The pace of new Russia sanctions matters slowed this week, with most of the action coming out of the European Union and United Kingdom. New measures this week included bans on imports of steel and iron products, exports of luxury goods, investments in the Russian energy sector, and dealings with oligarchs and Russian state-owned enterprises.
This post summarizes current sanctions on Russia and Belarus as of Friday, March 18, 2022. Please reach out to our team if you have any questions about these or future developments.
Central Bank Sanctions
G7 countries imposed broad sanctions on transactions involving Russia’s Central Bank, National Wealth Fund, and Ministry of Finance. These sanctions include a sweeping prohibition on direct or indirect transactions or other business dealings involving the sanctioned entities without authorization. The U.S. Office of Foreign Assets Control (OFAC) issued two general licenses and expanded two existing general licenses to authorize limited interactions with the sanctioned entities. OFAC also issued important guidance explaining the intended scope of the U.S. sanctions.
Banks Subject to Blocking or Asset Freeze Restrictions
Western countries have implemented blocking sanctions or asset freeze restrictions on a number of large Russian financial institutions over the last several weeks. In the United States, banks were added to the List of Specially Designated Nationals. Russian banks subject to blocking or asset freeze sanctions in at least one Western jurisdiction include: VEB, PSB, VTB Bank, Bank Otkritie, Sovcombank, Novikombank, Bank Rossiya, Black Sea Bank For Development And Reconstruction, Genbank, and IS Bank.
The sanctions generally prohibit any direct or indirect dealings with these banks, unless authorized pursuant to a “wind down” or other type of general license or OFAC Directive. We cover these sanctions in several posts, including here, here, here, here, and here.
The United States imposed correspondent and payable-through sanctions on Sberbank, which will limit Sberbank’s ability to conduct U.S. dollar transactions. The sanctions also require U.S. financial institutions to reject future transactions involving Sberbank and its subsidiaries. The U.K. imposed similar measures. You can read more about sanctions on Sberbank here and here.
EU Banking, Financial, & SWIFT Restrictions on Russia & Belarus
The EU imposed a series of financial sanctions on Russia and Belarus, including limits on deposits in the European Union, sanctions on the sale of euro-denominated securities, limits on the listing of shares in the EU, sanctions on the provision of investment services, limits on supplying euro-denominated banknotes, and the expansion of existing securities and debt sanctions. The EU also imposed a ban on the provision of specialized financial messaging services to listed Russian and Belarusian banks, a move that will effectively cut off those banks from the SWIFT interbank messaging system. We cover these developments here, here, and here.
New SDNs and Asset Freezes
The United States and allies imposed blocking sanctions and asset freezes on a number of Russian elites, their family members, and Russian companies. Nord Stream 2 AG and the Russian Direct Investment Fund were also subject to sanctions. Blocking and asset freeze sanctions generally prohibit all business with the sanctioned parties and their majority-owned entities. We cover these sanctions in many of our posts.
Financing Restrictions & U.S. Dollar Banknotes
The United States imposed financing restrictions on large Russian state-owned enterprises that prohibit U.S. persons from dealing in new debt of those companies with a maturity of more than 14 days or in new equity of those companies. The sanctions are very similar to existing U.S. sectoral sanctions that have been imposed on Russian companies pursuant to E.O. 13662 since 2014. As noted below, the EU expanded similar debt sanctions.
The United States also prohibited the export, sale, or supply of U.S. dollar banknotes to Russia, subject to certain exceptions.
Expanded Dual-Use Export Controls
The United States, European Union, and other countries amended export control regulations to impose license requirements on exports of a broad array of goods, software, and related technical knowhow to Russia and Belarus. The U.S. restrictions apply to all items listed in Categories 3 through 9 of the Commerce Control List, including a number of less sensitive items. Subject to a limited number of exceptions, the U.S. government will review license applications related to these exports under a presumption of denial, which means that licenses will rarely be granted. The EU and UK imposed corresponding broad-based dual use export bans on Russia and Belarus, subject to limited exceptions.
The United States extended prohibitions on the export of specified items to Military End Users and Uses and added a significant number of Russian and Belarusian companies to the Entity List, broadly prohibiting the transfer of items subject to the EAR to the listed parties. The United States also expanded existing controls on the transfer of certain items in support of oil refining in Russia and imposed a heightened license review policy. The EU imposed license requirements on the transfer of enumerated items that could contribute to Russia’s military or technological enhancement and on transfers of specified goods and technology suited for use in oil refining, aviation, and space industries.
The United States also extended its “Foreign Direct Product Rule” (FDPR) to apply to exports of goods made outside the U.S. using certain U.S. equipment and know how to Russia and to Russian Military End Users (including supporters of Military End Users or the Russian military). The FDPR operates differently depending on whether military end users are involved. The complex changes to the FDPR significantly increase the scope of non-U.S. origin items that are now subject to the EAR’s Russia-related license requirements.
Energy Bans: Imports & Investment
The United States banned the import of Russian-origin crude oil; petroleum; petroleum fuels, oils, and products of their distillation; liquefied natural gas; coal; and coal products into the United States. The EU and UK announced corresponding measures designed to reduce their reliance on Russian energy supplies.
The United States and EU also adopted measures that prohibit new investment in the Russian energy sector.
Other Import Bans: Iron & Steel, Seafood, Alcohol, Diamonds
The United States adopted measures that ban the import of certain Russian-origin seafood, vodka and spirits, and diamonds into the United States, while the EU imposed restrictions on dealings in Russian-origin iron and steel products. We cover these developments here and here.
Luxury Goods Export Bans
The United States and EU imposed bans on the export of luxury goods to Russia, including alcohol products, tobacco products, clothing items, jewelry, vehicles, art, and antique goods, among other items. We cover these developments here and here.
Embargo and Trading Ban on Separatist Regions
The United States and allies imposed embargoes or trading bans on the separatist Donetsk People’s Republic (DNR) and Luhansk People’s Republic (LNR) regions of Ukraine. We cover the U.S. and EU bans here and here, and provide initial thoughts on how to comply with the embargo here.
Trade Controls & Sanctions on Belarus
Western countries imposed additional sanctions, export controls, and import restrictions on Belarus in response to the country’s growing involvement in the conflict in Ukraine. The measures imposed additional asset freeze restrictions on Belarusian companies and officials, extended the new Russia dual-use export controls to Belarus, and limited imports of certain wood, cement, iron, steel, rubbery, and machinery products to the EU. The U.S. and EU have taken steps to subject Belarus to restrictions that are similar to those imposed on Russia.
While the United States, EU, and other allies are closely coordinating new sanctions measures, there are meaningful differences between the measures imposed by different jurisdictions. To ensure compliance with applicable law, it is important to review the new sanctions measures in all of the jurisdictions in which you operate.