US Begins Second Round of Russia Sanctions, Adds Substantial New Export Controls
The U.S. is imposing additional sanctions and new export controls following Russia's "further invasion of Ukraine," as promised by President Biden in his Feb. 22 speech (see 2202220003). The sanctions cover financial restrictions on Russian state-owned enterprises, banks, and individuals, while the export controls set restrictions on a variety of high-tech products. The new measures are part of an "unprecedented level of multilateral cooperation" according to the White House.
The Bureau of Industry and Security implemented license requirements on all Export Control Classification Numbers in categories 3-9 of the Commerce Control list, 58 of which were previously not controlled to Russia. The items include semiconductors, computers, telecommunications, information security equipment, lasers, and sensors, according to a BIS fact sheet. BIS is also adding 49 Russian military end users to the Entity List. BIS is also created two new foreign direct product rules for Russia including a more restrictive foreign direct product rule for military end users that will require a license if an entity with a footnote 3 designation and establishes a control over foreign-produced items that are direct or indirect products of U.S.-origin or technology.
Applications for the export, reexport, or transfer (in-country) of items that require a license for Russia will be reviewed under a policy of denial. The categories reviewed on a case-by-case basis are related to flight safety, maritime safety, humanitarian needs, government space cooperation, civil telecommunications infrastructure, government-to-government activities, and to support limited operations of partner-country companies in Russia.
BIS said that, "these measures … reflect momentous cooperation among the United States, the European Union (EU), Japan, Australia, United Kingdom, Canada, and New Zealand, with more expected to join, in aligning on export control policies and requirements. If necessary, based upon any subsequent destabilizing actions by Russia, the U.S. government will follow up in the days to come with additional stringent economic measures.”
The Treasury Department's Office of Foreign Assets Control is also further sanctioning Russia. In a press release, OFAC announced "unprecedented & expansive sanctions" that target "core infrastructure of the Russian financial system" including all of Russia's largest banks and that ability of state-owned and private entities to raise funds from the global financial system. The actions target nearly 80 percent of all banking assets in Russia that OFAC promises "will have a deep and long-lasting effect on the Russian economy and financial system."
The sanctions target Russia's two largest financial institutions. OFAC imposed correspondent and payable-through account sanctions on Sberbank and full blocking sanctions on VTB Bank. In addition, blocking sanctions have been implemented on three additional financial institutions that "play significant roles in the Russian economy," Otkritie, Novikom, and Sovcom. Russia-related Directive 2 covers these financial sanctions.
OFAC expanded Russia-related debt and equity restrictions to additional key aspects of Russia’s economy under Directive 3, “Prohibitions Related to New Debt and Equity of Certain Russia-related Entities” to prohibit transactions and dealings by U.S. persons or within the United States in new debt and equity of 13 major state-owned firms critical to the Russian economy.
Sanctions were also issued on Belarusian individuals and entities due to Belarus’s "support" and "facilitation" of the Russian invasion of Ukraine. OFAC announced in a press release that two significant state-owned banks, Belinvestbank and Bank Dabrabyt, and numerous defense industries and close associates of President Lukashenko. OFAC also notes that Treasury’s Russia-related actions will also have significant downstream effects in Belarus.
Along with the sanctions package, OFAC released Russia-related General Licenses 5, 6, 7, 8, 9, 10, 11 and 12 along with Belarus General Licenses 6 and 7. In addition, OFAC has published new Frequently Asked Questions and updated several Frequently Asked Questions.