US, EU and UK Designate Putin and Lavrov; US Expands Sanctions against Russia and Belarus; Switzerland Adopts Sanctions to Address Russian Actions in Ukraine
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On 25 February 2022, the US, EU and UK imposed asset freeze restrictions/blocking sanctions on Russian President Vladimir Putin and Foreign Minister Sergei Victorovich Lavrov, and Switzerland adopted sanctions against Russia. A day earlier, the US announced sanctions on the Russian financial system and individuals involved in the Russian government and financial sector. The US also announced sanctions on individuals and entities in the Belarusian finance and defense sectors and the imposition of new export control restrictions related to Russia.
US, EU and UK designate President Putin and Foreign Minister Lavrov
On 25 February 2022, the US, EU and UK added Russian President Vladimir Putin and Russian Foreign Minister Sergei Victorovich Lavrov to their respective asset freeze lists/SDN List. The US also added Valery Gerasimov, the Chief of the General Staff of the Armed Forces of Russia, as well as Sergei Shoigu, the Russian Minister of Defense, to the SDN List.
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 may not be dealt in. Any entity in which one or more blocked persons owns in the aggregate, directly or indirectly, a 50 percent or greater ownership interest is itself blocked. US persons may not engage in any dealings, directly or indirectly, with blocked persons or with any property in which blocked persons have any interest, absent an applicable license or exemption.
Under the EU and UK Asset Freezes, all funds and economic resources belonging to, owned, held or controlled by asset freeze parties must be frozen. Further, no person under EU or UK sanctions jurisdiction may make available funds or economic resources, directly or indirectly, to, or for the benefit of, an asset freeze party. The Asset Freeze can also extends to third parties "owned or controlled" by an asset freeze party.
US adopts Additional Sanctions Measures on Russia and Belarus
US Restricts Sberbank's Ability to Use Correspondent and Payable-Through Accounts
On 24 February 2022, the US announced sanctions on Russia's largest financial institution, Sberbank. Specifically, OFAC imposed, with a delayed effective date, correspondent and payable-through account sanctions on Sberbank and 25 of its subsidiaries and a prohibition against US financial institutions processing transactions involving Sberbank. Beginning at 12:01am EDT 26 March 2022, these sanctions prohibit US financial institutions from opening or maintaining any Sberbank correspondent or payable-through accounts and to reject any transactions involving Sberbank or its foreign financial institution subsidiaries, starting 12:01am EDT 26 March 2022. OFAC implemented these measures by issuing Directive 2 under EO 14024.1 All foreign financial institutions owned 50 percent or more, directly or indirectly, by Sberbank are covered by the prohibitions of Directive 2, even if not identified on OFAC's List of Foreign Financial Institutions Subject to Correspondent Account or Payable-Through Account Sanctions ("CAPTA List"). For entities outside of this annex list that may in the future be determined to be subject to the same prohibitions, such closures or transaction rejections are required as of 12:01am EDT 30 days after the determination.
US Designates VTB and Three Other Financial Institutions to the SDN List
The US has imposed full blocking sanctions on VTB Bank, adding it and 20 of its subsidiaries to the SDN list. These subsidiaries include banks, holding companies, and other financial companies located in Russia and eight other countries: Angola, Armenia, Azerbaijan, Belarus, Georgia, Germany, Kazakhstan, and Vietnam. The US also imposed full blocking sanctions on Otkritie, Novikom, and Sovcombank, along with various subsidiaries.
By operation of OFAC's 50 Percent Rule, any entities that are owned, directly or indirectly, 50 percent or more by one or more SDNs, are also automatically blocked, regardless of whether they appear on the SDN List.
US Imposes Debt and Equity-Related Restrictions
OFAC imposed debt and equity restrictions on thirteen Russian entities. New Directive 3 under EO 14024, "Prohibitions Related to New Debt and Equity of Certain Russia-related Entities," ("Russia-related Entities Directive") prohibits any transactions by US persons, or within the United States, in any new debt of these entities that exceeds 14 days' maturity. This Directive also prohibits transactions or dealings in new equity of such entities.2 New debt and new equity include debt and equity issued on or after 12:01 a.m. eastern daylight time on 26 March 2022. A similar 30-day delay will apply to entities made subject to Directive 3 in the future.
