The Bass, Berry & Sims international trade team is actively monitoring the situation in Russia and Ukraine and providing real-time advice to clients on managing the situation. This post summarizes new U.S. sanctions and export restrictions as of April 6. This post supplements our previous summaries, which are available by following the links at the bottom of this page.

United States Issues Expansive Restrictions on Russian Entities, Expected to Ban New Investment

On April 1, the Commerce Department added 120 entities in Russia and Belarus to the Entity List based on their activities in the Russian and Belarusian defense, aerospace, maritime, and other strategic sectors. Of these entities, 95 are designated military end-users, which makes them subject to the Russia Military End-User Foreign Direct Product Rule (Russia-MEU FDP Rule). As discussed in a previous update, the Russia-MEU FDP Rule significantly broadens U.S. export jurisdiction over items made outside the United States using U.S.-origin technology.

Generally speaking, a license is required to export any U.S.-origin good, software, or technology to a party on the Entity List. This requirement also extends to re-exports, i.e., a license is required for any person, regardless of nationality or location, to ship a U.S. item to one of these parties.

Extensive New Sanctions Announced, More to Come

On April 6, the White House announced additional sweeping financial sanctions and indicated that President Biden is expected to sign an Executive Order (EO) prohibiting new investment in Russia by U.S. persons. The EO will reportedly prohibit the export, re-export, sale or supply, directly or indirectly, of certain categories of services designated by the Departments of State and Treasury.

Restrictions Related to Sberbank, Alfa-Bank Are Expanded Significantly

Also on April 6, in conjunction with the White House announcement, the Office of Foreign Assets Control (OFAC) issued full blocking sanctions on Sberbank and Alfa-Bank. Both Sberbank and Alfa-Bank were previously subject to prohibitions under Directive 2 and Directive 3, respectively (discussed in our previous post). Today’s action expands the prohibitions by adding Sberbank and Alfa-Bank (and their subsidiaries) to the Specially Designated Nationals (SDN) List. This means that U.S. persons are prohibited from conducting virtually any transaction with either bank – or any other entity owned 50% or more by one of the banks, even if that entity is not itself listed on the SDN List.

OFAC also sanctioned family members of Russian President Putin and Russian Foreign Minister Sergey Lavrov, as well as all members of Russia’s Security Council that were not previously designated. Today’s action results in the following additions to the SDN List:

• Sberbank and 42 Sberbank subsidiaries.
• Alfa-Bank, six Alfa-Bank subsidiaries (three in Russia, one in Cyprus, one in the Netherlands, and one in Kazakhstan), and five vessels owned by an Alfa-Bank subsidiary. Note: The sanctioned Alfa-Bank is a distinct entity from Alfa-Bank (Ukraine), which has not been sanctioned.
• Russian President Putin’s daughters Katerina Vladimirovna Tikhonova and Maria Vladimirovna Vorontsova.
• Russian Foreign Minister Sergey Lavrov’s wife, Maria Aleksandrovna Lavrova, and daughter, Yekaterina Sergeyevna Vinokurova.
• 21 remaining members of Russia’s Security Council.

General Licenses Issued, Allow Certain Transactions for Limited Period

OFAC also issued new and revised General Licenses (GLs) to permit some limited activity with designated entities. GL 8B (superseding GL 8A) adds Alfa-Bank to the list of entities for which certain transactions related to energy are authorized. GL 9B (superseding GL 9A) authorizes, until June 30, 2022, transactions related to certain debt or equity of Alfa-Bank issued before April 6, 2022. Transactions related to debt or equity previously authorized by GL 9A (now referred to as Tranche 1 debt or equity) are authorized until May 25, 2022. GL 10B, which authorizes certain transactions related to derivative contracts, features similar revisions as GL 9B.

GLs 21, 22, and 23 authorize the winding down of transactions involving Sberbank CIB USA, Inc. (through June 7, 2022), Sberbank (through April 13, 2022), and Alfa-Bank (through May 6, 2022).

The White House indicated that blocking sanctions on critical major Russian state-owned enterprises will be announced on April 7.