OFAC announces new sanctions targeting Belarus’ construction, coal, oil, tobacco, potash and transportation sector

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Eversheds Sutherland (US) LLPOn Monday, August 9, 2021, the Office of Foreign Assets Control (OFAC) of the US Department of the Treasury issued a multitude of sanctions designations affecting dealings with Belarusian companies in the construction, oil, coal, tobacco, and other commodities sectors. The new designations rely on existing Belarus sanctions authority under Executive Order 13405 (June 20, 2006), which was issued to counter alleged human rights abuses, political repression, and the undermining of democratic processes or institutions in Belarus. The stated bases for Monday’s sanctions actions were “the continuing violent crackdown on peaceful protests,” the “May 23, 2021 Ryanair incident” and other activities considered to “profit from or sustain the Belarusian regime at the expense of the Belarusian people.” Monday’s Order authorizes the imposition of sanctions on, among others, any person determined “to operate or have operated in the defense and related material sector, security sector, energy sector, potassium chloride (potash) sector, tobacco products sector, construction sector, or transportation sector of the economy of Belarus,” as well as any person determined to have “materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of,” any person who is designated under the Order.

Who was sanctioned under Monday’s Order?

The new designations target 23 individuals and 21 entities, including various revenue-generating enterprises for President Lukashenka’s regime—referred to by the US Treasury Department as “Lukashenka’s wallets”—including those in the tobacco, construction, and energy, transportation, and potash and other commodities sectors. Also targeted are certain senior Belarus government officials, the Belarusian security services, and the Belarusian National Olympic Committee.

Considered a key actor in Lukashenka’s “energy wallet,” OFAC has designated Belarusian businessman Mikalai Varabei, reportedly a member of Lukashenka’s inner circle with enterprises extending into the Ukraine and Russia. Accordingly, OFAC also designated BelKazTrans and BelKazTrans Ukraine—two companies involved in the transport of coal in Belarus, Russia, and Ukraine—as owned or controlled by Varabei.

OFAC also sanctioned for operating in the energy sector Novopolotsk Limited Liability Company Interservice (Interservice), one of the largest oil traders in Belarus, and Closed Joint-Stock Company New Oil Company (NNK), the only private company permitted to export petroleum products from Belarus state-owned refineries.

Absolutbank, a financial institution in Belarus, and Industrial Unitary Enterprise Oil Bitumen Plant (OBP) were also designated for being owned or controlled by Interservice, and Limited Liability Company New Oil Company East (NNK East), a subsidiary of petroleum product exporter NNK, was designated for being owned or controlled by NNK.

Lastly, Limited Liability Company Bremino Group (Bremino Group), which is also linked to Varabei and was granted a presidential decree to manage a special economic zone in Lukachenka’s home region, was designated for operating in the Belarusian transportation sector. Meanwhile, Belaruskali OAO, one of the world’s largest producers of fertilizer ingredient potassium chloride (potash) and reportedly a source of revenue and foreign currency for the Lukashenka regime, was designated for being owned or controlled by the government of Belarus and for operating in the potash sector of the Belarusian economy.

The European Union (EU) had previously sanctioned both NNK and Bremino Group on June 24, 2021, along with broad sectors of the Belarusian economy, including financial services, insurance, telecommunications, technology, oil and gas, shipping and maritime, mineral and mining, agriculture and tobacco enterprises.

Expansion of Biden Administration Sanctions Targeting Belarus

These latest OFAC designations follow other recent sanctions actions by the Biden Administration targeting the Lukachenka regime. In April 2021, OFAC revoked wind-down General License 2H and imposed, as of June 3, 2021, comprehensive sanctions against nine Belarusian state-owned entities and their 50%-or-more owned subsidiaries:

  • Belarusian Oil Trade House (a transaction clearinghouse)
  • Belneftekhim (a petrochemical company)
  • Belneftekhim USA, Inc. (US unit of petrochemical company Belneftekhim)
  • Belshina OAO (a tire manufacturing company)
  • Grodno Azot OAO (a fertilizer producing company)
  • Grodno Khimvolokno OAO (a large manufacturing company)
  • Lakokraska OAO (a paint and varnish manufacturing company)
  • Naftan OAO (an oil-refining company)
  • Polotsk Steklovolokno OAO (a fiberglass manufacturing company).

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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