US, Allies Announce New Restrictions to ‘Starve’ Russia of Tech, Financing
The U.S. announced a host of new Russia-related sanctions and export controls last week, including more than 300 sanctions designations by the Treasury and State departments and an expansion of Commerce Department export controls on items destined to Russia and entities supporting the country’s military. The measures, some of which were coordinated with allies as part of the Group of 7 summit in Japan, aim to “further undermine Russia’s capacity to wage its illegal aggression” in Ukraine, the G-7 countries said in a May 19 joint statement.
The countries said they “remain united in imposing coordinated sanctions and other economic actions” against Russia, and committed to ”broaden our actions” to impose export controls on “all items critical to Russia’s aggression,” specifically mentioning “industrial machinery” and other technology. They also said they are “prepared to take further measures” to penalize people and companies “willfully supporting the financing of Russia’s war. “We will starve Russia of G7 technology, industrial equipment and services that support its war machine,” the countries said.
Treasury’s new financial sanctions target more than 120 entities and people, including “dozens” of third-country parties tied to sanctions evasion activities, and expand U.S. sanctions to cover Russia’s architecture, engineering, construction, manufacturing and transportation sectors in a pair of new determinations, one effective May 19 and the other effective 12:01 a.m. June 18. The State Department sanctions targeted more than 200 people, entities, vessels and aircraft, including parties that procure items for Russia’s military.
Treasury also issued a new Russia-related directive outlining a new reporting requirement for U.S. people or companies, which will require them to tell the Office of Foreign Assets Control if Russia’s Central Bank, the National Wealth Fund or the Ministry of Finance “has an interest” in their property. New General Licenses 13E authorizes certain transactions that would normally be prohibited by the directive, while GLs 66, 67 and 68 authorize certain transactions with various entities sanctioned by the agency last week.
OFAC also issued an array of new frequently asked questions, including guidance for the new Russia sanctions determinations. Other guidance includes a joint alert issued by Treasury’s Financial Crimes Enforcement Network and Commerce’s Bureau of Industry and Security, which describes additional Russia-related sanctions evasion tactics. The alert outlines Russia’s use of third-party intermediaries and transshipment points to evade export controls, a list of “high priority items” to monitor, various red flag indicators, ways to improve compliance and more.
BIS also introduced a range of new Russia-related export controls, including measures that expand its Russian and Belarusian Industry Sector Sanctions and foreign direct product rule restrictions, and add 71 new entities to the Entity List. Some of the changes, outlined in a 106-page final rule effective May 19, “better align” U.S. export controls with allies, place new export license requirements on additional “industrial items” and chemicals destined to Russia, and impose controls on certain electrical parts destined to Iran for use in unmanned drones, among many other new restrictions and clarifications.
The Entity List changes, also effective May 19, add entities in Armenia, Kyrgyzstan and Russia for either supporting Russia’s military sector, diverting U.S.-controlled items to Russia or preventing a U.S. end-use check. Sixty-nine of those entities, which include research institutes, engineering companies, civil aviation firms and more, were designated as Russian or Belarusian military end users and will be subject to the BIS Russia/Belarus-Military End User Foreign Direct Product Rule.
BIS Undersecretary Alan Estevez said the controls were imposed alongside allies as part of the U.S.-spearheaded “Global Export Control Coalition.” He added that the agency will “continue to impose costs on the Kremlin for continuing this war both by further restricting their access to additional items, as well as through aggressive enforcement in concert with our allies and partners.”
BIS said the changes make its existing Russian and Belarusian Industry Sector Sanctions “stronger, more effective, and easier to understand and comply with,” including by adding license requirements for more items controlled under the Export Administration Regulations to help align U.S. restrictions with those imposed by close allies. The items include a “variety” of electronics, instruments and “advanced fibers for the reinforcement of composite materials, including carbon fibers,” the agency said, as well as “discrete chemicals, biologics, fentanyl and its precursors, and related equipment” designated as EAR99.
BIS also expanded the list of foreign-produced items that require a license when destined to Russia, Belarus or Iran to “further limit” Iran’s ability to support Russia by providing it with unmanned drones. The agency also expanded the scope of its Russia/Belarus FDP rule to apply the restriction to the Russian-occupied Crimea region, “thereby making it more difficult for items to be procured for Russia’s use in Crimea in support of its ongoing military aggression in Ukraine.”
All exports that now require a license as a result of the Entity List additions or the other export control changes that were aboard a carrier to a port as of May 19 may proceed to their destinations under the previous eligibility without a license before June 20. Any items captured by the Entity List changes but not exported before midnight June 20 will require a license. See the BIS notice for a complete list of the Entity List additions.