US Announces Energy Import Ban, and Further Sanctions and Export Controls on Russia and Belarus; Restricts Russian Aircraft from US Airspace
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Between March 2 and 8, 2022, the US undertook a number of measures escalating the sanctions against Russia and Belarus. The US banned the imports of certain Russian energy products, prohibited new investment in the Russian energy sector, blocked a number of individuals and entities, expanded Russian oil industry export controls, expanded export controls applied to Belarus, and restricted Russian flight operations in US airspace. The US also added more Russian entities to the Entity List and excluded South Korea from the expanded Russian export controls applicable to foreign-made items.
US Bans Imports of Russian Oil, Liquefied Natural Gas, and Coal
On March 8, 2022, the US President issued an Executive Order ("EO") which prohibits the importation of the following products of Russian Federation origin1: crude oil, petroleum, petroleum fuels, oils, and products of their distillation, liquefied natural gas, coal and coal products.
According to FAQs issued by OFAC, the EO does not prohibit the importation of other forms of energy, and does not prohibit imports of non-Russian Federation origin energy products, even if such items transit through or depart from the Russian Federation.2 OFAC further indicated that the EO does not prohibit transactions such as the unwinding of contracts to comply with the import ban, or transactions to sell or re-direct shipments laden on or after March 8, 2022, previously destined for the US.3 Additionally, General License 8A, authorizing certain transactions "related to energy," remains valid but does not authorize transactions prohibited by the EO.4 OFAC further clarified that the EO does not prohibit dealing in the crude oil of the Caspian Pipeline Consortium.5
US Prohibits Financing and Facilitation of Russian Energy Production
In addition to the import ban, the March 8 EO also prohibited (1) new investment by US persons in the energy sector in the Russian Federation; and (2) any approval, financing, facilitation or guarantee by US persons, wherever located, of transactions by foreign persons where the transactions would be prohibited if performed by a US person or within the United States. According to the FAQ issued by OFAC, "New investment in the energy sector in the Russian Federation" means "a transaction that constitutes a commitment or contribution of funds or other assets for, or a loan or other extension of credit to, new energy sector activities (not including maintenance or repair) located or occurring in the Russian Federation beginning on or after March 8, 2022."6
US Adds Numerous Russian Individuals, Defense Entities, and Media Outlets to the SDN List
On March 3, 2022, the US added 22 defense-related firms and 6 media outlets to the List of Specially Designated Nationals and Blocked Persons ("SDN List").7 OFAC also added 26 Russian businessmen, their family members and certain of their entities to the SDN List, including:
- Alisher Burhanovich Usmanov, one of Russia's wealthiest billionaires, and a superyacht and aircraft in which he has an interest;
- Nikolay Petrovich Tokarev, president of Transneft, his wife and daughter, and 3 companies related to them.
- Yevgeniy Prigozhin, financier of Russia's Internet Research Agency, certain family members, and 4 entities related to him;
- Igor Ivanovich Shuvalov, his wife and children, along with 7 entities related to them.
All property and interests in property of persons on the SDN List that are located in the United States or within the possession or control of a US person, wherever located, are blocked, and US persons may not engage in any dealings, directly or indirectly, with them, absent an applicable license or exemption. Any entity in which one or more blocked persons owns in the aggregate, directly or indirectly, a 50 percent or greater interest is itself blocked.
