Russia, Ukraine: Update as of June 6 | Bass, Berry & Sims APIs
Bass, Berry & Sims’ international trade team is actively monitoring the situation in Russia and Ukraine and providing real-time advice to customers on how to handle the situation. This article summarizes new U.S. export sanctions and restrictions effective Monday 6 june. This article complements our previous summaries, which are available by following the links at the end of this blog post.
Commerce Department Issues Final Rule Refining Export Administration Regulations and Improving Transparency in Export Enforcement Matters
EAR Changes and Clarifications
On June 2, the U.S. Department of Commerce, Bureau of Industry and Security (BIS) issued a final rule refining certain provisions of the Export Administration Regulations (EAR).
Several parts of the rule expand and refine EAR restrictions related to Russia and Belarus.
First, the rule amended export controls related to end uses and military end users from Russia and Belarus to extend licensing requirements to foods and drugs designated as EAR99. The entity list will also be amended to reflect the updated food and drug licensing requirement. The license review policy for EAR99 food and drug will be on a case-by-case basis while – as was the case before – all other items will be subject to a denial policy.
The final rule also made technical corrections and clarifications to the Russia and Belarus sections of the EAR, including changing the wording of the Russia and Belarus sections of the EAR to ensure consistency, clarifying the licensing review policy to support civil telecommunications infrastructure, clarifying the Russian industrial sector. Sanctions List by updating Appendix B numbers and clarifying the dollar value of clothing and footwear entries in the Luxury Goods List.
More generally, the final rule seeks to increase transparency by amending the EAR to make letters of indictment public upon filing with the administrative judge (ALJ). The BRI said that by making the letters of accusation public when filed with the ALJ, it seeks to educate the exporting community about the consequences that can result from misconduct and encourage investment in compliance and deterrence.
On June 6, the BRI released the letter of indictment issued against Roman Abramovich, a Russian national, for re-exporting US-origin aircraft without BRI authorization.
Specifically, BIS accused Mr. Abramovich on or about March 12 of re-exporting Gulfstream G650ER aircraft from Turkey to Russia; on March 13, the Gulfstream flew from Russia to Israel, then to Turkey on March 14. On March 15, the Gulfstream flew from Turkey to Russia. On March 4, it re-exported Boeing 787-8s from the United Arab Emirates to Russia. Mr. Abramovich did not obtain the required authorization the three times he re-exported Gulfstream and Boeing planes to Russia. Since March 2, the BRI has required authorizations to export and re-export aircraft of American origin to Russia or Belarus.
Seventy-one entities added to entity list
On June 2, the BIS issued a final rule adding 71 Russian and Belarusian entities to the entity list. The result is that these entities are severely restricted in terms of access to US technology and assets. The licensing review policy for these entities is the denial policy.
Notably, 66 entities were determined to be military end users and subject to the foreign direct product rule for exports by foreign manufacturers. See our April 11 article for more information on the expanded foreign direct product rule.
Treasury Designates a Wide Range of Russian Assets and Individuals to the Specially Designated National List (SDN) and Sectoral Sanctions Identification List (SSI)
On June 2, the US Treasury Department’s Office of Foreign Assets Control (OFAC) designated numerous yachts and planes, a yacht brokerage firm, Russian politicians and President Putin’s fund manager with the aim of disrupt networks used by Russian elites to evade sanctions.
Blockades against properties, companies and individuals linked to President Putin
OFAC has designated two yachts, the Russian-flagged Graceful and the Cayman Islands-flagged Olympia, as blocked property in which President Putin has an interest. OFAC has also named entities and a person involved in the ownership or management of the yachts: Olympia: SCF Management Services Cyprus Ltd; Ironstone’s maritime investments; Argument JSC; O’Neill Assets Corporation; and Andrei Valeryevich Gasilov, sole shareholder of JSC Argument and former director.
Additionally, yachts named Shellest and Nega have been identified as being linked to President Putin and belonging respectively to Non-Profit Partnership Revival of Maritime Traditions and its Russian subsidiary, Limited Liability Company Gelios. The Shellest and the Nega were designated as escrow property, and Non-Profit Partnership Revival and its subsidiary were designated to have operated or operated in the Russian maritime sector.
