On February 23, 2024, the Treasury Department’s Office of Foreign Assets Control (“OFAC”) and Department of State together announced more than 500 sanctions designations targeting government officials, companies, and individuals in Russia and beyond.  The sanctions, which the U.S. stated were intended to mark the two-year anniversary of Russia’s invasion of Ukraine and the death of opposition politician Aleksey Navalny, target Russian government officials responsible for Navalny’s death, entities in Russia’s military-industrial base, and those providing revenue to the Russian government to support its war effort.  The sanctions also target companies and individuals throughout Europe, Asia, and the Middle East considered to be aiding Russia in its efforts to evade sanctions.

The sanctions identify companies and individuals across all sectors of the Russian economy, including the financial, technology, defense and related materiel, construction, aerospace, manufacturing, engineering, electronics, metals and mining, and transportation sectors.  Beyond Russia, the U.S. sanctions target third-country actors involved in circumventing critical technology and equipment to Russia’s military-industrial base, including in China, the United Arab Emirates, and Serbia.

Sanctioned entities and individuals have been added to OFAC’s Specially Designated Nationals and Blocked Persons (“SDN”) List.  Key SDNs targeted with these designations include (but are not limited to) the following:

• Russia’s largest shipping company, Joint Stock Company Sovcomflot (“Sovcomflot”), 14 vessels beneficially owned by Sovcomflot, and multiple additional logistics companies involved in helping transport goods to support the Russian war effort and sanctioned sectors of the Russian economy;
• Three officials from the Federal Penitentiary Service of Russia who were connected to the death of Aleksey Navalny;
• Multiple Russian government officials involved in the forced transfer, deportation and/or re-education of Ukrainian children from the Russian-occupied areas of Ukraine;
• National Payment Card System Joint Stock Company, the operator of Russia’s Mir National Payment System;
• Over 20 additional Russian financial institutions, 5 investment and venture capital funds and 6 FinTech vendors who provide software and IT solutions to the Russian financial sector; and
• Multiple companies operating in key industrial and technological sectors of the Russian economy such as 3D printing, metalworking, semiconductor and electronics manufacturing, production of navigational equipment, and manufacturing of lubricants, coolants and industrial chemicals. 

U.S. persons are prohibited from transacting with such blocked persons and property, including providing to or receiving from any funds, goods, or services.  U.S. secondary sanctions against Russia authorize OFAC and the State Department to impose SDN List designations on non-U.S. persons who provide material assistance to the SDNs designated in these actions. OFAC’s 50% ownership rule will also extend these sanctions to any subsidiary entities in which these SDNs directly or indirectly, either individually or in the aggregate, hold an ownership interest of 50% or more.  Identifying information for Sovcomflot and its vessels added to the SDN List by OFAC can be found here.  The complete list of other entities added to the SDN List in these actions by OFAC and the Department of State can be found here and here, respectively.

OFAC and the Department of State issued all sanctions designations pursuant to Executive Order 14024 (“E.O. 14024)”.  Concurrent with the new sanctions designations, OFAC also issued the following General Licenses, which authorize certain limited transactions and activities with specified blocked entities.

• Russia-related General License 88A authorizes all transactions prohibited by E.O. 14024 that are ordinarily incident and necessary to the wind down of any transaction involving Sovcomflot and 18 of the other newly blocked entities, as well as any entity that is 50 percent or more owned by one or more of these blocked persons, through 12:01 am eastern daylight time, April 8, 2024.
• Russia-related General License 89 authorizes all transactions prohibited by E.O. 14024 that are ordinarily incident and necessary to the wind down of any transaction involving eight of the newly blocked financial institutions, as well as any entity that is 50 percent or more owned by one or more of these blocked persons through 12:01 am eastern daylight time, April 8, 2024.  General License 89 further authorizes U.S. persons to reject and return all transactions prohibited by E.O. 14024 that are ordinarily incident and necessary to the processing of funds involving any of these blocked financial institutions through 12:01 am eastern daylight time, April 8, 2024. 
• Russia-related General License 90 authorizes all transactions prohibited by E.O. 14024 that are ordinarily incident and necessary to the divestment or transfer, or the facilitation of the divestment or transfer, of debt or equity issued or guaranteed by six (6) of the newly blocked entities to a non-U.S. person, as well as any entity that is 50 percent or more owned by one or more of these blocked persons, through 12:01 am eastern daylight time, April 8, 2024. 
• Russia-related General License 91A authorizes all transactions prohibited by E.O. 14024 that are ordinarily incident and necessary to certain activities involving specific blocked vessels and persons, including docking and anchoring, preservation of the health or safety of the crew, and emergency repairs, through 12:01 a.m. eastern daylight time May 23, 2024.
• Russia-related General License 92 authorizes all transactions prohibited by E.O. 14024 that are ordinarily incident and necessary to the delivery and offloading of cargo from any Sovcomflot vessels identified on the SDN List through 11:59 pm eastern daylight time April 8, 2024, provided that the cargo was loaded prior to February 23, 2024.
• Russia-related General License 93 authorizes all transactions prohibited by E.O. 14024 involving vessels which would otherwise be blocked solely due to Sovcomflot directly or indirectly owning a 50 percent or greater interest, provided that those vessels are not identified on the SDN List. 