OFAC added the thirteen Directive 3 entities to the Non-SDN Menu-Based Sanctions List (NS-MBS List). The listed entities span the financial, telecommunications, oil and gas, mining, shipping, and hydroelectricity industries and include, among others, Sberbank, Gazprom (the largest natural gas company in the world), and Transneft, which manages Russian petroleum pipelines.
US Imposes Sanctions on Individuals
OFAC has also added the following individuals from the Russian government and financial sector to the SDN list:
Sergei Sergeevich Ivanov, Special Presidential Representative for Environmental Protection, Ecology, and Transport, was designated and his father Sergei Borisovich Ivanov was re-designated.
- Andrey Patrushev, Secretary of the Russian Federation Security Council and former leader at Gazprom Neft was designated and his father Nikolai Patrushev was redesignated.
- Ivan Igorevich Sechin, a deputy head of a department at Rosneft, was designated and his father, Igor Ivanovich Sechin, Chairman of the Management Board, and Deputy Chairman of the Board of Directors of Rosneft, was redesignated.
- Alexander Aleksandrovich Vedyakhin, First Deputy Chairman of the Executive Board of Sberbank, was designated.
- Andrey Sergeyevich Puchkov, VTB Bank executive, was designated, along with two companies related to him: Limited Liability Company Atlant S and Limited Liability Company Inspira Invest A.
- Yuriy Alekseyevich Soloviev, VTB Bank executive, was designated along with his wife, Galina Olegovna Ulyutina.
OFAC Russia-Related General Licenses
OFAC issued eight general licenses in connection with the Russia-related measures:
- General License 5 authorizes (with conditions) transactions for the conduct of the official business of a number of international organizations, including the International Committee of the Red Cross and the International Federation of Red Cross and Red Crescent Societies.3
- General License 6 authorizes (with conditions) transactions ordinarily incident and necessary to (1) exports of agricultural commodities, medicine, medical devices, replacement parts and components for medical devices, or software updates for medical devices to, from, or transiting Russia, and (2) the prevention, diagnosis, or treatment of COVID-19.4
- General License 7 authorizes (with conditions) transactions related to overflights of, emergency landings in, and air ambulance services to individuals in Russia.5
- General License 8 authorizes (with conditions) transactions related to energy through 12:01 a.m. EDT 24 June 2022 involving certain of the newly-sanctioned banks.6-7
- General License 9 authorizes (with conditions) certain transactions related to certain dealings in debt or equity involving certain of the newly-sanctioned banks.8
- General License 10 authorizes (with conditions) certain transactions related to certain derivatives contracts involving certain of the newly-sanctioned banks.9
- General License 11 authorizes (with conditions) certain wind-down transactions involving certain newly-blocked persons, until 12:01 a.m. EDT, 26 March 2022.10
- General License 12 authorizes (with conditions) US persons to reject instead of block unauthorized transactions involving certain newly-blocked persons, through 12:01 a.m. EDT, 26 March 2022.11
US Imposes Sanctions Related to Belarus
The US also imposed blocking sanctions on 24 Belarusian individuals and entities including:
- Belarussian Bank of Development and Reconstruction Belinvestbank Joint Stock Company (Belinvestbank) and two of its related companies, real estate firm Limited Liability Company Belinvest-Engineering and financial leasing company CJSC Belbizneslizing.
- Bank Dabrabyt Joint-Stock Company (Bank Dabrabyt).
- Several entities and individuals in the Belarusian defense and related materiel and transportation sectors.
- Government officials including Belarusian Minister of Defense Viktor Gennadievich Khrenin and State Secretary of the Security Council of Belarus Aleksandr Grigorievich Volfovich.
