US, UK and European Union Extend Trade Restrictions on Russia and Belarus
On March 11, 2022, the US imposed additional sanctions and import and export restrictions on Russia and Belarus. President Biden issued an executive order (EO) describing the US’s latest economic response to Russia’s continued activities in Ukraine. Meanwhile, the Treasury Department and the Commerce Department took action to implement the new measures, including an import ban on key Russian products, an export ban of US-origin luxury goods, and new designations to the Treasury Department’s Office of Foreign Assets Control (OFAC) Specially Designated Nationals (SDN) List.
Pursuant to the EO, the following Russian products are barred from import into the United States:
- Fish, seafood, and preparations thereof;
- Alcoholic beverages;
- Non-industrial diamonds; (collectively “banned items”) and
- Any other products of Russian Federation origin as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State and the Secretary of Commerce.
The EO also prohibits US persons from engaging in the following activities:
- Exporting, reexporting, selling, or supplying luxury goods directly or indirectly to Russia;
- Exporting, reexporting, selling, or supplying US dollar-denominated banknotes directly or indirectly to the Russian government or to any person in Russia;
- Investing in any sector of the Russian economy as determined by the Secretary of the Treasury, in consultation with the Secretary of State and the Secretary of Commerce; and
- Approving, financing, facilitating, or guaranteeing a transaction by a foreign person if that transaction would be prohibited under the EO.
Finally, the EO prohibits any transaction that evades or avoids, "causes" a violation of, or attempts to violate any of the above prohibited activities.
The EO defines the Russian government broadly to include "any person owned, controlled, or directed by, or acting for or on behalf of," the Russian government.
Export Bans and New License Requirements
In furtherance of the EO, the Commerce Department’s Bureau of Industry and Security (BIS) published new rules under the Export Administration Regulations (EAR) aimed at controlling the export of certain US-origin items to Russia and Belarus.
US persons are now prohibited from exporting, reexporting, or transferring (in-country) certain luxury goods subject to the EAR to or within Russia or Belarus without a license. Additionally, licenses are now required for the export, reexport, or transfer (in-country) of a luxury good subject to the EAR worldwide if destined to any Russian or Belarusian individual designated on the SDN List pursuant to EO 14024, EO 13660, EO 13661, EO 13662, EO 13685, and EO 14038.
A new supplement to Part 746 of the EAR was added to define luxury goods, which broadly includes certain beer, wine, and other spirits, tobacco products, perfume, make-up and other cosmetics, clothing items, jewelry, textiles, sporting equipment, vehicles, and antique goods. A full list can be found here.
All such licenses will be reviewed under a policy of denial. However, BIS did outline two license exceptions that may be available:
- License Exception BAG (Baggage), for baggage, excluding firearms and ammunition; and
- License Exception AVS (Aircraft, Vessels, and Spacecraft), for saloon stores and supplies, excluding any saloon stores and supplies for aircraft registered in, owned, or controlled by, or under charter or lease by Russia or Belarus or a national of Russia or Belarus.
Meanwhile, OFAC imposed full blocking sanctions on several new Russian elites, political leaders, and their families for their involvement in or support of the Russian government. All of the following have been added to the SDN List:
- Tatiana Aleksandrovna Navka, wife of Dmitriy Sergeevich Peskov
- Nikolay Peskov, child of Mr. Peskov
- Elizaveta Dmitriyevna Peskova, child of Mr. Peskov
- Viktor Feliksovich Vekselberg, prominent Russian businessman
- P4-MIS, an aircraft owed by Viktor Feliksovich Vekselberg
- Tango, yacht owned by Mr. Vekselberg
- Olga Konstantinovna Dergunova, member of VTB Bank’s management board
- Vadim Valerievich Kulik, member of VTB Bank’s management board
- Valerii Vasilyevich Lukyanenko, member of VTB Bank’s management board
- Anatolii Yuryevich Pechatnikov, member of VTB Bank’s management board
- Natalia Germanovna Dirks, member of VTB Bank’s management board
- Maxim Dmitrievich Kondratenko, member of VTB Bank’s management board
- Erkin Rakhmatovich Norov, member of VTB Bank’s management board
- Svyatoslav Evgenievich Ostrovsky, member of VTB Bank’s management board
- Dmitrii Vasilyevich Pyanov, member of VTB Bank’s management board
- Yuriy Nikolaevich Andresov, member of VTB Bank’s management board
- Vyacheslav Victorovich Volodin, speaker of the Russian State Duma
- Yuriy Vyacheslavovich Afonin, member of the Russian State Duma
- Yevgeniy Ivanovich Bessonov, member of the Russian State Duma
- Leonid Ivanovich Kalashnikov, member of the Russian State Duma
- Vladimir Ivanovich Kashin, member of the Russian State Duma
- Nikolay Vasilievich Kolomeitsev, member of the Russian State Duma
- Aleksey Vladimirovich Kurinniy, member of the Russian State Duma
- Ivan Ivanovich Melnikov, member of the Russian State Duma
- Dmitriy Georgievich Novikov, member of the Russian State Duma
- Nikolay Ivanovich Osadchiy, member of the Russian State Duma
- Kazbek Kutsukovich Taysaev, member of the Russian State Duma
- Gennady Andreyevich Zyuganov, member of the Russian State Duma
US persons, including US financial institutions, are prohibited generally from engaging in any transactions with SDNs and are required to block (i.e., freeze) any property or interests in property belonging to SDNs.
