On August 9, 2021, the United States, United Kingdom and Canada announced further coordinated sanctions to mark one year since the allegedly fraudulent 2020 Belarusian presidential election in response to the continued undermining of democracy and human rights violations by the Lukashenko regime. The new sanctions follow the imposition by the United States, United Kingdom, European Union and Canada, on June 21, 2021, of targeted financial sanctions against dozens of individuals and entities as well as EU sectoral-style sanctions against certain sectors of the Belarusian economy, as discussed in our June 28, 2021 blog post.
New US Sanctions
The US measures include a new executive order (“EO”), 44 new additions to the Specially Designated Nationals and Blocked Persons List (“SDN List”), a new general license (“GL”) and three new frequently asked questions (“FAQs”) regarding those measures.
The new EO 14038 is entitled “Blocking Property of Additional Persons Contributing to the Situation in Belarus” and contains a number of notable measures. First, the EO expands the category of persons who may be designated by the Secretary of the Treasury as an SDN to include, among others, persons determined to be responsible for or complicit in, or to have directly or indirectly engaged or attempted to engage in:
- actions or policies that threaten the peace, security, stability, or territorial integrity of Belarus;
- actions or policies that prohibit, limit, or penalize the exercise of human rights and fundamental freedoms (including freedoms of expression, peaceful assembly, association, religion or belief and movement) by individuals in Belarus, or that limit access to the internet or print, online, or broadcast media in Belarus;
- electoral fraud or other actions or policies that undermined the electoral process in a Republic of Belarus election;
- deceptive or structured transactions or dealings to circumvent any US sanctions by or for or on behalf of, or for the benefit of, directly or indirectly, the Government of Belarus or any person whose property and interests in property are blocked pursuant to EO 14038 or Executive Order 13405 (Blocking Property of Certain Persons Undermining Democratic Processes or Institutions in Belarus); and
- public corruption.
The order also authorizes the designation of persons determined:
- to be a leader, official, senior executive officer, or member of the board of directors of an entity engaged in the above activities, certain activities enumerated in EO 13405, or which is blocked under EO 14038 or EO 13405;
- to be a political subdivision, agency, or instrumentality of the Government of Belarus;
- to be or have been a leader or official of the Government of Belarus;
- to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, any activity described above or any person designated pursuant to EO 14038; and
- to be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, the Government of Belarus or any person designated pursuant to EO 14038.
The term Government of Belarus is defined broadly to include “the Government of Belarus, any political subdivision, agency, or instrumentality thereof, including the National Bank of the Republic of Belarus and any person owned, controlled, or directed by, or acting for or on behalf of, the Government of Belarus.”
Finally, EO 14038 authorizes the designation of persons determined “to operate or have operated in” certain enumerated sectors of the Belarus economy, including:
- the defense and related materiel sector;
- security sector;
- energy sector;
- potassium chloride (“potash”) sector;
- tobacco products sector;
- construction sector;
- transportation sector; or
- any other sector of the Belarus economy as may be determined by the Secretary of the Treasury.
EO 13850 under the Venezuela sanctions program similarly authorizes the designation of persons determined “to operate” in certain enumerated sectors of the Venezuelan economy. In that context, OFAC has interpreted the term “to operate” broadly by, for example, designating persons engaged in business involving Venezuela, such as the purchase or shipment of oil, but who do not have physical operations within Venezuela. It is worth noting that, unlike the new EO 14038, EO 13850 does not contain the phrase “or have operated in,” which suggests that EO 14038 may apply to a broader range of actors and past conduct. Companies operating in the above industries in Belarus should be aware that their conduct does not need to involve the United States or US persons for them to be targeted by the above authority. Therefore, any entity operating in the above sectors in Belarus may face sanctions risk even if the conduct occurs entirely outside the United States.
The 44 designations announced by the Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) include 23 individuals and 21 entities, which were designated under EO 14038 and EO 13405. As explained by OFAC, the designated persons “are involved in the continuing violent crackdown on peaceful protests; are connected to the May 23, 2021, Ryanair incident; or, profit from or sustain the Belarusian regime at the expense of the Belarusian people.” The designated persons include individuals and entities associated with the energy, tobacco and construction sectors; Belarus state-owned entities; the Belarus security services; persons involved in the Ryanair incident; Belarus government officials; and persons involved in Belarussian athletics, human rights abuses and corruption. A complete list of designated persons is available on the OFAC website.
