US and Western Allies Announce New Russia Sanctions and International Sanctions Evasion Initiative
On March 24, 2022, the US imposed new sanctions on Russia in coordination with Western allies as the leaders from the US, Canada, France, Germany, Italy, Japan, the United Kingdom (UK), and the European Union (EU) met in Brussels to discuss the growing crisis in Ukraine. Both the US and its allies continue to target Russia.
The latest meeting between the US and its allies signals greater effort in coordinating an economic response to Russia’s invasion into Ukraine. The latest sanction measures are broken down by individual countries below.
Both the US Treasury Department and the US Department of State took action to impose full blocking sanctions on Russia’s defense-industrial sector, hundreds of Russian politicians, and several Russian elites, including the head of the largest financial institution in Russia.
The Treasury Department’s Office of Foreign Assets Control (OFAC) designated The State Duma of the Federal Assembly of the Russian Federation (Duma) and 328 of its members to its Specially Designated Nationals (SDN) List. US persons, including US financial institutions, are prohibited generally from engaging in any transaction with SDNs and are required to block (i.e., freeze) any property or interests in property belonging to SDNs.
This follows earlier sanctions imposed by the US on 12 members of the Duma who reportedly voiced their support of recognizing the Luhansk and Donetsk regions of Ukraine. The full list of the recently designated Duma members can be found here.
The head of Sberbank, Herman Gref, was also added to the list. Sberbank is the largest financial institution in Russia and has already been a target of US sanctions. Pursuant to Directive 2 under Executive Order (EO) 14024 “Prohibitions Related to Correspondent or Payable-Through Accounts and Processing of Transactions Involving Certain Foreign Financial Institutions,” US individuals may not open or maintain a correspondent bank account nor may they process any transaction on behalf of Sberbank and its subsidiaries starting on March 26, 2022.
Additionally, the Treasury Department added 48 entities and one individual involved in the Russian defense-industrial base to the SDN list.
- Tactical Missiles Corporation JSC (KTRV), state-owned defense conglomerate
- Boris Viktorovich Obnosov, General Director of KTRV
- Globus Ryazan Design Bureau JSC, supplier of automated weapons systems
- Joint Stock Company Ural Design Bureau Detal, aircraft radar manufacturer
- Temp-Avia Arzamas Research and Production Association JSC, aircraft control system developer
- Vympel State Engineering Design Bureau JSC, aircraft armament developer
- Joint Stock Company Salute, aircraft armored parts producer
- AO GNPP Region, weapons and ammunition producer
- Joint Stock Company Machine Building Design Bureau, missile system developer
- Raduga State Machine Building Design Bureau Joint Stock Company, high-precision missile developer
- Joint Stock Company Azovski Optiko Mechanichesky Zavod, spectral and thermal imaging equipment manufacturer
- Joint Stock Company Smolensk Aircraft Plant, manufacturer and repairer of aircraft, military, and weapons equipment
- Soyuz Turaevo Engineering Design Bureau JSC, liquid rocket engine manufacturer
- JSC MBDB Iskra, fabricated metal products manufacturer
- Joint Stock Company 711 Aircraft Repair Plant, military equipment repairer
- TRV Auto Limited Liability Company, motor vehicle repairer
- Joint Stock Company Central Design Bureau of Automatics, involved in electronic machinery
- State Scientific Research Institute of Mechanical Engineering Imeni V.V. Bakhireva, developer of blasting technology
- Joint Stock Company Concern Granit-Electron, manufacturer and supplier of radio electronic systems for Russian Navy
- JSC Rawenstvo, manufacturer of special equipment and navigational radar systems.
- Petrovsky Electromechanical Zavod Molot, producer of navigational, measuring, electromedical, control, and aeronautical instruments
- Joint Stock Company Severniy Press, producer of instruments and appliances for measuring, testing, and navigation
- JSC Saratovski Radiopribornyi Zavod, manufacturer of instruments for measuring electrical quantities
- Joint Stock Company Zavod Kulakova, producer of equipment and apparatus for automatic regulation and operation.
