On December 2, 2021, the United States, the EU, the UK, and Canada announced a new round of coordinated sanctions in response to their concerns regarding the Belarusian government’s continued undermining of democracy, its violations of human rights, and its alleged orchestration of irregular migration into the EU. The latest sanctions include blocking sanctions and asset freezes, as well as new restrictions on US persons dealing in Belarusian sovereign debt.
SDN Designations and General License No. 5
The US Treasury Department’s Office of Foreign Assets Control (OFAC) named 20 individuals and 12 entities in Belarus as Specially Designated Nationals (SDNs) pursuant to Executive Order (EO) 14038 and 13405. The targets include Belarusian government officials; state-owned entities; entities in Belarus’s defense, security and potassium chloride (potash) sectors; and individuals and entities closely linked to the family of Belarusian President Alexander Lukashenko. In particular, OFAC designated Lukashenko’s middle son and the Republican State-Public Association Presidential Sports Club for being “part of an alleged corruption scheme in Belarus.”
All property and interests in property of these SDNs (and any entity that is owned 50 percent or more by one or more SDNs) must be “blocked,” i.e., frozen if within the United States or in the possession or control of a US person. Additionally, there is a broad prohibition on dealing directly or indirectly with the SDNs or their “blocked” property to the extent US persons are involved. A number of the SDNs are also subject to targeted EU, UK, and Canadian financial sanctions.
Among the entities newly designated by OFAC are:
- State-owned tourism company Republican Unitary Enterprise Tsentrkurort;
- Cargo carrier JSC Transaviaexport Airlines;
- Open Joint Stock Company Belarusian Potash Company (BPC) and its subsidiary Agrorozkvit LLC;
- Foreign Limited Liability Company Slavkali, another producer of potash fertilizers; and
- Three entities in the defense and security sectors that supply Belarusian military and law enforcement agencies.
OFAC previously designated Belaruskali, a major potash producer, on August 9, 2021. The new designation of BPC, which handles the trading and exportation of potash for Belaruskali, eliminates any prior ambiguity on whether – and to what extent – transactions with BPC might still have been permitted after the designation of Belaruskali.
Concurrent with these designations, OFAC issued General License No. 5, authorizing US persons to engage in transactions and activities that are ordinarily incident and necessary to wind down transactions involving BPC or Agrorozkvit, or any entity owned 50 percent or more by them, until April 1, 2022. The authorization in GL-5 extends to wind-down transactions involving BPC or Agrorozkvit “in which Belaruskali OAO [also] has a property interest.” However, FAQ 939 clarifies that GL 5 does not authorize direct transactions with Belaruskali, which is subject to a separate General License No. 4 that authorizes wind-down transactions only until December 8, 2021.
Directive 1 under EO 14038
In addition to the new SDN designations, OFAC issued Directive 1 under EO 14038, prohibiting US persons from transacting in, providing financing for, or otherwise dealing in new debt with a maturity of greater than 90 days issued on or after December 2, 2021, by the Belarusian Ministry of Finance or the Development Bank of the Republic of Belarus. The prohibition applies to dealings in such new sovereign debt not only in the primary market but also in the secondary market. FAQ 943 clarifies that OFAC’s 50 Percent Rule does not apply to Directive 1, unlike sanctions against SDNs.
Directive 1 further aligns US sanctions policy with previous actions taken by the EU, UK and Canada. The Directive is also similar to restrictions adopted under Directive 1 under Russia-related EO 14024 restricting US financial institutions from transacting in certain Russian government debt in the primary market, as described in our April 19, 2021, blog post.
For additional information on OFAC’s new Belarus related SDN designations, Directive 1, and new FAQs, see OFAC’s website.
The Council of the EU announced the designation of 17 individuals and 11 entities under the fifth package of sanctions against Belarus, set out in Council Implementing Decision (CFSP) 2021/2125 and Council Implementing Regulation (EU) 2021/2124. The targets include prominent members of the judicial branch, alleged propaganda outlets, high-ranking political officials of the Lukashenko regime, as well as companies (such as Belavia Belarusian Airlines), tour operators and hotels that have been accused of helping incite and organize illegal border crossings through Belarus to the EU.
EU sanctions targeting Belarus now apply to a total of 183 individuals and 26 entities. Those designated are subject to an asset freeze and EU operators are prohibited from making funds or economic resources available to them. Additionally, listed individuals are subject to an EU travel ban.
The new designations come as the Council of the EU recently agreed to update the listing criteria under the EU’s sanctions framework against Belarus in view of the regime’s policy of instrumentalizing migrants for political purposes (see Council Decision (CFSP) 2021/1990 and Council Implementing Regulation (EU) 2021/1985). These rules provide the legal basis for designations of those organizing or contributing to activities by the Lukashenka regime that facilitate the illegal crossing of the EU’s external borders or the transfer of prohibited goods and the illegal transfer of restricted goods into EU territory. However, many of the newly designated individuals and entities were listed under pre-existing listing criteria, including for serious human rights violations, for the repression of civil society and democratic opposition, for seriously undermining the rule of law as well as for supporting the Lukashenka regime.
HM Treasury’s Office of Financial Sanctions Implementation (OFSI) announced additional designations under the Republic of Belarus (Sanctions) (EU Exit) Regulations 2019 against eight individuals and Belaruskali. The individuals include five Belarusian journalists accused of spreading propaganda on behalf of the Lukashenko regime or otherwise lending support to the regime through the provision of false information to the Belarusian public, a former prosecutor and judge accused of politically motivated prosecutions and rulings against journalists, protestors, and opposition figures, and a Ministry of the Interior official accused of playing a leading role in the repression of civil society and democratic opposition in Belarus.
UK sanctions targeting Belarus now apply to a total of 108 individuals and 10 entities. Those designated are subject to an asset freeze. The UK measures also prohibit UK persons and any person within the UK from making funds or economic resources available to, or for the benefit of, a designated person, and extend to any subsidiaries “owned or controlled” by a designated person. Additionally, designated individuals are subject to a UK travel ban.
Canada’s Foreign Ministry announced asset freezes and travel bans against 24 individuals and 7 entities pursuant to the Special Economic Measures (Belarus) Regulations. The targets mostly align with OFAC’s designations, with the exception of 5 individuals who have not been designated as SDNs.
For more information on how international Belarus-related sanctions may apply to your organization, contact a member of Steptoe’s Economic Sanctions team.
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