Summary of Regulatory Updates impacting Russia, Belarus and Ukraine as of March 2, 2022

The President signed a new Executive Order – Blocking Property Of Certain Persons And Prohibiting Certain Transactions With Respect To Continued Russian Efforts To Undermine The Sovereignty And Territorial Integrity Of Ukraine.

Similar to the existing embargo targeting the Crimea region of Ukraine, which Russia attempted to annex in 2014, the regulations prohibit:

• new investment in DNR (Donetsk People’s Republic region of Ukraine), LNR (Luhansk People’s Republic region of Ukraine), or any other Covered Region by a U.S. person, wherever located;
• the importation into the United States, directly or indirectly, of any goods, services, or technology from any Covered Region;
• the exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a U.S. person, wherever located, of any goods, services, or technology to any Covered Region; and
• any approval, financing, facilitation, or guarantee by a U.S. person, wherever located, of a transaction by a foreign person where the transaction by that foreign person would be prohibited if performed by a U.S. person or within the U.S.

OFAC issued the following general licenses authorizing certain limited dealings with the Covered Regions, including:

• General License No. 17, authorizing transactions that are ordinarily incident and necessary to the wind down of transactions.
• General License No. 18, authorizing certain exports of food, medicine, medical devices, and certain COVID-19 treatments to the Covered Regions;
• General License No. 19, authorizing certain transactions ordinarily incident and necessary to the receipt or transmission of telecommunications;
• General License No. 20, authorizing activities by certain international organizations;
• General License No. 21, authorizing certain personal, non-commercial remittances, and the operation, maintenance, and closure of certain personal accounts; and
• General License No. 22, authorizing the export of certain services and software incident to the exchange of personal communications over the internet.

As a part of the EO and existing authorities, OFAC designated over 50 individuals, entities, and Russian vessels that operate or have operated in the financial services sector, technology sector, and defense and related materiel sector of the Russian economy and added them to the SDN List. FAQ 964 clarifies that a sector determination does not automatically impose sanctions on all persons who operate or have operated in the sector.

Included in these measures are two financial institutions seen as crucial to financing the Russian defense industry along with their subsidiaries: Promsvyazbank Public Joint Stock Company (PSB), a Russian state-owned financial institution that is Russia’s eighth largest financial institution, and State Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank (VEB), Russia’s national economic development institution.

The measures also target elites close to Russian President Vladimir Putin viewed by the U.S. as President Putin’s inner circle, including Aleksandr Vasilievich Bortnikov, the Director of the Federal Security Service (FSB), and his son Denis Bortnikov, Petr Mikhailovich Fradkov, Chairman and CEO of PSB, and his son Vladimir Kiriyenko.

In response to the Russian Federation’s (Russia’s) further invasion of Ukraine, with this final rule, the Department of Commerce is adding new Russia license requirements and licensing policies to the Export Administration Regulations (EAR) to protect U.S. national security and foreign policy interests. These new Russia measures:

• impose new Commerce Control List (CCL)-based license requirements for Russia;
• add two new foreign “direct product” rules (FDP rules) specific to Russia and Russian ‘military end users;’ specify a license review policy of denial applicable to all of the license requirements being added in this rule, with certain limited exceptions;
• significantly restrict the use of EAR license exceptions;
• expand the existing Russia ‘military end use’ and ‘military end user’ control scope to all items “subject to the EAR” other than food and medicine designated EAR99, or ECCN 5A992.c and 5D992.c unless for Russian “government end users” and Russian state-owned enterprises (SoEs);
• transfer forty-five Russian entities from the Military End-User (MEU) List to the Entity List with an expanded license requirement of all items subject to the EAR (including foreign-produced items subject to the Russia-MEU FDP rules);
• and add two new Russia entities and revise two Russia entities to the Entity List.

Lastly, this rule imposes comprehensive export, reexport and transfer (in- country) restrictions for the so-called Donetsk People’s Republic (DNR) and Luhansk People’s Republics (LNR) regions of Ukraine (“Covered Regions of Ukraine”) and makes conforming revisions to export, reexport transfer (in-country) restrictions for Crimea Region of Ukraine provisions.

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued Russia-related Directive 2 to impose correspondent and payable- through account sanctions on Russian financial institutions and listed Public Joint Stock Company Sberbank of Russia (Sberbank) and its subsidiaries under this directive. Additionally OFAC issued Directive 3 which prohibits U.S. persons from dealing in new equity and new debt from targeted entities. The impacted entities are large, Russian state- owned entities critical to the Russian economy, including Gazprombank, Gazprom, Gazprom Neft, and Sberbank.

