• On the second anniversary of the start of the war in Ukraine and in response to the death of activist Aleksey Navalny in a Russian prison, the United States, European Union, and United Kingdom, along with Australia and Canada, imposed additional sanctions on hundreds of individuals and entities connected to Russia.
• Persons engaged in Russia’s finance, transportation, mining, and energy sectors were specifically targeted by the sanctions.
• The U.S. actions do not implement new types of measures but instead target hundreds of individuals and entities with blocking sanctions and export restrictions and are focused on targeting entities helping Russia evade sanctions. The U.S. Government also issued a stark warning to those continuing to do business in Russia, highlighting the many risks involved.
• The EU has imposed asset freezes on over 100 individuals and over 80 entities, along with extending export restrictions to entities from third countries such as China, India, and Turkey, evidencing a focus on sanctions circumvention.
• The UK sanctions package also focuses on targeting new individuals and entities with asset freezes, including Chinese and UAE companies. The UK Government also published a sanctions strategy which sets out its approach to using sanctions as a tool to achieve its foreign policy priorities.

Introduction

Western governments once again coordinated their imposition of sanctions against additional entities and individuals believed to be associated with the war effort in Ukraine (see our previous OnPoint here). In this article we describe the United States’, European Union’s, and United Kingdom’s latest wave of sanctions against Russia.

United States

The U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) and the U.S. State Department (“State”) added over 500 persons (both entities and individuals) to the Specially Designated Nationals and Blocked Persons List (the “SDN List”). The U.S. Department of Commerce also added almost 100 entities to the Bureau of Industry and Security’s (“BIS”) Entity List. Additionally, OFAC issued general licenses authorizing limited transactions with newly sanctioned parties, and State issued an advisory highlighting the various risks for companies that continue to conduct business with Russia.

Additional Sanctions Designations

In the last two years, and in combination with these new sanctions, the United States has sanctioned over 4,000 persons in connection with the war in Ukraine.

The latest U.S. sanctions continue to focus on individuals and large revenue-generating entities in the financial, energy, mining, and transportation sectors of Russia. The financial sector has been a particular target of U.S. sanctions given the potential evasion risks posed by banks. Notably, National Payment Card System Joint Stock Company (“NPC”), owned by the Central Bank of Russia, and the operator of the Mir National Payment System (“MNPS”), was added to the SDN List. The MNPS is a card system that operates like other major credit cards, enabling secure money transfers on behalf of its users. MNPS was once embraced by multiple non-U.S. banks, but most banks had ceased using it following the start of the war. Regardless, NPC’s official addition to the SDN List will likely have an impact on Russia’s payment ecosystem.

With this round of sanctions, the U.S. Government has again targeted so-called sanctions evaders in Europe, East Asia, Central Asia, and the Middle East, which have increasingly become a major focus of the sanctioning authorities.

OFAC General Licenses and FAQs

In connection with the sanctions, OFAC issued six general licenses that permit the wind down of transactions with certain entities and authorize certain transactions related to divestments and offloading of cargo. The general licenses authorize the following:

1. General License No. 88A – the wind down of transactions involving 19 newly blocked entities (including certain financial and transportation companies);
2. General License No. 89 – the wind down and rejection of transactions involving eight newly blocked financial institutions;
3. General License No. 90 – certain transactions involving six newly blocked entities related to debt, equity, or derivative contracts;
4. General License No. 91A – certain safety and environmental transactions involving six blocked entities or vessels (e.g., emergency repairs of a blocked vessel, safe docking, and anchoring in port, etc.);
5. General License No. 92 – offloading of cargo from a vessel blocked solely due to a property interest of Joint Stock Company Sovcomflot (with some exceptions); and
6. General License No. 93 – transactions involving any vessel that is blocked solely due to a property interest of Joint Stock Company Sovcomflot (with some exceptions).

In addition, OFAC published three new “Frequently Asked Questions” ("FAQs") related to two recent determinations involving the import of Russian diamonds (see FAQs 1164, 1165, and 1166) and reissued a handful of other FAQs.

Export Controls

As part of the recent U.S. Government actions, BIS added 93 entities to its Entity List. These entities were added for their support of Russia’s military-industrial base. The majority (63) of the entities are located in Russia, while others are located in Turkey, China, the UAE, Kyrgyzstan, India, and South Korea.

BIS also updated its list of common high priority items that it describes as “necessary to fuel Russia’s war machine.” BIS did so in coordination with the EU, Japan, and the UK, bringing the number of categories of such items to 50.