- Aktsionernoe Obshchestvo Ravenstvo-Service, repairer of submarine computers and radar systems
- Joint Stock Company Concern Sea Underwater Weapon Gidropribor, developer of marine underwater weapons
- Joint Stock Company Research and Design Bureau Institute Sea Thermal Engineering, researcher in the natural science and engineering fields
- Joint Stock Company Dagdizel Plant, manufacturer of electric motors, generators, weapons, and ammunition.
- Aktsionernoe Obshchestvo Verkhneufaleiskii Zavod Uralelement, engaged in activity related to electronic machinery
- Aktsionernoe Obshchestvo Elektrotyaga, engaged in activity related to electronic machinery
- JSC NPO High Precision Systems (High Precision Systems), state-owned holding company developing, producing, modernizing, and repairing weapons and military equipment
- NPK Tekhmash OAO (Tekhmash), state-owned holding company producing and supplying ammunition to Russian military
- Joint Stock Company Russian Helicopters (Russian Helicopters), state-owned holding company overseeing the design, manufacturing, testing, and maintenance of civilian and military helicopters
- Joint Stock Company National Helicopter Center Mil and Kamov, helicopter designer
- Joint Stock Company Reductor – Pm, producer of helicopter components
- Joint Stock Company Stupino Engineering Productive Enterprise, producer of helicopter components
- Joint Stock Company Kazan Helicopters, helicopter producer
- Rostov Helicopter Production Complex, helicopter producer
- Joint Stock Company Ulan-Ude Aviation Plant, helicopter producer
- Joint Stock Company Kumertau Aviation Production Enterprise, helicopter producer
- Joint Stock Company Helicopter Service Company, maintenance provider of Russian-made helicopters
- Joint Stock Company 150 Aircraft Repair Plant, helicopter repairer
- Joint Stock Company 356 Aircraft Repair Plant, helicopter repairer
- Joint-Stock Company 810 Aircraft Repair Plant, helicopter repairer
- Limited Liability Company Center of Purchases and Logistics of the Helicopter Industry, motor vehicle repairer
- International Helicopters Programs Limited Liability Company, involved in managing and supporting air transportation activities.
- Joint Stock Company Progress Arsenyev Aviation Company, transport manufacturer
- Obshchestvo S Ogranichennoi Otvetsvennostyu Vr-Resurs, special trade contractor and involved in real estate.
- Joint Stock Company Kronshtadt (Kronshtadt), private Russian defense contractor developing and manufacturing equipment, software, and integrated solutions for the unmanned aviation and defense industries of Russia
The US State Department also targeted several individuals, including 17 board members of PJSC Sovcombank, one of the largest privately-owned banks in Russia. A full list of the 17 board members can be found here.
In addition to the Sovcombank board members, the State Department also announced sanctions on Gennady Nikolayevich Timchenko and his companies and family members. Mr. Timchenko was previously sanctioned by the US over Russia’s annexation of Crimea in 2014.
Pursuant to these State Department designations, OFAC added the 17 board members, and the following assets and individuals to its SDN list:
- OOO Volga Group, privately held investment vehicle that manages assets on behalf of Mr. Timchenko
- OOO Transoil, entity owned or controlled, directly or indirectly, by Mr. Timchenko
- Ksenia Gennadevna Frank, official of OOO Transoil
- Gleb Sergeevich Frank, spouse of Ms. Frank
- Elena Petrovna Timchenko, spouse of Mr. Timchenko
- Natalya Browning, daughter of Mr. Timchenko
- Yacht Lena, property of Mr. Timchenko
Aside from the new designations, the Treasury Department also issued new guidance on how Russia-related sanctions impact gold transactions or persons involved in the gold market. In particular, any person “determined to be responsible for or complicit in, or to have directly or indirectly engaged or attempted to engage in, deceptive or structured transactions or dealings to circumvent US sanctions, including through the use of assets such as gold or other precious metals” may be sanctioned for such activity. This guidance comes as White House officials state they have heard suggestions that Russia is using gold reserves to support and stabilize its economy.
