On December 2, 2021, the Treasury Department’s Office of Foreign Assets Control (OFAC) expanded its Belarus-related sanctions program by imposing restrictions on dealings in Belarusian sovereign debt and adding 32 individuals and entities to its List of Specially Designated Nationals (SDN List). Among these additions are several state-owned or -controlled companies operating in the tourism, transportation, defense, security, and potassium chloride (potash) sectors of the Belarusian economy. OFAC also issued a general license that temporarily authorizes the wind down of transactions involving specified Belarusian SDNs, and issued guidance clarifying the scope of this latest round of sanctions.
Last week’s sanctions were imposed pursuant to Executive Orders (E.O.) 14038 and 13405, which authorize OFAC to impose sanctions on the Government of Belarus and key sectors of the Belarusian economy.
Sectoral Sanctions on Belarusian Sovereign Debt
With the publication of Directive 1, OFAC imposed restrictions on dealings in certain debt of the Ministry of Finance of the Republic of Belarus (Ministry of Finance) and the Development Bank of the Republic of Belarus (Development Bank). The directive prohibits “all transactions in, provision of financing for, and other dealings in new debt with a maturity of greater than 90 days issued on or after December 2, 2021” by the Ministry of Finance or the Development Bank. Notably, OFAC’s “50 percent rule” does not apply to Directive 1’s prohibitions, which means that these restrictions do not extend to entities owned 50 percent or more, directly or indirectly, by the Ministry of Finance or the Development Bank.
Interested persons should carefully review OFAC’s “Frequently Asked Questions,” as OFAC has issued important clarifications on how Directive 1 applies in a number of contexts. For instance, OFAC has indicated that Directive 1’s prohibitions extend to derivative contracts linked to new debt issued by the Ministry of Finance and Development Bank.
New Belarusian Designations
OFAC also added 20 individuals and 12 entities to its SDN List. Among the designations are Republican Unitary Enterprise Tsentrkurort, JSC Transaviaexport Airlines, CJSC Beltechexport, AGAT Electromechanical Plant OJSC, Joint Stock Company 140 Repair Plant, Kidma Tech OJSC, JSC Peleng, OOO Gardservis, Open Joint Stock Company Belarusian Potash Company (BPC), BPC’s subsidiary Agrorozkvit LLC, and Foreign Limited Liability Company Slavkali.
Pursuant to the new General License 5, U.S. persons are permitted to engage in certain, limited activities ordinarily incident and necessary to the wind down of transactions with BPC, Agrorozkvit LLC, and entities owned 50 percent or more by those companies until 12:01 a.m. eastern standard time, April 1, 2022.
OFAC’s latest updates, taken in coordination with U.S. allies, introduce heightened sanctions risks for companies doing business in Belarus. Companies with operations involving Belarus will need to carefully examine these developments and monitor future moves by OFAC and allied governments.
Please contact our sanctions and export control team with any questions about ensuring compliance with the evolving Belarus sanctions program.