G7 Meeting Accompanied by Flood of Sanctions Actions

The United States, backed by the G7 and other international allies, is ramping up worldwide sanctions and restrictive economic measures to further hinder Russia's warfighting capabilities.

The Commerce, Treasury and State Departments issued separate and joint actions and rules reaching from icebreakers to rubber, with a primary focus on Russia's extractive and weaponry industries.

Commerce (BIS) Actions

BIS' First Rule makes Four Major Changes:·       

• The rule adds the remaining HTS-6 Codes under three entire harmonized tariff system chapters (Chapters 84, 85, and 90; now over 2,000 total entries) to the industrial and commercial controls listed in Supplement No. 4 to Part 746 of the EAR so that every HTS-6 Code under these three chapters is now controlled. The items added in today’s rule include a variety of electronics, instruments, and advanced fibers for the reinforcement of composite materials, including carbon fibers.
• Adds certain additional chemicals to Supplement No. 6 to part 746 of the EAR, which consists of discrete chemicals, biologics, fentanyl and its precursors, and related equipment designated EAR99 
• Expands the list of foreign-produced items in Supplement No. 7 to part 746 of the EAR that require a license when destined to Russia, Belarus, and Iran.  This addition builds on the rule issued on February 24, 2023, that created Supplement No. 7 which identifies a number of priority items of concern and that is being used to advance counter-evasion efforts. 
• Expands the destination scope of the Russia/Belarus Foreign-Direct Product (FDP) Rule, as well as other conforming changes. The rule applies the Russia/Belarus FDP Rule to the temporarily occupied Crimea region of Ukraine,

The Second Rule adds sixty-nine entities in Russia and one entity each in Armenia and Kyrgyzstan to the Entity List.    The Russian entities are added to the Entity List for providing support to Russia’s military and defense sector and are receiving “footnote 3” designations and will be subjected to the restrictions imposed under the Russia/Belarus-Military End User FDP Rule, which represent some of the most severe restrictions available under the EAR. 

State Department Action

State is today imposing sanctions on individuals and entities complicit in: sanctions evasion and circumvention; maintaining Russia’s capacity to wage its war of aggression; and supporting Russia’s future energy revenue sources.

Along with these actions, the Department is also designating several individuals and entities to further promote accountability of those supporting Russia’s war, including

• Russia-installed puppet occupation authorities,
• those involved in theft of Ukrainian grain, and in
• the systematic and unlawful transfer and/or deportation of Ukraine’s children.

Sanctioned entities include

• Energy Dredging Vessels owned by Rosatom, (as well as Russia's Icebreaker Fleet), Oil Services, Coal Extraction and professional services providers associated with the Port of Indiga, project a flagship port facility under development in Russia, which is designed to expand the export capacity of Russian energy and metals from the Russia’s arctic region.
• Military-related procurement and sanctions evasion entities realted to Drone construction, computer and electronic parts.
• Marine entities, including four shipping lines.
• Polyus and related entities, Russia's largest gold producer.
• Various Armements and munitions manufacturers.
• Aircraft supporting the Wagner Group, (seventy-seven Tupolev and Ilushyn Models)
• Wholesale Electronics distributors and Synthetic Rubber manufacturers.
• Individuals implicated in various crimes, including the unlawful abduction of Ukrainian children, the theft of Ukrainian Grain, and numerous functionaries and enablers. 

Norilsk Nickel continues to get a pass from sanctions, although the firm's Chief Financial Officer was named in the sanctions actions. Norilsk Nickel is responsible for about 5% of the world’s annual production of nickel and about 40% of its palladium.

FinCEN & BIS Joint Alert

Treasury’s Financial Crimes Enforcement Network (FinCEN) and Commerce’s Bureau of Industry and Security (BIS) issued a joint supplemental alert urging continued vigilance for potential Russian export control evasion.

This supplemental alert builds on FinCEN and BIS’s first joint alert, issued in June 2022, and provides financial institutions additional information with respect to new BIS export control restrictions relating to Russia.

The alert also reinforces ongoing U.S. government engagements and initiatives designed to further constrain and prevent Russia from accessing needed technology and goods to supply and replenish its military and defense industrial base. It details evasion typologies and identifies additional transactional and behavioral red flags to assist financial institutions.

OFAC Sanctions

Treasury's Office of Foreign Assets Control (OFAC).has imposed sanctions on 22 individuals and 104 entities across more than 20 countries, aiming at those seeking to circumvent sanctions and other economic measures against Russia.

Importantly, Treasury is broadening its sanctions remit to cover new sectors of the Russian economy and cut their access to new categories of services. Treasury identifies the architecture, engineering, construction, manufacturing, and transportation sectors of the Russian Federation economy pursuant to section 1(a)(i) of Executive Order (E.O.) 14024.

This action complements existing sanctions authorities against those that operate or have operated in the metals and mining, quantum computing, accounting, trust and corporate formation, management consulting, aerospace, marine, electronics, financial services, technology, and defense and related materiel sectors of the Russian Federation economy.

OFAC is also amending Directive 4 under E.O. 14024, “Prohibitions Related to Transactions Involving the Central Bank of the Russian Federation, the national Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation,” to require U.S. persons to report to OFAC any property in their possession or control in which the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation has an interest.

Swiss-Italian businessman Walter Moretti and members of his network have covertly procured sensitive technologies and equipment for Russia’s intelligence services and military. Today, OFAC designated five additional members of Moretti’s network, a Liechtenstein Trust, as well as Baltic Russian and Dutch procurement networks.

Russia’s Energy Educational Institutions and Research Institutes were named in the new sanctions, as well as numerous drilling and oil services companies.

Links to all OFAC Actions are as follows:

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) is issuing Russia-related General License 13E, “Authorizing Certain Administrative Transactions Prohibited by Directive 4 under Executive Order 14024;” General License 66, “Authorizing the Wind Down of Transactions Involving Public Joint Stock Company Polyus;” General License 67, “Authorizing Certain Transactions Related to Debt or Equity of, or Derivative Contracts Involving, Public Joint Stock Company Polyus;” and General License 68, “Authorizing the Wind Down of Transactions Involving Certain Universities and Institutes.”

OFAC is also issuing Russia-related Directive 4 under Executive Order (E.O.) 14024, as amended, and updating Frequently Asked Questions (FAQs) 998-1002, 1004-1005, and 1118 to reflect the amendment.  Russia-related Directive 4, as amended imposes an additional reporting requirement on U.S. persons to identify assets of entities subject to Russia-related Directive 4, as amended, which U.S. persons may hold.  U.S. persons must submit a report to OFACreport@treasury.gov on or before June 18, 2023, and annually thereafter, on property in their possession or control with an interest, direct or indirect of an entity subject to Russia-related Directive 4, as amended (see FAQ 998).  Note that existing licenses or authorizations issued by OFAC pursuant to the prior version of Russia-related Directive 4 remain in effect.

Furthermore, OFAC is publishing a Determination Pursuant to Section 1(a)(i) of E.O. 14024 and a Determination Pursuant to Section 1(a)(ii) of E.O. 14071.  OFAC is publishing three associated FAQs and removing FAQs 964, 1037, and 1085, which were incorporated into new FAQs 1126-1128. These changes consolidate OFAC’s general guidance pertaining to Russia-related sector and service determinations.  OFAC is also amending FAQs 1059 and 1061-1062.

In addition, OFAC is issuing one new FAQ related to a designated person (1129).

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