OFAC also issued four new General Licenses (GL):
- Russia-related No. 6A: permitting exports and reexports to, from, or transiting through Russia of agricultural commodities, medicine, medical devices, replacement parts and components for medical devices; treatment relating to COVID-19; and ongoing clinical trials and other medical research activities in effect prior to March 24, 2022
- Russia-related No. 17A: authorizing through March 25, 2022 transactions ordinarily incident and necessary to the import into the US of Russian-origin alcoholic beverages and non-industrial diamonds pursuant to a written contract or agreement entered into prior to March 11, 2022; authorizing transactions ordinarily incident and necessary to the import into the US of Russian-origin fish, seafood, and preparations thereof pursuant to a written contract or agreement entered into prior to March 11, 2022 through June 23, 2022
- Russia-related No. 20: authorizing transactions by US persons that are ordinarily incident and necessary to the official business of third-country diplomatic or consular missions in Russia
- Ukraine/Russia-related No. 25: permitting US news organizations and US persons employed by a news organization to engage in certain activities, including but not limited to hiring and paying staff, leasing space, and paying expenses ordinarily incident and necessary to journalistic activities, in the Donetsk and Luhansk regions.
The UK also imposed new sanctions targeting strategic industries, financial institutions, and Russian elites. Pursuant to this latest measure, all assets in the UK of the 65 specified individuals are frozen preventing any UK citizen or business in the UK from dealing with any funds or any UK-based economic resources which are owned, held, or controlled by a designated person.
A representative list of the new individuals sanctioned by the UK includes:
- Alfa-Bank JSC, one of Russia’s largest private banks
- Alrosa, world’s largest diamond mining company based in Russia
- The Wagner Group, private military firm with ties to the Russian military has been sanctioned
- Russian Railways, state-owned railway company
- Kronshtadt, defense company producing Russian drones
- Eugene Markovich Shvidler, businessman with close links to Roman Abramovich
- Oleg Tinkov, founder of Tinkoff Bank
- Herman Gref, CEO of Sberbank
- Oleg E Aksyutin, Deputy Chairman of the Management Board at Gazprom PJSC
- Didier Casimiro, First Vice President of Rosneft
- Zeljko Runje, Deputy Chairman of the Management Board and First Vice President for Oil, Gas, and Offshore Business Development of Rosneft
- Galina Danilchenko, individual installed as “mayor” of Melitopol, Ukraine
- Polina Kovaleva, stepdaughter of Russian Foreign Minister, Sergey Lavrov
Meanwhile, a day prior to the March 24 meeting in Brussels, Canada imposed new sanctions on 160 members of the Russian Federal Council, the upper house of Russia’s parliament. This latest addition means all members of the Council are now subject to Canada’s sanctions regime. Any person in Canada or Canadian living abroad is prohibited from engaging in the following activities with a sanctioned individual:
- dealing in any property, wherever situated, held by or on behalf of a designated person
- entering into or facilitating, directly or indirectly, any transaction related to such a dealing
- providing any financial or other related services in respect of such a dealing
- making any goods, wherever situated, available to a designated person
- providing any financial or related service to, or for the benefit of, a designated person
In addition to the new sanctions, Canada is set to issue new export restrictions on certain Canada-origin goods and technologies to Russia.
International Sanctions Evasion Initiative
In addition to new sanction measures, the US and its allies announced a new international sanctions evasion initiative aimed at information sharing and coordinating enforcement measures to stymie evasion methods. This international effort follows the establishment of a US interagency task force, KleptoCapture, dedicated to tracking down and seizing sanctioned assets as well as investigating and prosecuting sanctions violations.
We will continue to monitor the sanctions and export control restrictions as they emerge.
© Arnold & Porter Kaye Scholer LLP 2022 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.