Joint Advisory

State issued a joint advisory alongside the U.S. Departments of Treasury, Commerce, and Labor regarding the risks associated with continuing to conduct business in Russia. The advisory warns that doing business in Russia “poses serious legal, financial, and reputational risks,” and notes that businesses in Russia are “susceptible to extortion, property seizures, and U.S. law enforcement action.” Although the joint advisory does not prohibit U.S. persons from doing business with or in Russia, it highlights three areas of concern for businesses that continue to operate in Russia:

1. Risk of businesses and individuals becoming exposed to sanctions, export controls, import prohibitions, money laundering vulnerabilities, and corruption;
2. Risk of businesses and individuals being implicated in the Government of Russia’s violations of international law, including war crimes and crimes against humanity, and human rights abuses; and
3. Risk to businesses and individuals due to the proliferation and implementation of repressive laws in the Russian Federation and the areas of Ukraine it occupies, including measures authorizing expropriation in certain instances or detentions based on spurious grounds.

Even though the risks of conducting business in Russia are evident, companies with operations and individuals with assets in Russia are finding it difficult to exit their investments due to Russian countermeasures in place which restrict the outflow of capital and require steep discounts in order to obtain special Russian government approval for a sale of an entity in Russia.

European Union

On 23 February 2024, the EU adopted its 13^th sanctions package to mark two years since the beginning of Russia's full-scale invasion of Ukraine. The new package designates further individuals and entities, expands the list of restricted items, and introduces further restrictions on the exports of goods enhancing Russia's industrial capabilities.

Additional Designated Persons

The EU has imposed asset freezes on an additional 106 individuals and 88 entities responsible for actions undermining or threatening the territorial integrity, sovereignty, and independence of Ukraine. Those listed are primarily in the military and defence sectors, as well as members of the judiciary, local politicians, and people responsible for the illegal deportation and military re-education of Ukrainian children. Entities and individuals involved in the supply of armaments by North Korea to Russia are also among those who have been designated.

Enhanced Export Control Restrictions

The EU has added 27 new entities to the list of persons set out in Annex IV to Council Regulation 833/2014, which will be subject to enhanced export control restrictions on dual-use and advanced technology items. The majority of these are registered in Russia, though there are also entities registered in third countries such as China, India, Kazakhstan, Thailand, Sri Lanka, Serbia, and Turkey. The expansion of the list to include these third country entities indicates a more aggressive approach by the EU to countering circumvention of trade restrictions. The list of export-controlled technology items has been expanded to include materials that could be used in unmanned aerial vehicles (“UAVs”) such as drones, highlighting a focus on the role of UAVs in the ongoing conflict.

As above, the EU, in coordination with the U.S., the UK, and Japan, updated the Common High Priority Items List of items “necessary to fuel Russia’s war machine”.

United Kingdom

Additional Designations

On 22 February 2024, the United Kingdom imposed asset freezes on 21 individuals and 29 entities to the UK Sanctions List. The new sanctions target those involved in the supply of Russia with munitions, as well as those who deal in metals, diamonds, and the energy trade. Electronics companies from Turkey and China and a shipping company from the Marshall Islands allegedly involved in the supply of armaments by North Korea to Russia have also been designated. The UK has also designated entities from Serbia and the UAE. Although this is not the first time that the UK has designated entities from third countries (for example, three Chinese entities were added to the Sanctions List as part of the UK’s sanctions package in December 2023), this does indicate the UK’s determination to clamp down on circumvention of sanctions via third countries.

The UK also updated the Common High Priority Items List in line with the U.S., the EU and Japan.

The UK Sanctions Strategy

On the same day that it announced the additions to the UK Sanctions List, the UK also launched its first sanctions strategy alongside the new designations, which is entitled ‘Deter, Disrupt and Demonstrate – UK sanctions in a contested world’. This sets out the UK’s approach to sanctions as a tool to achieve its key foreign policy priorities, which it lists as:

1. Undermining Russia’s ability to wage war against Ukraine;
2. Addressing threats and malign activity through geographic and thematic sanctions regimes;
3. Building international coalitions and taking coordinated action with allies and partners; and
4. Reinforcing sanctions implementation and enforcement.

The strategy sets out the UK’s intention to use sanctions to reinforce other tools (such as export controls, tariffs and action through multilateral fora) to achieve foreign policy and security objectives, as well as utilising its position as a permanent UN Security Council member to support the Security Council in its efforts to maintain international peace and security.

Conclusion

Companies should assess any ties they may have to newly sanctioned persons as well as risks associated with any existing business in Russia.