On March 2, 2021, the US Departments of Treasury, State, and Commerce announced the coordinated imposition of sanctions and other restrictive measures on Russia and Russian officials and entities for the “poisoning and subsequent imprisonment of Russian opposition figure Aleksey Navalny.” The Department of the Treasury added seven Russian officials and entities to the Specially Designated Nationals and Blocked Persons List (the SDN List) pursuant to Executive Order (EO) 13661 and EO 13382, thereby blocking their property or interests in property that come within the possession of US persons or the jurisdiction of the United States. US persons are now prohibited from engaging in transactions with these SDNs. The State Department designated seven entities under its own authority, including four that were already on the SDN List. Treasury further expanded the sanctions applied to Russia in 2018 after the poisoning of Sergei Skripal in the UK, and named six entities as operating for the Russian defense sector, triggering sanctions. The Commerce Department announced the addition of fourteen entities to the Entity List, which triggers a licensing requirement for exports, re-exports, and in-country transfers to those entities of all items subject to the US Export Administration Regulations (EAR).
The US Treasury Department’s Office of Foreign Assets Control (OFAC) added to the SDN List the following seven Russian government officials pursuant to EO 13661 (March 17, 2014), “Blocking Property of Additional Persons Contributing to the Situation in Ukraine,” for “serving as officials of the Russian government.”
- Federal Security Service (FSB) Director Aleksandr Bortnikov (Bortnikov)
- Chief of the Presidential Policy Directorate Andrei Yarin (Yarin)
- First Deputy Chief of Staff of the Presidential Executive Office Sergei Kiriyenko (Kiriyenko)
- Deputy Minister of Defense Aleksey Krivoruchko (Krivoruchko)
- Deputy Minister of Defense Pavel Popov (Popov)
- Federal Penitentiary Service (FSIN) director Alexander Kalashnikov (Kalashnikov)
- Prosecutor General Igor Krasnov (Krasnov)
OFAC also designated FSB Director Bortnikov pursuant to EO 13382 (June 28, 2005), “Blocking Property of Weapons of Mass Destruction Proliferators and Their Supporters,” for “acting or purporting to act for or on behalf of, directly or indirectly,” the FSB.
In connection with the designations, OFAC issued cyber-related General License (GL) 1B, “Authorizing Certain Transactions with the Federal Security Service,” which replaces, but does not substantively change, GL 1A, dated March 15, 2018. According to OFAC, GL 1B:
- Authorizes transactions and activities with the FSB that are “necessary and ordinarily incident to requesting, receiving, utilizing, paying for, or dealing in certain licenses and authorizations for the importation, distribution, or use of certain information technology products” in Russia (FAQ 501);
- Only authorizes certain transactions and activities with the FSB “acting in its administrative and law enforcement capacities” (FAQ 502); and
- Does not authorize the exportation of hardware or software directly to the FSB, or where the FSB is the end user of such hardware and software (FAQ 503).
State Department Designations and Other Measures
The US State Department announced a range of measures in response to the attempt to assassinate Mr. Navalny.
The State Department added the following three Russian entities to the SDN List pursuant to EO 13382, for having “engaged in activities to develop Russia’s chemical weapons capabilities, including technologies for delivering such weapons.”
- State Scientific Research Institute of Organic Chemistry and Technology (GosNIIOKhT)
- 33rd Scientific Research and Testing Institute (33rd TsNIII)
- 27th Scientific Center (27th NTS)
State also designated four additional individuals and entities, also pursuant to EO 13382, that were already present on the SDN List:
- Federal Security Service (FSB)
- Main Intelligence Directorate (GRU)
- GRU officer Alexander Yevgeniyevich Mishkin (Mishkin)
- GRU officer Anatoliy Vladimirovich Chepiga (Chepiga)
According to the State Department, the FSB is being designated for “its role in the Navalny poisoning and for possessing a Novichok chemical weapon[,]” while the GRU, Mishkin, and Chepiga “have engaged in activities that materially contribute to the possession, transport, and use of WMD by Russia, namely the chemical weapon Novichok.” It should be noted that these individuals and entities have already been designated and restricted pursuant to EO 13694 as amended, as well as section 224 of the Countering America’s Adversaries Through Sanctions Act (CAATSA).
The State Department also is expanding certain sanctions imposed on Russia after the 2018 chemical weapon attack on Sergei Skripal and his daughter in the United Kingdom. These sanctions, which restrict foreign assistance and US government credit to Russia, terminate arms sales and foreign military financing, and restrict certain commercial exports to Russia, will remain in effect for at least one year.
Some of these sanctions are subject to waivers, given the determination by the US government that it is “essential to US national security interests to waive certain restrictions on foreign assistance and exports.” The State Department issued a fact sheet to explain which waivers remain in effect and those that have been modified or eliminated, thereby tightening up the restrictions on business with Russia. The waivers that remain in effect are as follows:
- Certain Commerce Department dual use export license exceptions remain available for exports and reexports to Russia: Temporary Imports, Exports, and Reexports (TMP); Governments, International Organizations, and International Inspections under the Chemical Weapons Convention (GOV); Baggage (BAG); Aircraft and Vessels (AVS); or Encryption Commodities and Software (ENC).