Finally, the Departments of Treasury and State, along with Commerce and Labor, issued a business advisory to inform businesses and individuals of the increased risks of doing business within and involving Russia.  These business activities include risks beyond trade restrictions and include:

• Risk of becoming exposed to sanctions, export controls, import prohibitions, money laundering vulnerabilities, and corruption;
• Risk of being implicated in the Russian Government’s violations of international law, including war crimes, crimes against humanity, and human rights abuses; and
• Risk 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.

Entity List Additions and High Priority Item Guidance Issued by BIS

Also on Friday, February 23, the Department of Commerce’s Bureau of Industry and Security (“BIS”) announced new export controls and Entity List additions aimed at “hold[ing] accountable both Russia and those who support its brutal war.” The latest round of export controls includes: (1) additions to the Entity List; and (2) additions to the high-priority items list. This export control package was issued in conjunction with sanctions imposed by both the Office of Foreign Assets Control and the Department of State. The export controls and Entity List additions are effective February 23, 2024.

Entity List Additions

BIS added 93 entities from Russia, China, Turkey, the UAE, Kyrgyzstan, India, and South Korea.   As a result of these latest additions, over 900 parties have been placed on the Entity List for their role in supporting Russia’s war efforts.  These entities are subject to a license requirement for all items subject to the EAR and a license review policy of either presumption of denial or policy of denial for all items subject to the EAR. Some entities have an exception listed for food and medicine designated as EAR99, which BIS will review on a case-by-case basis. For a complete list of entities added to the Entity List and the license review policy for those entities, see the FR Notice. 

In addition to being added to the Entity List, 51 entities also received a Footnote 3 designation, which further restricts these entities under the Russia/Belarus-Military End User FDP Rule in § 734.9(g).

High Priority Items

BIS also highlighted its continued efforts toward multilateral enforcement, including an updated common high priority items list compiled in cooperation with the European Union, Japan, and the United Kingdom. The new list increased the number of high priority items from 45 to 50. The new additions include items such as “computer numerically controlled” or “CNC” machinery, among others. This list is meant to highlight for industry members a subset of certain tools, machinery, and other items that are already restricted for export to Russia but which are particularly valuable and important to Russia and thereby pose an especially heightened risk of diversion. The items on the list include both lower technology items as well as more sensitive items, including those controlled by an Export Control Classification Number (“ECCN”).

BIS also issued a Russian Export Controls Communique, further highlighting the multilateral efforts between the United States and the European Union, Japan, and the United Kingdom, stating that “[a]s the war has progressed, this export control partnership has continued to grow stronger, with more sophisticated cooperation and more comprehensive controls.”

The communique further states that “providing logistical, banking, or other services to those who ship [common high priority items] requires authorization; failure to comply carries a serious risk of sanction by the United States and our partners and allies.” This language suggests that not only is BIS concerned with exports and reexports of high priority items to Russia, but also the supply of additional services that support such exports and reexports.

Savings Clause

The new restrictions and Entity List additions are subject to a savings clause authorizing shipments that are en route aboard a carrier to port, and that would now otherwise be prohibited by these new restrictions, to proceed to the final destination provided the export, reexport, or transfer (in-country) is completed by March 24, 2024.

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