Belarus GL 4 relates to Belaruskali OAO, which was designated by OFAC on August 9, and authorizes “all transactions and activities prohibited by” EO 14038 “that are ordinarily incident and necessary to the wind down of transactions involving Belaruskali OAO, or any entity in which Belaruskali OAO owns, directly or indirectly, a 50 percent or greater interest.” The GL is valid through 12:01 a.m. eastern standard time, December 8, 2021. OFAC describes Belaruskali OAO as “one of the world’s largest producers of key fertilizer ingredient potassium chloride (potash) and a major source of tax revenue and foreign currency for the Lukashenka regime.”
New FAQ 916 describes EO 14038 and provides additional context with respect to the intent of the EO. New FAQ 917 clarifies that “identification of a sector pursuant to [EO 14038] provides notice that persons operating in the identified sector risk exposure to sanctions; however, the identification of a sector does not automatically block all persons operating in that sector of the Belarus economy.” New FAQ 918 provides additional information regarding GL 4. In particular, it notes that the GL “does not authorize the entry into new purchase contracts, or the stockpiling of inventory, involving Belaruskali OAO, or any entity in which Belaruskali OAO owns, directly or indirectly, a 50 percent or greater interest … that are not ordinarily incident and necessary to the wind down of transactions.”
New UK Sanctions
The UK Foreign Secretary, Dominic Raab, has announced a package of trade, financial and aviation sanctions on Belarus, which are intended to target and apply pressure to the Lukashenko regime, state institutions and those around Alexander Lukashenko while minimizing, to the extent possible, any unintended consequences on the wider population in Belarus. The UK government’s new Belarusian sanctions measures are imposed under The Republic of Belarus (Sanctions) (EU Exit) (Amendment) Regulations 2021 (“Amended UK Regulations”).
The Department for International Trade’s notice entitled “NTE 2021/09: new UK trade sanctions imposed on the Republic of Belarus” provides an overview of the new trade sanctions measures imposed on Belarus, which will be administered by the Export Control Joint Unit and include prohibitions on:
- exporting, making available, supplying and delivering or transferring items that could be used for the interception or monitoring of telecommunications (as specified in Schedule 2A, Amended UK Regulations) in Belarus, as well as related provision of technical assistance, financial services, funds and brokering services. This prohibition also covers interception and monitoring services to – or for the benefit of – the Government of Belarus;
- exporting, making available, supplying and delivering or transferring dual-use items that are for use by the Belarusian military, any other military end-user or for any military use, as well as related provision of technical assistance, financial services, funds and brokering services;
- importing, acquiring or supplying and delivering potash (as specified in Schedule 2B, Amended UK Regulations) originating in – or consigned from – Belarus;
- importing, acquiring or supplying and delivering petroleum products (as specified in Schedule 2B, Amended UK Regulations) originating in – or consigned from – Belarus, as well as the provision of technical assistance, financial services, funds and brokering services related to the acquisition or supply and delivery of these items;
- exporting, making available or supplying and delivering specified goods used for the production or manufacture of tobacco industry products (as specified in Schedule 2B, Amended UK Regulations) to or for use in Belarus; and
- the provision of technical assistance related to aircraft when this is provided to or for the benefit of eight designated persons identified in the Foreign, Commonwealth and Development Office’s August 9, press release. The Republic of Belarus sanctions: guidance (“UK Statutory Guidance”) identifies the following eight aircraft that – as of August 9, 2021 – the UK government considers relevant to this prohibition:
- Gulfstream G550 – Registration number: EW-001PJ;
- Boeing 767-300 – Registration number: EW-001PB;
- Boeing 737-800 – Registration number: EW-001PA;
- Mil Mi-8 helicopter – Registration number: EW-002DA;
- Mil Mi-8 helicopter – Registration number: EW-001DA;
- AgustaWestland AW-139 helicopter – Registration number: EW-001PH;
- Embraer ERJ-135BJ Legacy – Registration number: P4-MSG; and
- Bombardier BD-700 1A10 Global Express XRS – Registration number: P4-GMS.
The UK Statutory Guidance has been updated to reflect the new financial sanctions measures, which will be administered by the Office of Financial Sanctions Implementation (“OFSI”) on behalf of HM Treasury and include:
- prohibitions on providing insurance and re-insurance services to: (1) Belarus; (2) a Belarusian authority; (3) an entity that is wholly owned by Belarus or a Belarusian authority; or (4) those acting on behalf of – or at the direction of – any of the foregoing persons; and
- restrictions on access to UK capital markets for: (1) Belarus; (2) a Belarusian authority; (3) entities that are wholly owned by Belarus or a Belarusian authority; (4) credit or financial institutions that are majority owned by Belarus or a Belarusian authority and those non-UK entities majority owned by such institutions; and (5) those acting on behalf of – or at the direction of – the aforementioned institutions. These restrictions target direct or indirect:
- dealings with transferable securities or money-market instruments (excluding instruments of payment) issued after noon British Summer Time on August 9, 2021 with a maturity exceeding 90 days; and
- new loans or credit arrangements with a maturity exceeding 90 days.