OFAC Russia-Related General Licenses
OFAC further issued or amended five general licenses in connection with the Russia-related sanctions:
- General License 9A replaces and supersedes General License 9 to further authorize (with conditions) transactions prohibited by Directive 4 under EO 14024 that are ordinarily incident and necessary to the receipt of interest, dividend, or maturity payments in connection with debt or equity issued before March 1, 2022, of Russia's Central Bank, National Wealth Fund, or Ministry of Finance. Transactions are authorized through 12:01 a.m. EDT May 25, 2022. Any divestment or transfer of covered debt or equity must be to a non-US, non-blocked person. General License 9A does not authorize any debit to an account on the books of a US financial institution of Russia's Central Bank, National Wealth Fund, or Ministry of Finance.8
- General License 10A replaces and supersedes General License 10 to further authorize (with conditions) transactions prohibited by Directive 4 under EO 14024 that are ordinarily incident and necessary to the wind down of derivative contracts, repurchase agreements, or reverse repurchase agreements entered into prior to 12:01 a.m. EDT March 1, 2022, that include Russia's Central Bank, National Wealth Fund, or Ministry of Finance. Transactions are authorized through 12:01 a.m. EDT May 25, 2022. Any payments to a blocked person must be made into a blocked account. General License 10A does not authorize any debit to an account on the books of a US financial institution of Russia's Central Bank, National Wealth Fund, or Ministry of Finance.9
- General License 13 authorizes (with conditions) the payment by US persons of taxes, fees, and import duties, and the purchase and receipt of permits, licenses, registrations, or certifications, to the extent such transactions are prohibited by Directive 4 under EO 14024, provided that they are ordinarily incident and necessary to such persons' day-to-day operations in Russia, through 12:01 a.m. EDT June 24, 2022. General License 13 does not authorize any debit to an account on the books of a US financial institution of Russia's Central Bank, National Wealth Fund, or Ministry of Finance.10
- General License 14 authorizes (with conditions) transactions involving Russia's Central Bank, National Wealth Fund, or Ministry of Finance where those entities' sole function in the transaction is to act as an operator of a clearing and settlement system. General License 14 does not authorize any debit to an account on the books of a US financial institution of Russia's Central Bank, National Wealth Fund, or Ministry of Finance.11
- General License 15 authorizes (with conditions) transactions involving any entity owned 50 percent or more, directly or indirectly, by Alisher Burhanovich Usmanov that is not listed on the SDN List (collectively, the "blocked Usmanov entities"). That is, transactions with the blocked Usmanov entities—which are otherwise prohibited—are authorized under General License 15, unless specifically designated on the SDN List. General License 15 also authorizes debits to accounts on the books of a US financial institution of the blocked Usmnanov entities, and unblocks the property and interests in property of the blocked Usmanov entities.12
- General License 16 temporarily authorizes (with conditions) energy imports pursuant to written contracts or written agreements entered into prior to 8 March 2022. These imports are authorized through 12:01 a.m. EDT, April 22, 2022.
OFAC has also issued new and updated FAQs as new rounds of sanctions on Russia are introduced.13
The US Federal Aviation Administration ("FAA") issued a Notice to Air Mission ("NOTAM") prohibiting Russian flight operations in the territorial airspace of the United States. The prohibition includes (regardless of the state of registry of the aircraft) all Russian air carriers and commercial operators, all aircraft registered to Russia, and all Russian state aircraft. All aircraft owned, chartered, leased, operated or controlled by, for or for the benefit of, a person who is a Russian citizen are prohibited from operating to, from, within, or through US territorial airspace, except for (1) authorized humanitarian or search-and-rescue operations, (2) state aircraft granted diplomatic clearance and (3) aircraft experiencing in-flight emergencies.14
In conjunction with the FAA measure above, the US Department of Commerce's Bureau of Industry and Security ("BIS") also amended the availability of License Exception AVS for Russia and Belarus. License Exception AVS authorizes the departure from the US of foreign registry civil aircraft. In its March 2, 2022 rule, BIS limited the application of License Exception AVS to exclude any aircraft registered in, owned, or controlled by, or chartered or leased by Russia or a Russian national. As a result, any aircraft registered in, owned, or controlled by, or under charter or lease by Russia or a Russian national would require a license for export, reexport or in-country transfer from the United States.
Expanded Export Controls Targeting Russia's Oil Refining Industry
On March 3, 2022, BIS expanded the scope of Russian industry sector sanctions by adding a new general prohibition that will apply to items described in additional customs codes (Harmonized Tariff Schedule (HTS)-6 codes and Schedule B numbers). The rule prohibits, without a license, all exports, reexports, and transfers (in-country) to or within Russia of certain items (listed in new supplement no. 4 to part 746) that are needed for oil refining. In contrast to the existing Russia industry sector controls, the new rule does not include a "knowledge" requirement. Thus, a person involved in the export, reexport, or transfer to or within Russia of the restricted items must submit a license application whether or not they have "knowledge" that the item(s) would be used directly or indirectly in the Russian oil refinery sector. License applications will be reviewed under a policy of denial, except for items that are necessary for health and safety, which will be reviewed on a case-by-case basis.