OFAC also issued two general licenses related to Belarus. General License 6 authorizes transactions for the conduct of the official business of the US Government.12 General License 7 authorizes transactions for the conduct of the official business of certain international organizations, including the UN, the International Committee of the Red Cross, and the International Federation of Red Cross and Red Crescent Societies.13
OFAC has also issued new and updated FAQs for the newest round of sanctions on both Russia and Belarus.14
US Russia-Related Export Controls
On 24 February 2022, the US Department of Commerce's Bureau of Industry and Security ("BIS") released a final rule (effective immediately), which imposes new restrictions on exports to Russia and to certain Russian end users.
Foreign Direct Product Rules
BIS announced two new Foreign Direct Product ("FDP") rules: (1) the general Russia FDP rule, and (2) the Russia Military End User FDP rule. The FDP rules make items produced outside of the United States that are the direct product of US-origin software or technology or the direct product of a plant or equipment made with US software or technology "subject to the EAR" when:
- In the case of the general Russia FDP rule, (a) the underlying US-origin software or technology is controlled on the Commerce Control List ("CCL") under Categories 3 through 9 of the CCL, (b) the item is specified in any export control classification number ("ECCN") on the CCL (i.e. is not EAR99); and (c) there is knowledge that the item is destined for Russia or for incorporation into a product made in or destined for Russia that is specified on the CCL;
- In the case of the Russia Military End User FDP rule, (x) the underlying technology or software is subject to the EAR; and (y) the exporter has knowledge that a party on the Entity List with a footnote 3 designation (currently 49 parties) is a party to the transaction. There are no license exceptions for the Russia MEU FDP rule unless stated specifically in that party's entry on the Entity List.
Other Export Controls
In addition to the new FDP rules, the final rule also imposes: (1) comprehensive export restrictions for the so-called Donetsk People's Republic (DNR) and Luhansk People's Republic (LNR) regions of Ukraine; (2) CCL-based license requirements for products exported/reexported/transferred to Russia (including new license requirements related to the energy sector); (3) a license review policy of denial applicable to all license requirements added pursuant to the final rule, with limited exceptions; (4) restrictions on the use of EAR license exceptions for exports/reexports/in-country transfers to Russia; and (5) the expansion of the existing Russia "military end use" and "military end user" control scope to include virtually all items on the EAR.
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 24 February, 2022. A second savings clause allows the same for shipments affected only by the new Russia FDP rule until 26 March 2022.
Switzerland adopts sanctions against Russia
On 25 February 2022, Switzerland reinforced its sanctions (in force since 2014) in relation to the situation in Ukraine, by extending the prohibition of new business relationships to 363 additional individuals and 4 additional corporate entities that have recently been targeted by the EU sanctions.
In practice, financial intermediaries in Switzerland will be barred from entering into any new business relationships with these targeted individuals and entities, as well as with any individual or entity acting on their behalf or with any entity owned or control by them. Financial intermediaries will also have to disclose to the Swiss authorities any existing relationships with targeted individuals or entities.
Switzerland is considering further sanctions to prevent the circumvention via the Swiss territory of the EU sanctions.
1 Full text of Directive 2 is here.
2 Full text of Directive 3 is here.
3 See full text of General License 5 here.
4 See full text of General License 6 here.
5 See full text of General License 7 here.
6 "Related to energy" means the extraction, production, refinement, liquefaction, gasification, regasification, conversion, enrichment, fabrication, transport, or purchase of petroleum, including crude oil, lease condensates, unfinished oils, natural gas liquids, petroleum products, natural gas, or other products capable of producing energy, such as coal, wood, or agricultural products used to manufacture biofuels, or uranium in any form, as well as the development, production, generation, transmission, or exchange of power, through any means, including nuclear, thermal, and renewable energy sources.
7 See full text of General License 8 here.
8 See full text of General License 9 here.
9 See full text of General License 10 here.
10 See full text of General License 11 here.
11 See full text of General License 12 here.
12 See full text of Belarus General License 6 here.
13 See full text of Belarus General License 7 here.
14 See a list of new FAQs here. See a list of updated FAQs here.
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