OFAC has appointed Imperial Yachts SARL (Imperial), a Monaco-based yacht brokerage firm that designs, charters and manages mega yachts for many Russian elites. OFAC claimed Imperial had an office in Moscow and provided services to Russia’s elite, including President Putin’s inner circle. OFAC also blocked Imperial CEO Evgeniy Borisovich Kochman and Flying Fox, the largest of Imperial’s yachts. OFAC also designated four other Kochman-related entities:
- OOO Nord Marine
- OOO Yakht-Treid
- OOO Bidding Management
- OOO North Marin Inzhiniring
In addition, OFAC named a close confidant and adviser to President Putin, Sergei Pavlovich Roldugin, apparently the godfather of President Putin’s daughter and who manages much of President Putin’s overseas wealth. Roldugin’s wife, Elena Yuryevna Mirtova, was also named.
Additional Blocked Properties and Businesses
OFAC has designated SRL Skyline Aviation, a San Marino-based company, the T7-OKY aircraft and the Sea Rhapsody yacht for routes with Andrei Kostin, designated in 2018 to be a Russian government official.
OFAC has identified Madame Gu, a yacht, a 3A-MGU helicopter and a P4-MGU aircraft for liaisons with Andrei Vladimirovich Skoch, a member of the Russian Duma, who has been designated twice by OFAC, in 2018 and 2022, to be an official of the government of Russia.
Designated senior officials of the Russian government
OFAC named five other senior Russian officials:
- Yury Slyusar – chairman of United Aircraft Corporation (UAC). UAC is 88% owned by Rostec, a Russian public defense company. Slyusar was previously nominated by the European Union, Australia, Canada, New Zealand and the United Kingdom.
- Vitaly Savelyev – Minister of Transport of the Russian Federation, Member of the Board of Russian Railways and Chairman of the Board of Aeroflot. Savelyev was previously nominated by the European Union and the United Kingdom.
- Maxim Reshetnikov – Minister of Economic Development of the Russian Federation and member of the board of directors of sanctioned Russian entities, including VTB Bank, VEB.RF and Russian Railways. Reshetnikov was previously nominated by the European Union, Australia, Canada, New Zealand and the United Kingdom.
- Irek Envarovich Faizullin – Minister of Construction, Housing and Utilities of the Russian Federation and member of the Board of Russian Railways. Faizullin was previously nominated by the European Union and the United Kingdom.
- Dmitriy Yuryevich Grigorenko – Deputy Prime Minister and Chief of Staff of the Government of Russia. Grigorenko was previously nominated by the European Union, Australia, Canada, New Zealand and the United Kingdom.
OFAC issues blanket licenses; Modifies a general license
- GL 25B – authorizes certain transactions that (1) are generally related to the receipt and transmission of telecommunications involving Russia or (2) relate to the export to Russia of services, software, hardware or technology related to exchange of communications on the Internet. The GL does not allow transactions with specifically named Russian entities. GL 25B replaces GL 25A, which was released on May 8.
- GL 36 – authorizes transactions that are usually incidental and necessary to terminate transactions involving the public joint-stock company Severstal. GL 36 expires August 31, 2022.
- GL 37 – authorizes transactions that are usually incidental and necessary to terminate transactions involving Nord Gold PLC. GL 37 expires July 1, 2022.
- GL 38 – authorizes transactions usually incidental and necessary to the processing of pension payments to US Persons. The GL does not allow debits to an account of a US financial institution of the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation or the Ministry of Finance of the Russian Federation. There is no expiration date associated with this GL.
State targets Russian oligarchs and elites – Parties added to OFAC lists
On June 2, the US Department of State designated the following individuals and entities. These people and entities are added to the OFAC SDN List or SSI List.
- God Nisanov, an oligarch with close ties to many Russian officials.
- Evgeny Novitskiy, a Russian elite closely linked to the Russian government.
- Maria Zakharova, spokesperson for the Ministry of Foreign Affairs. Zakharova was previously nominated by the European Union, Australia, New Zealand, Japan and the United Kingdom.
- Sergey Gorkov, director of RosGeo and former head of sanctioned banks.
- Severgroup Limited Liability Company (Severgroup), a multi-billion dollar investment company with holdings and subsidiaries in several sectors of the Russian economy such as metallurgy, engineering, mining, technology and bank.
- Alexey Mordashov, CEO of Severgroup.
- Marina Mordashova, Nikita Mordashov and Kirill Mordashov, family members of Alexey Mordashov.
- Public Joint Stock Company Severstal, owned by Alexey Mordashov. As noted above, OFAC General License 36 permits certain Severstal-related liquidation activities through the end of August 2022.
- Limited Liability Company Algoritm, owned by Alexey Mordashov.
- Nord Gold, owned by Alexey Mordashov. As noted above, OFAC General License 37 permits certain Severstal-related liquidation activities through July 1, 2022.