Russia Update: U.S. Tightens Pressure on Russia with New, Coordinated Sanctions Package | Insights

Venable LLP

Venable LLP

This is part of a series of advisory alerts from Venable's International Trade and Logistics Group, published in response to the ongoing war in Ukraine. Earlier alerts on Russia and Ukraine sanctions are available in sequential order here, here, here, here, here, here, here, and here.

As the G7 leaders met this week with Ukrainian President Zelenskyy, the United States and allies introduced a new, coordinated package of sanctions to ramp up the pressure against Russia for its aggression in Ukraine. The latest U.S. package, unveiled by the White House on June 27, 2022, intensifies pressure on Russia's military-industrial complex, places new limits on Russian exports of gold and other industrial commodities, and further targets Russian individuals and entities determined to be contributing to the war in Ukraine.

New Treasury Department Sanctions

On June 28, 2022, the Office of Foreign Assets Control (OFAC) added over 90 individuals and entities to the Specially Designated Nationals and Blocked Persons List (SDN List), with a focus on Russia's military-industrial base, including major state-owned defense-related actors.

State Corporation Rostec (Rostec) and its numerous subsidiaries are a major target of the new SDN designations under Executive Order (EO) 14024. Rostec is a massive Russian state-owned enterprise that consolidates Russia's technological, space, aerospace, and military-industrial expertise, with a corporate umbrella reaching 800 entities across sectors. As the result of the latest actions, U.S. persons are now prohibited from transacting, directly or indirectly, with Rostec or any other Rostec holdings or affiliates named on the SDN list. Furthermore, pursuant to OFAC's 50% rule, any entity owned 50% or more, directly or indirectly, by Rostec is also blocked. (Please note this action expands previous U.S. sanctions on certain Rostec-related entities, including Rostec's preexisting designation on OFAC's Sectoral Sanctions Identifications List and on Directive 3 under EO 13662.) Notably, General License No. 39 provides a wind-down license for transactions involving Rostec or its subsidiaries until August 11, 2022. The EU, UK, and numerous other nations have also now placed sanctions on Rostec.

In addition to Rostec, other notable OFAC designations include Kamaz (Russia's largest truck manufacturer); several Russian companies in the information-security sector, including Concern Avtomatica, and IS Refor; and several current and former officials of the breakaway territories in Ukraine's Donbas region. Simultaneously, the Department of State also imposed sanctions on 45 entities and 29 individuals, including Russian Federation military units and Russia's Federal Security Service (FSB) for violations of international humanitarian law.

Other Russia-Related Trade Restrictions

In addition to the new OFAC designations, the U.S. government announced several notable import- and export-related actions designed to further curb Russian access to the global economy:

  • OFAC issued a new prohibition, under EO 14068, on the import into the U.S. of all new Russian-origin gold, which is the second-largest Russian export after energy products.
  • Pursuant to the Suspending Normal Trade Relations with Russia and Belarus Act (19 U.S.C. § 2434), President Biden announced a significant increase in ad valorem tariff rates, effective on July 29, 2022, on more than 570 categories of Russian-origin goods, covering a wide range of steel, aluminum, mineral, metal, chemical, arms and ammunition, wood and paper, aircraft, and automotive-related products. The new rates are effective on July 29, 2022, and the full list of affected HTS codes can be found here.
  • In a new collaboration, the U.S. Department of Commerce's Bureau of Industry and Security (BIS) and the Financial Crimes Enforcement Network (FinCEN) released a joint alert to U.S. financial institutions, urging increased vigilance against efforts to subvert U.S. export controls on Russia and Belarus. The alert provides a helpful review of obligations under U.S. export control laws and the Bank Secrecy Act, as well as common compliance "red flags" for financial institutions.
  • Finally, BIS continues to designate new entities (in Russia and elsewhere) to its Entity List, including 36 new entities on June 28, in order to prevent U.S.-origin technologies from being routed to Russian military end users and uses.

Venable's International Trade and Logistics Group is carefully monitoring the situation and will continue to provide updates as developments occur.

* The authors would like to thank Summer Associate Maria Krol-Sinclair for her assistance in writing this article.

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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