On September 14, 2023, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) announced nearly 100 new sanctions on Russian elites and on Russia’s industrial base, financial institutions, and technology suppliers in an effort to further constrict Russia’s capacity to wage war in Ukraine by disrupting its supply chains and cracking down on sanctions evasion. Firms should carefully evaluate those covered in this announcement in order to anticipate future designations and prevent commercial involvement with Specially Designated Nationals (“SDN”), directly or indirectly.
OFAC added the following notable Russian elites and firms to the SDN List subjecting them to full blocking sanctions pursuant to Executive Order 14024 for operating or having operated in the manufacturing sector of the Russian economy:
- Iskandar Kakhramonovich Makhmudov (“Makhmudov”), founder of Joint Stock Company Ural Mining and Metallurgical Company (“JSC UMMC”), one of Russia’s top producers of metals such as copper, zinc, gold, and silver. JSC UMMC was previously designated by OFAC earlier this year;
- Joint Stock Company HMS Group, a manufacturer of industrial pumps and compressors;
- Kriogenmash OAO, a manufacturer of equipment for producing, processing, transporting, and storing industrial gases; and
- Several Russian producers of machinery and steel products, including Kirovsky Zavod Public Joint Stock Company and Joint Stock Company United Metallurgical Company.
OFAC also continues to crack down on sanctions circumvention by targeting supply networks in other countries that are supporting Russia’s war effort. Specifically, OFAC designated a Finland-based network that specializes in shipping foreign electronics to Russia-based end-users. Finnish logistics firms Siberica Oy and Luminor Oy have supplied Russia’s military with unmanned aerial vehicle (“UAV”) cameras, high-performance optical filters, and lithium batteries. In Turkey, OFAC designated Margiana Insaat Dis Ticaret Limited Sirketi (“Margiana”) and Demirci Bilisim Ticaret Sanayi Limited Sirketi (“Demirci”). Margiana is involved in the supply chain for producing Russian military UAVs and Demirci has sent sensors and measuring tools into Russia.
Importantly, the Russian supply chains in Finland and Turkey are indicative of a broader effort by Russian companies and others to use shipments and transactions to countries neighboring Russia, particularly in Central Asia, to unlawfully evade U.S. sanctions and export controls. Firms should expect to see more enforcement cases related to such diversion attempts going forward. Of note, the U.S. Department of Commerce recently updated its “List of Common High-Priority Items” that are at higher risk for diversion to Russia from neighboring countries. Companies face higher risks when dealing in such products or engaging with the sectors that were targeted by OFAC in the recent sanctions.