable energy industry, which further explain the Administration’s strategies and recommendations to advance its clean energy goals.  For additional information on and links to the DOE’s assessments, please consult our advisory here.


[1] In a separate section of the statute, the DPA notably excludes from the President’s scope of authority the ability to control employment contracts.  See 50 U.S.C. § 4511(c)(1) (2022).

[2] For additional information on the DPA, please consult our advisory here.

[3] 87 Fed. Reg. 35,071; 87 Fed. Reg. 35,073; 87 Fed. Reg. 35,075; 87 Fed. Reg. 35,077; 87 Fed. Reg. 35,079.

Last Friday, the European Union adopted its sixth round of sanctions against Russia, including the highly anticipated ban on imports of Russian seaborne crude oil and petroleum products and the provision of related services, subject to certain exceptions.

The European Union’s latest package also expands its ban on the provision of SWIFT interbank messaging network services, expands the EU dual-use export ban, prohibits the broadcasting or advertising of content from certain Russian media outlets to the European Union, prohibits the provision of various consulting services to Russia, and expands EU asset freeze restrictions.

EU Energy Ban

The latest EU sanctions package prohibits those subject to EU jurisdiction from directly or indirectly purchasing, importing, or transferring listed crude oil or petroleum products originating in, or exported from, Russia, subject to the exceptions below.  Notably, the EU ban currently does not apply to imports by pipeline of CN 2709 00 crude oil into Member States.  The direct or indirect provision by EU persons of related services, such as insurance, technical assistance, brokering services, or financing or financial assistance, is also prohibited.

The list of products subject to the EU Energy Ban are set out in Annex XXV to Regulation (EU) No 833/2014, as amended.  Specifically, the Annex describes the following two categories of energy products subject to the EU embargo, which are further defined by reference to the EU’s Combined Nomenclature (CN):

  • CN Code 2709 00, Petroleum oils and oils obtained from bituminous minerals, crude; and
  • CN Code 2710 00, Petroleum oils and oils obtained from bituminous minerals, other than crude; preparations not elsewhere specified or included, containing by weight 70 % or more of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations; waste oils.

EU Energy Ban Exceptions

The EU Energy Ban takes immediate effect, but features transitory periods for preexisting contracts and other exceptions.  For contracts concluded before June 4, 2022, EU persons may continue conducting the following transactions, provided that the relevant Member State satisfies EU notification requirements:

  • EU persons may continue conducting limited transactions for near-term delivery of energy products falling under CN 2709 00 until December 5, 2022; and
  • EU persons may continue conducting limited transactions for near-term delivery of energy products falling under CN 2710 00 until February 5, 2023.

Temporary derogations allowing the importation of seaborne crude oil are also available to landlocked Member States whose supply of crude oil by pipeline is interrupted for reasons outside of the Member State’s control.

Nor does the ban apply to listed seaborne crude oil and energy products originating from third countries that are only being loaded in, departing from, or transiting through Russia, provided that the origin and owner of the products are non-Russian.

The EU measure contains specific derogations for the Czech Republic, Bulgaria, and Croatia.

Further Restrictions

The latest measures imposed a number of further restrictions.

First, the EU also imposed SWIFT-related restrictions on Sberbank, Credit Bank of Moscow, JSC Russian Agricultural Bank, and Belinvestbank (Belarusian Bank for Development and Reconstruction).  Persons subject to EU jurisdiction shall be prohibited from providing specialized financial messaging services to Sberbank, Credit Bank of Moscow, and JSC Russian Agricultural Bank, and Belinvestbank, including to entities whose proprietary rights are directly or indirectly owned, 50 % or more, by the same.

Second, the EU expanded its dual-use ban to capture additional exports that may enhance Russia and Belarus’s military and technological capabilities.  The measures include the addition of 80 chemicals to its list of goods subject to export requirements.  Alongside the expanded list of goods and technology are significant additions to the list of Russia and Belarus entities subject to EU dual-use restrictions.

Third, the measure prohibits those subject to EU jurisdiction from advertising products or services in any content produced or broadcast by designated individuals or entities, including the following:

  • Rossiya RTR / RTR Planeta;
  • Rossiya 24 / Russia 24; and
  • TV Centre International.

Fourth, similar to a recent move by the United States, the EU imposed a ban on the direct or indirect provision of various services, such as accounting, auditing, bookkeeping or tax consulting services, or business management consulting or public relations services to the Government of Russia or Russian entities.  The service ban includes various exceptions to its prohibitions.

Fifth, the EU is now requiring that Member States impose appropriate criminal penalties for sanctions violations.  Member States are also required to provide appropriate measures of confiscation of proceeds derived from EU regulation infringements.

Finally, the EU added 65 individuals and 18 entities to its asset-freeze.  The designations focus on Russian military and defense targets, and proliferators of disinformation.  As a reminder, all funds and economic resources belonging to, owned, held, or controlled by designated individuals or entities shall be frozen, and no funds or economic resources shall be made available, directly or indirectly, for the benefit of such individuals or entities.

 

Today, the United States imposed new sanctions on Russia, targeting Russian oligarch Alexey Mordashov and his companies, other Russian elites, luxury asset management and service companies, and companies involved in procurement for the Russian and Belarusian militaries.

Targeting Russian Elites and Their Companies

The Office of Foreign Assets Control (OFAC), together with the U.S. State Department, designated Russian billionaire Alexey Mordashov and several of his companies as Specially Designated Nationals (SDNs) today, including PJSC Severstal, a major Russian steel producer; Severgroup, a multi-billion-dollar investment company; Nord Gold PLC, a gold mining company; and Algoritm LLC, a Russian technology, media, and advertising company.  Mordashov, the designated companies, and any entities owned 50 percent or more by the newly listed SDNs are subject to full U.S. blocking sanctions.  Business with—and any dealings in the property or interests in property of—the blocked parties is broadly prohibited absent prior authorization from OFAC.  U.S. persons must also report any property or interests in property of the blocked parties in their possession or control to OFAC within 10 business days.

OFAC issued two temporary general licenses to authorize U.S. persons to engage in certain activities necessary to wind down preexisting dealings with PSJC Severstal and Nord Gold PLC that expire on August 31, 2022 and July, 11, 2022, respectively.

Other designated elites include Mariya Zakharova, spokesperson for Russia’s foreign ministry; Sergei Roldugin, a close associate ofRussian President Vladmir Putin; God Nisanov, Russian billionaire and real estate tycoon; and Evgeny Novitsky, a Russian entrepreneur.

Luxury asset management and service companies

OFAC sanctioned a series of luxury asset management and service companiesassociated with Vladimir Putin’s inner circle, such as Imperial Yachts SARL, a yacht brokerage, its CEO, Evgeniy Borisovich Kochman, and other companies associated with Kochman.  The designations also included various yachts and aircraft used by or affiliated with the Russian elite.

Military procurement networks

Finally, the U.S. Department of Commerce’s Bureau of Industry and Security added 71 Russian and Belarusian parties to its Entity List, broadly barring the export, re-export, or transferof items subject to the Export Administration Regulations (EAR) to the listed parties without a license from BIS, which is unlikely to be granted pursuant to a policy of denial for most items.

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Please contact our sanctions and export team with any questions regarding these latest developments.