OFAC published new Frequently Asked Questions (regarding Russian Harmful Foreign Activities Sanctions) and updated several Frequently Asked Questions (including regarding sanctions applicable to Russian Harmful Foreign Activities, Belarus, Ukraine and Russia) .

OFAC published a range of general licenses, intended to minimize unintended impacts on third parties.

Russia-related

• Russia-Related General License 5 authorizes transactions for the conduct of the official business of certain international organizations (as well as a notation indicating that transactions for the conduct of the official business of the United Nations and its specialized agencies, programs, funds, and related organizations are exempt);
• Russia-Related General License 6 authorizes all transactions ordinarily incident to the export or reexport of covered agricultural commodities, medicine, and medical devices (including software and replacement parts), as well as transactions relating to the prevention, diagnosis, or treatment of COVID-19;
• Russia-Related General License 7 authorizes transactions ordinarily incident to services rendered in connection with overflights of the Russian Federation or emergency landings;
• Russia-Related General License 8 authorizes energy-related transactions through June 24, 2022 with certain entities;
• Russia-Related General License 9 authorizes transactions necessary to divest, to a non-U.S. person, debt or equity;
• Russia-Related General License 10 authorizes transactions necessary to wind down certain derivative contracts.
• Russia-Related General License 11 authorizes a broader wind-down of certain transactions;
• Russia-Related General License 12 authorizes U.S. persons to reject (as opposed to block) all transactions involving Otkritie, Sovcombank, VTB, or any entity that is 50% or more owned by one of these Russian financial institutions, through March 26, 2022;

Belarus

• Belarusian General License 6 authorizes all transactions that are for the official business of the United States government; and
• Belarusian General License 7 authorizes all transactions that are for the official business of certain international organizations, including the United Nations and its programmes, funds, specialized agencies, and related organizations.

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) added Russian Harmful Foreign Activities Sanctions Regulations (31 CFR part 587) to implement Executive Order 14024 from April 15, 2021. OFAC intends to supplement these regulations with a more comprehensive set of regulations, which may include additional interpretive guidance and definitions, general licenses, and other regulatory provisions.

This White House Fact Sheet on Russia and Belarus sanctions describes new sanction actions. More details will be published by agencies in coming days (see example below for Belarus).

Actions described in the Fact Sheet include:

• Sweeping restrictions on Belarus to choke off its import of technological goods in response to its support of Putin’s war of choice. The Department of Commerce will extend the stringent export control policies put in place for Russia to Belarus.
• Full blocking sanctions on Russian defense entities. The Department of State will impose sweeping sanctions that target Russia’s defense sector to further restrict Putin’s war machine. In total, 22 Russian defense-related entities will be designated, including firms that make combat aircraft, infantry fighting vehicles, electronic warfare systems, missiles, and unmanned aerial vehicles for Russia’s military.
• Export Controls Targeting Oil Refining, a Key Revenue Source that Supports Russian Military. Through export controls on oil and gas extraction equipment, the Commerce Department will impose restrictions on technology exports that would support Russia’s refining capacity over the long term.
• Targeting Entities Supporting the Russian and Belarusian Military. The Commerce Department, in coordination with its interagency partners, will add entities that have been involved in, contributed to, or otherwise supported the Russian and Belarusian security services, military and defense sectors, and/or military and defense research and development efforts to the Entity List.
• Banning Russian aircraft from entering and using domestic U.S. airspace.

In response to Belarus’s substantial enabling of the Russian Federation’s (Russia)’s further invasion of Ukraine, this rule is adding new license requirements and review policies for Belarus to the Export Administration Regulations (EAR) to render Belarus subject to the same sanctions that were imposed on Russia under the EAR effective February 24, 2022.

These new sanctions impose new Commerce Control List (CCL)-based license requirements for Belarus;

• revise the two foreign “direct product” rules (FDP rules) that are specific to Russia and Russian ‘military end users’ to make them also applicable to Belarus and Belarusian ‘military end users;’
• specify a license review policy of denial applicable to all of the license requirements on Belarus that are being added in this rule, with certain limited exceptions;
• significantly restrict the use of EAR license exceptions;
• expand the existing ‘military end use’ and ‘military end user’ control scope to include Belarus for all items “subject to the EAR” other than food and medicine designated EAR99;
• and add two new Belarusian entities to the Entity List as ‘military end users.’

This rule also imposes a license requirement for nuclear nonproliferation items for exports and reexports to Belarus and removes Belarus from Country Group A:4 under the EAR.

In addition, for Belarus and Russia, this rule amends the availability of License Exceptions AVS and ENC and includes clarifying guidance on the availability of CCD.