The term Belarusian authority is defined broadly in the Amended UK Regulations to include:
- public bodies and agencies subordinate to the President of Belarus, including the Administration of the President of Belarus and the Committee of State Control;
- the Council of Ministers of Belarus and each of its members;
- any Ministry of the Government of Belarus;
- any public body, agency or state concern subordinate to the Council of Ministers of Belarus;
- any State Committee of Belarus;
- the National Bank of Belarus; and
- any local government body of Belarus, including the Councils of Deputies and Executive Committees.
Some of the foregoing trade and financial sanctions prohibitions are subject to exceptions. It also may be possible to obtain licences in certain circumstances. The specific circumstances in which a license may be granted for certain activities that otherwise would be prohibited by the Amended UK Regulations are set out in the UK Statutory Guidance.
Aviation measures preventing Belarusian air carriers from overflying or landing in the United Kingdom have been introduced under Part 5A of the Amended UK Regulations, which confers powers on the Secretary of State for Transport, air traffic control and airport operators to make certain directions with the object of preventing aircraft owned, chartered or operated by a person connected with Belarus, or registered in Belarus, from flying over or landing in the United Kingdom. It also empowers the Civil Aviation Authority to refuse certain permissions under the Air Navigation Order 2016 – or to suspend/revoke permissions already granted – in respect of Belarusian aircraft.
OFSI also announced the designation of one individual under The Republic of Belarus (Sanctions) (EU Exit) Regulations 2019 (S.I. 2019/600). Mikhail Safarbekovich Gutseriev is a prominent Russian businessman who is one of the main private investors in Belarus and a “longstanding associate” of President Lukashenko. According to OFSI’s Financial Sanctions Notice, “Gutseriev has provided support for the Government of Belarus, including through use of his business interests.”
Following his designation, Gutseriev is subject to an asset freeze and UK persons and any person within the UK are prohibited from dealing with his funds or economic resources or making funds/economic resources available to, or for the benefit of, Gutseriev. The prohibition on dealing with Gutseriev’s funds or economic resources also extends to any legal entities that he owns or controls, directly or indirectly, even if the particular entity is not itself listed by the UK as a designated person. In addition, Gutseriev is subject to a UK travel ban.
UK sanctions targeting Belarus now apply to a total of 100 individuals and 9 entities.
New Canadian Sanctions
In coordination with the US and UK, Canada also announced a number of new sanctions measures. As described in a press release from the Canadian Foreign Ministry, the new measures “impose restrictions on key sectors of the Belarusian economy and minimize Belarusian state actors’ access to international finance.” The targeted sectors include “transferrable securities and money market instruments, debt financing, insurance and reinsurance, petroleum products and potassium chloride products.” The restrictions are imposed pursuant to Canada’s Special Economic Measures Act and the Special Economic Measures (Belarus) Regulations (“Canadian Regulations”) and, with some exceptions, prohibit persons in Canada or Canadians outside Canada from:
- dealing in transferable securities and money market instruments, including treasury bills, certificates of deposit and commercial papers but not including instruments of payment, issued by specific entities or individuals identified in the Canadian Regulations;
- transacting in, provide financing for or otherwise dealing in debt of longer than 90 days’ maturity, including bonds, loans, debentures, extensions of credit, loan guarantees, letters of credit, bank drafts, bankers’ acceptances, discount notes, treasury bills, commercial paper and other similar instruments in relation to specific entities or individuals identified in the Canadian Regulations;
- providing insurance or reinsurance to specific entities or individuals identified in the Canadian Regulations;
- importing, purchasing, acquiring, shipping or otherwise dealing in any petroleum goods referred to in Part 1 of Schedule 2 of the Canadian Regulations, wherever situated, that is exported from Belarus, as well as providing any financial, technical or other services such as insurance or reinsurance related to goods subject to this prohibition; and
- importing, purchasing, acquiring, shipping or otherwise dealing in any potassium chloride goods referred to in Part 2 of Schedule 2 of the Canadian Regulations, wherever situated, that is exported from Belarus.
Implications for International Business
The coordinated approach by the United States, United Kingdom and Canada suggests that the international community continues to be concerned with regard to the situation in Belarus and the conduct of the Belarusian government. Additional sanctions by the United States, United Kingdom, Canada and other governments, such as the EU (which has previously imposed a number of measures targeting Belarus), may be likely, particularly if Belarus does not take measures to address the concerns of such governments. Companies operating in Belarus should proceed with caution and conduct careful sanctions due diligence prior to engaging in any activity in Belarus.
For more information on these developments, contact a member of Steptoe’s Economic Sanctions team