US Belarus-Related Export Controls
On March 2, 2022, BIS extended the export controls put in place on February 24, 2022 for Russia to Belarus, citing "Belarus's substantial enabling of Russia's further invasion of Ukraine."15 As with the Russia controls, the Belarus rule primarily targets items that support Belarusian defense, aerospace, and maritime industries and also seeks to prevent items being diverted to Russia through Belarus. Generally, the new rule imposes the following restrictions:
- New Commerce Control List (CCL)-based license requirements for Belarus that mirror those on Russia;
- The two foreign "direct product" rules (FDP rules) that were specific to Russia and Russian "military end users" are now applicable to Belarus and Belarusian "military end users;"
- Addition of Belarus to "military end use" and "military end user" controls and imposition of the same control scope as for Russia to include virtually all items on the EAR, and the addition of two new Belarusian entities, including the including the Ministry of Defense of Belarus, to the Entity List as "military end users;"
- A new license requirement for items controlled for reasons of nuclear nonproliferation and the removal of Belarus from the Nuclear Supplies Group (Country Group A:4) under the EAR;
- A license review policy of denial applicable to all of the license requirements on Belarus that are being added in this rule; and
- Significantly restricted EAR license exceptions.
The rule includes a savings clause that permits certain exports, reexports, or transfers that did not require an export license before the rule, to proceed without a license, if the shipments were en-route aboard a carrier to a port of export on March 2, 2022. A second savings clause allows the same for shipments affected only by the new Russia and Belarus FDP rules until March 26, 2022.
Additions to the Entity List Related to Sanctions against Russia
On March 3, 2022, BIS added 91 new parties in countries to the Commerce Department's entity list. These entities are located in Russia (81), United Kingdom (3), Estonia (3), Spain (2), Malta (2), Kazakhstan (1), Latvia (1), Belize (1), Singapore (1), and Slovakia (1). For all 91 entities, BIS will require a license for all items subject to the EAR. BIS will review license applications under a policy of denial, except on a case-by-case basis for five of the entities for exports involving US Government supported space programs. No license exceptions are available for exports, reexports, or transfers (in country) to the entities added to the Entity List in this rule.
Addition of South Korea to Russia and Belarus Exclusion List
On March 4, 2022, BIS added South Korea to a list of countries excluded from certain license requirements associated with the new Russia and Belarus restrictions ("Russia and Belarus Exclusion List"). The list, found in Supplement No. 3 to Part 746, excludes listed countries from the requirement to apply the new Russia and Belarus specific FDP rules. It also excuses those countries from applying the expanded CCL controls when calculating the value of US-origin controlled content for de minimis purposes, if certain conditions are met. The list consists of countries, which have committed to implementing substantially similar export controls on Russia and Belarus in their domestic laws. Countries added to this list may receive either full or partial exclusions. South Korea was added with a "full" designation.
1 According to an FAQ, issue by OFAC, "Russian Federation origin" means "goods produced, manufactured, extracted, or processed in the Russian Federation, excluding any Russian Federation origin good that has been incorporated or substantially transformed into a foreign-made product."
2 See FAQ 1014 here
3 See FAQ 1015 here
4 See FAQ 1017 here
5 See FAQ 1020 here
6 See FAQ 1019 here
7 Full text is here
8 See full text of General License 9A here.
9 See full text of General License 10A here.
10 See full text of General License 13 here.
11 See full text of General License 14 here.
12 See full text of General License 15 here.
13 https://home.treasury.gov/policy-issues/financial-sanctions/faq/updated/2022-03-02; https://home.treasury.gov/policy-issues/financial-sanctions/faq/added/2022-03-04.
14 Federal Aviation Administration, Notam/Special Security Instructions (March 2, 2022), available here.
15 US Department of Commerce, Press Release (March 2, 2022), available here.
16 See full text of new Rule here.
17 Note: Entities with locations in more than one country may be listed under each country. In this case, there are 96 entries created under ten countries for 91 entities.
18 See full text of new Rule here.
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