- Dual use items needed to ensure the safe operation of commercial passenger aviation will not be subject to sanctions restrictions;
- Exports to wholly-owned subsidiaries of US and other foreign companies operating in Russia will not be affected;
- The Commerce Department will continue to process applications for “deemed exports” to Russian nationals working in the United States on a case-by-case basis; and
- Exports in support of US-Russian government space cooperation remain unaffected.
However, the State Department will remove several previously-issued waivers, including:
- Commerce Department license exceptions Service and Replacement of Parts and Equipment (RPL), Technology and Software Unrestricted (TSU), and Additional Permissive Reexports (APR) are no longer available;
- Applications for the export, reexport, or in-country transfer of “national security” (NS) controlled items to commercial end-users in Russia for civil end-uses will now be reviewed with a presumption of denial; and
- Applications for the export of US Munitions List items and Commerce Control List NS-controlled items in support of commercial space flight activities in Russia will be reviewed under a presumption of denial after a six month transition period.
The State Department is amending the International Traffic in Arms Regulations (ITAR), section 126.1, to include Russia in the list of countries subject to a policy of denial for exports of ITAR-controlled defense articles and defense services. However, as discussed above, the State Department has adopted an exception to this policy for licenses associated with government space cooperation. It also is allowing for the use of exemptions in ITAR §§ 126.4(a)(2) and (b)(2) for exports to Russia in furtherance of government space cooperation.
The State Department also added six entities to the CAATSA Section 231 list of entities that are part of, or operate for or on behalf of, the Russian defense sector. These newly-added entities are:
- 27th Scientific Center
- 33rd Scientific Research and Testing Institute (aka 33rd TsNIII)
- 48th Central Scientific Research Institute Kirov (aka 48th Central Research Institute Kirov; aka 48th TsNII)
- 48th Central Scientific Research Institute Sergiev Posad (also known as [aka] 48th TsNII Sergiev Posad; aka 48th Central Research Institute, Sergiev Posad)
- 48th Central Scientific Research Institute Yekaterinburg (aka 48th TsNII Yekaterinburg)
- State Scientific Research Institute of Organic Chemistry and Technology (aka GoSNIIOKhT)
As described in our prior blog post, when Section 231 sanctions are triggered, the State Department must impose five or more measures from a menu of sanctions on any person (US or non-US) that engages in significant transactions with a section 231 designated entity. The US Government imposed such sanctions in connection with Turkey’s purchase of S-400 missile systems from Russia.
BIS Additions to the Entity List
The US Department of Commerce, Bureau of Industry and Security (BIS) announced the addition of 14 entities to its Entity List. BIS announced that this action “supplements the addition of five Russian Government facilities to the Entity List in August 2020 for supporting Russia’s chemical and biological weapons programs.” The Entity List designation means that license exceptions will no longer be available; and all items subject to the EAR will require a license for export, reexport, or in country transfer to these entities. The 14 entities are:
- The 27th Scientific Center of the Russian Ministry of Defense (a.k.a., 27th NTs) (Russia)
- Chimmed Group (Russia)
- Chimconnect GmbH (Germany)
- Chimconnect AG (Switzerland)
- Pharmkontract GmbH (Germany)
- Femteco (Russia)
- Interlab (Russia)
- LabInvest (Russia)
- OOO Analit Products (Russia)
- OOO Intertech Instruments (Russia)
- Pharmcontract GC (Russia)
- Rau Farm (Russia)
- Regionsnab (Russia)
- Riol-Chemie (Germany)
BIS describes the first entity, the 27th Scientific Center of the Russian Ministry of Defense, as a “Russian Government Ministry of Defense facility associated with Russia’s chemical weapons activities.” BIS will review license applications for this entity under § 744.4(d) of the EAR, the review policy that applies to items subject to the EAR that are destined for certain chemical and biological weapons end-uses.
The other 13 entities were added “based on their proliferation activities in support of Russia’s weapons of mass destruction programs.” BIS will review these entities’ license applications under § 744.4(d) of the EAR as well as the policies set forth in § 744.2(d) and § 744.3(d), which apply to items subject to the EAR that are destined for certain nuclear and missile technology end-uses, respectively.
These additions follow the issuance on February 24, 2020 by BIS of a rule that expands the scope of US proliferation-related export controls on Russia under the EAR, as discussed in our prior blog post.
These sanctions and regulatory changes will require compliance updates for affected industries and entities. The removal of certain BIS license exceptions and waivers (and the addition of Russia to ITAR §126.1) may be significant for certain industry sectors, resulting in the need to revamp internal export procedures, assess business impacts now and going forward, and adopt new licensing procedures to avoid inadvertent infractions. Companies doing business in Russia are advised to closely monitor developments in US trade policy toward Russia, as it is possible more restrictions will be in the offing. Please contact the Steptoe International Trade and Regulatory Compliance team with any questions.