On March 24, 2022, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) updated the Specially Designated Nationals and Blocked Persons List (“SDN List”) with hundreds of new designations pursuant to Executive Order 14024. The new SDNs include:
- The Russian Federation (“Russia”) State Duma (lower house of the Russian legislature) as an entity;
- More than three hundred members of the Russian State Duma in their individual capacities;
- Seventeen (17) members of the board of PJSC Sovcombank (previously designated as a SDN);
- Numerous Russian elites, most notably Gennady Timchenko along with two entities he owns (OOO Volga Group and OOO Transoil) and his yacht;
- The CEO of PJSC Sberbank of Russia (“Sberbank”), Herman Oskarovich Gref (though Sberbank itself remains designated on the Sectoral Sanctions Identifications List which does not apply full blocking sanctions); and
- Forty-eight (48) entities involved in the production of weapons, aircraft, and other equipment used in Russia’s invasion of Ukraine.
In light of these designations, these individuals’ and entities’ property and interests in property in the U.S. or in the possession or control of U.S. persons are now blocked and must be reported to OFAC. All transactions within the U.S. or involving U.S. persons relating to the blocked persons or their property or interests in property are now prohibited. Additionally, these blocking sanctions apply to any entities owned 50 percent or more by one or more of the newly designated SDNs (or other SDNs), directly or indirectly, pursuant to the OFAC 50 Percent Rule.
The forty-eight (48) defense entities sanctioned on March 24, 2022 already met the definition of “military end users” (“MEUs”) under the Export Administration Regulations (“EAR”), including the modified EAR MEU rules for Russia prohibiting the export, reexport, or in-country transfer to such MEUs of any items “subject to the EAR.” (For more on those rules, see our previous posts here and here.) Now, with these new OFAC sanctions designations, virtually any action taken by a U.S. person with respect to these blocked Russian defense entities or their property or interests in property is prohibited.
Also on March 24, 2022, OFAC updated two (2) Russia-related General Licenses and released two (2) new General Licenses—one (1) related to the Russian Harmful Foreign Activities Sanctions Regulations (“RuHSR”) and one related to Ukraine-related sanctions authorities:
- General License 6A: Supersedes General License 6 related to transactions involving agricultural commodities, medicine, medical devices, replacement parts and components, or software updates, and the COVID-19 pandemic. Specifically, General License 6A now expands the license scope to include clinical trials and other medical research activities that were in effect prior to March 24, 2022 that would be prohibited under the RuHSR, reaffirms its inapplicability to the opening or maintaining of correspondent accounts at U.S. banks for entities subject to EO 14024, and clarifies that it does not permit any debit to an account on the books of a U.S. financial institution of the Central Bank of Russia, the National Wealth Fund of Russia, or the Ministry of Finance of Russia, nor does it permit any transaction prohibited by EOs 14066 or 14068, including the importation of certain products of Russian origin.
- General License 17A: Supersedes General License 17 by extending authorization to import into the U.S. Russian-origin fish, seafood, and preparations thereof pursuant to written contracts entered into prior to March 11, 2022. This authorization will expire after 12:01 a.m. eastern daylight time on June 23, 2022. Such importation is prohibited under the RuHSR. Notably, this extension does not apply to the importation into the U.S. of Russian-origin alcoholic beverages or non-industrial diamonds pursuant to pre-March 11 contracts. Those authorizations expire after 12:01 a.m. eastern daylight time on March 25, 2022. To the extent contracts or orders were finalized but will not qualify for the General License, OFAC indicated in FAQ 1024 that selling or re-directing those shipments to non-U.S. destinations is not prohibited by EO 14068.
- General License 20: Authorizes U.S. persons to engage in transactions ordinarily incident and necessary to the official business of third-country diplomatic or consular missions in Russia that are prohibited by the RuHSR.
- General License 25: Authorizes certain journalistic activities in the Crimea, Donetsk People’s Republic (“DNR”) and Luhansk People’s Republic (“LNR”) regions of Ukraine that would otherwise be prohibited under either EO 13685 of December 19, 2014 or EO 14065 of February 21, 2022.
Timed to align with the above actions, the President met with both North Atlantic Treaty Organization (“NATO”) and G7 leaders on March 24, 2022 to further discuss ways to support Ukraine, bolster the NATO alliance, and promote global security. In addition to an array of commitments across many topics, the G7 leaders resolved to “coordinate responses related to evasive measures [i.e., attempts to evade sanctions], including regarding gold transactions by the Central Bank of Russia.” On this point, OFAC released a new FAQ 1029 outlining the existing gold-related sanctions designation authorities under EO 14024 and reminding U.S. persons and financial institutions active in the gold market of the possibility of sanctions prohibitions applying to gold transactions. Additionally, given food security concerns arising from the Russian invasion of Ukraine, the G7 leaders stated they “will avoid export bans and other trade-restrictive measures . . .” that would curtail the global food supply chain.
Finally, on March 18 and March 15, respectively, OFAC (i) issued Ukraine-related General License 24 authorizing the provision or receipt of civil maritime services performed by individuals ordinarily resident in the so-called DNR and LNR regions of Ukraine (the “Covered Regions”) when those services are performed outside the Covered Regions and not on behalf of an entity located in, or organized under the laws of, the Covered Regions; and (ii) added several Russian and Belarusian individuals to the SDN List under human rights or anti-corruption-related authorities, including the wife of the President of Belarus, Alyaksandr Lukashenka.
Husch Blackwell’s Export Controls and Economic Sanctions Team and International Trade and Supply Chain Practice continue to monitor developments in Russia, Belarus and Ukraine closely and will provide further updates if or when additional developments occur. Should you have any questions or concerns, please contact Cortney Morgan, Grant Leach, or Tony Busch.
For further background, we suggest that you visit the Husch Blackwell Russia Sanctions Resource Library, which consolidates our updates on previous sanctions and export controls developments concerning Russia, Belarus and Ukraine.