U.S. announces new sanctions, export control restrictions, and an arms embargo on Russia

Kelley Drye & Warren LLP

Yesterday, the United States announced new targeted sanctions, export control restrictions, and an arms embargo on Russia after the poisoning and imprisonment of Russian opposition leader Alexey Navalny. All three of the agencies with primary authority to regulate exports – the Directorate of Defense Trade Controls (DDTC) at the State Department, the Bureau of Industry and Security (BIS) at the Commerce Department, and the Office of Foreign Assets Control (OFAC) at the Treasury Department – implemented new restrictions related to Russia.

The most significant change announced yesterday is the State Department’s decision to add Russia to the International Traffic in Arms Regulations’ (ITAR) list of “proscribed countries,” commonly known as the Section 126.1 list. Countries on this list are subject to a policy of denial for license applications, so the change will effectively subject Russia to a U.S. arms embargo, prohibiting the export of most ITAR-controlled defense articles and defense services to Russia. Limited exceptions to the policy of denial will be made for exports in support of government space cooperation. The State Department will also review licenses related to commercial space launches on a case-by-case basis, but only for six months, after which license requests related to commercial space launches will face a presumption of denial. As noted below, the Commerce Department has announced corresponding changes to its licensing policy regarding exports related to commercial space flight activities in Russia. Additionally, certain transactions with 126.1 countries are subject to mandatory disclosures to the DDTC, instead of the general rule that violations are subject to voluntary disclosures to the agency.

Below is a summary of the actions taken by other key U.S. regulators yesterday, including the Treasury, State, and Commerce Departments:

  • New SDNs: OFAC added seven Russian government officials and three entities to the Specially Designated Nationals (SDN) List and imposed new sanctions on existing Russian SDNs;
  • Entity List Additions: The Commerce Department added 14 entities in Russia, Switzerland, and Germany to its Entity List due to their connection to WMD and chemical weapons production, barring exports of items subject to the Export Administration Regulations (EAR) to the designated entities.
  • Dual Use Export Control License Restrictions: The Commerce Department will limit the availability of certain license exceptions and licenses for exports of NS-controlled items to Russia. Commerce indicated that exports of NS-controlled items to Russia will no longer be eligible for license exceptions Service and Replacement of Parts and Equipment (RPL), Technology and Software Unrestricted (TSU), and Additional Permissive Reexports (APR). Commerce will reverse its existing licensing policy and replace it with a presumption of denial to license requests related to exports of NS-controlled items for commercial end-users related to civil end-uses in Russia. In six months, Commerce will also adopt a policy of denial for license requests involving exports of NS-controlled items to Russia related to commercial space flight activities.
  • Secondary Sanctions: The State Department added six scientific institutes to its Section 231 List of persons known to operate for or on behalf of the Russian defense or intelligence sectors. As a result of the designations, non-U.S. persons that conduct significant transactions with these parties could be subject to U.S. secondary sanctions in the future.

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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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