OFAC also issued several General Licenses (GL) including:
- Russia-related General License No. 17 - authorizing winddown of the activities prohibited by the EO through March 25, 2022, if pursuant to a written contract or agreement made prior to March 11, 2022;
- Russia-related General License No. 18 - authorizing personal remittances of US dollar-denominated noncommercial, personal remittances from a US person to an individual in Russia or from a US person in Russia;
- Russia-related General License No. 19 - authorizing personal maintenance transactions for US person in Russia, including with respect to housing expenses, goods and services for personal use, taxes and fees, and permits, licenses, or public utility services; and
- Ukraine-related General License No. 23 - authorizing certain activities undertaken by nongovernmental organizations operating in the Donetsk and the Luhansk regions of Ukraine.
OFAC issued eight new Frequently Asked Questions (FAQs) addressing the EO:
- FAQ 1,021, emphasizing that sanctions imposed under the EO and OFAC's other expansive Russia-related sanctions actions apply to virtual currency, including virtual currency exchanges, virtual wallet hosts, and other service providers, such as those that provide nested services for foreign exchanges;
- FAQ 1,022, confirming activities prohibited under the EO;
- FAQ 1,023, confirming the scope of GL 17;
- FAQ 1,024, permitting US persons to sell or re-direct shipments to non-US destinations of items banned from import into the United States;
- FAQ 1,025, confirming that the "agricultural commodities" exception set out in GL 6 continues to apply under the EO;
- FAQ 1,026, noting that non-US persons importing items prohibited for import into the US are not exposed to sanctions for continuing import activities in non-US jurisdictions;
- FAQ 1,027, defining the items barred from import into the United States under the EO; and
- FAQ 1,028, clarifying the scope of GL 18, including that GL 18 does not does not authorize US financial institutions to process transactions for the provision of US dollar-denominated banknotes to foreign financial institutions for further distribution or supply to the Russian government or any person located in Russia.
Finally, OFAC updated FAQ 1,007 to account for activities authorized by the GLs issued under the new EO.
UK and EU Measures
In addition to the US, the United Kingdom (UK) and the European Union (EU) have also continued to update their sanction regimes, moving generally in parallel to the US but with some differences. Therefore, individuals and entities may be designated in one or multiple regimes.
- UK - new sanctions on Russian lawmakers, oligarchs, and entities, including 386 members of the Duma and Roman Abramovich; export bans on UK-origin aviation or space-related items and technology to Russia.
- EU - new restrictions on Society for Worldwide Interbank Financial Telecommunication (SWIFT) services to certain Belarusian banks and on providing public financing for trade with and investment in Belarus; export restrictions on maritime navigation and radio communication technology.
These latest actions come after the US and the other members of the Group of Seven (G7) published a joint statement announcing intentions to implement further restrictions to isolate Russia from their economies and the international financial system. In particular, the US and other Western allies are also planning on limiting Russia’s ability to obtain financing from multilateral financial institutions, such as the International Monetary Fund and the World Bank. The White House also indicated it will look to suspend normal trade relations with Russia by working with Congress to remove Russia’s "Most-Favoured-Nation" status with the US. Such a move would place Russia alongside Cuba and North Korea and allow the US to raise tariffs on Russian goods.
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.