Yesterday the U.S. government announced that it would implement new sanctions against Russia mandated under the Chemical and Biological Weapons Act of 1991 (the CBW Act) following the apparent deployment of a chemical weapon on British soil by Russia.

The first round of sanctions, which are expected to come into force on or around August 22, will prohibit many exports and reexports of goods, software, or technology to Russia controlled for national security reasons under the dual use Export Administration Regulations.  Such items include gas turbine engines, encryption items, electronics components, optical equipment, lasers, sensors, electronic components, materials, and certain unmanned systems, among many others. National security controlled items currently require a license to be exported to Russia, but the new rules will require the Commerce Department to apply a ‘presumption of denial’ to future license requests in many instances.  In a briefing announcing the new sanctions, the State Department indicated that certain exceptions will be made, including those related to joint space activities, aviation safety, and the activities of U.S. and other foreign companies in Russia.  While the scope of the sanctions has yet to finalized, the State Department suggested that up to half of all licensed exports to Russia are controlled for national security reasons.  If the sanctions are fully enforced, the impact could be substantial – based on 2016 figures over $1 billion in trade could be impacted.
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Today, the EC announced that it is moving forward with a package of measures to blunt the impact of renewed U.S. sanctions on Iran following the U.S. exit from the Joint Comprehensive Plan of Action (JCPOA).  Included in those measures is the planned activation of the EU blocking statute, which would bar EU companies from complying with the extraterritorial effects of U.S. sanctions requirements on Iran.  The statute is also intended to insulate EU companies from certain U.S. sanctions penalties.  Implementation of blocking statutes can create a situation in which companies must decide which country’s law they are going to violate – if they cannot find an approach that avoids the conflict.      
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Under Section 231 of the Countering America’s Adversaries Through Sanctions Act (CAATSA), the Trump administration was due to issue secondary sanctions on non-U.S. persons that conduct significant transactions with Russia’s defense and intelligence sectors.  The Trump administration declined to issue those new sanctions, claiming that CAATSA was serving as an effective deterrent – discouraging non-U.S. entities from doing business with the Russian defense and intelligence sectors – and that no new sanctions were needed at this time. 
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Last week, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) blacklisted 21 individuals and nine entities for various reasons, including involvement in the ongoing conflict in eastern Ukraine, connections to the Crimea region (which is subject to a complete U.S. embargo), and links to the Russian government.  Several of the newly minted Specially Designated Nationals (SDNs), including Russian engineering company Technopromexport, were allegedly involved in diverting Siemens-made gas turbines to Crimea in potential violation of European Union sanctions rules.  OFAC also added twelve subsidiaries of Surgutneftegaz to the Sectoral Sanctions Identification List, clarifying that the entities are subject to the energy-sector sanctions described in Directive 4 to E.O. 13662.
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As required under recent sanctions legislation, the U.S. Office of Foreign Assets Control (OFAC) recently issued an updated Directive 4 that will expand sectoral sanctions on the Russian energy industry.

The new rules, which apply to projects initiated on or after January 29, 2018, will bar persons subject to U.S. jurisdiction from providing goods, services, or technology in support of exploration or production for deepwater, Arctic offshore, or shale oil anywhere in the world if a party subject to Directive 4 sectoral sanctions has a 33 percent or more ownership interest or owns a majority of the voting interests in the project.
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Last Friday the State Department belatedly released a list of 39 Russian entities that operate as part of Russia’s defense and intelligence sectors (the full list is below).  Congress required the Trump Administration to produce a list of such parties as part of the Countering America’s Adversaries Through Sanctions Act (CAATSA), which became law in August 2017.  Under Section 231 of CAATSA, persons that engage in “significant” transactions with the designated firms could be subject to a menu of secondary sanctions starting on January 29, 2018.   
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Earlier this month, the Office of the U.S. Trade Representative (“USTR”) published a notice seeking public comment and participation in a hearing on Russia’s implementation of its obligations under the World Trade Organization (“WTO”). Public comments, summaries of hearing testimony, and requests to appear at the hearing are due on September 22, 2017.  The hearing will be held at USTR on September 28, 2017.

Written comments and testimony at the hearing will assist USTR in preparing its annual report to Congress on how Russia has done in meetings its WTO commitments. This will be USTR’s fifth such report to Congress pursuant to the Russia and Moldova Jackson-Vanik Repeal and Sergei Magnitsky Rule of Law Accountability Act of 2012, known as the Magnitsky Act.  The Magnitsky Act marked the extension of permanent normal trade relations to goods and services from Russia and allowed the United States to recognize Russia as a new member of the WTO, which it had joined several months prior to the law’s enactment.


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