The Bass, Berry & Sims international trade team is actively monitoring the situation in Russia and Ukraine and providing real-time advice to clients on managing the situation. This post summarizes new U.S. sanctions and export restrictions as of Monday, June 6. This post supplements our previous summaries, which are available by following the links at the end of this blog post.
Commerce Department Issues Final Rule Refining the Export Administration Regulations and Improving Transparency in Export Enforcement Cases
EAR Amendments and Clarifications
On June 2, the U.S. Commerce Department, Bureau of Industry and Security (BIS) issued a final rule refining certain provisions of the Export Administration Regulations (EAR).
Several portions of the rule expand and refine the EAR restrictions related to Russia and Belarus.
First, the rule modified export controls related to Russia and Belarus military end-uses and end users to extend license requirements to food and medicine designated as EAR99. The Entity List will also be modified to reflect the updated food and medicine license requirement. The license review policy for EAR99 food and medicine will be case-by-case while – as was previously the case – all other items will be subject to a policy of denial.
The final rule also made technical corrections and clarifications to the Russia and Belarus sections of the EAR, including modifying wordings in the Russia and Belarus sections of the EAR to ensure consistency, clarifying license review policy to support civil telecommunications infrastructure, clarifying the Russian industry sector sanctions list by updating Schedule B numbers, and clarifying the dollar value for clothing and shoes entries in the luxury goods list.
More generally, the final rule seeks to increase transparency by amending the EAR to make charging letters public upon filing with the administrative law judge (ALJ). BIS stated that by making charging letters public when filing with the ALJ, it seeks to educate the exporting community about the consequences that can result from misconduct and to incentivize investment in compliance and deterrence.
On June 6, BIS made public the charging letter issued against Roman Abramovich, a Russian national, for reexporting U.S.-origin aircraft without BIS authorization.
Specifically, BIS charged that on or about March 12, Mr. Abramovich reexported Gulfstream G650ER aircraft from Turkey to Russia; on March 13, the Gulfstream flew from Russia to Israel and then to Turkey on March 14. On March 15, the Gulfstream flew from Turkey to Russia. On March 4, he reexported Boeing 787-8 aircraft from the United Arab Emirates to Russia. Mr. Abramovich did not obtain the required authorization on the three occasions when he reexported the Gulfstream and Boeing aircraft to Russia. Since March 2, BIS has required authorizations to export and reexport U.S.-origin aircraft to Russia or Belarus.
Seventy One Entities Added to Entity List
On June 2, 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 U.S. technology and goods. The license review policy for these entities is the policy of denial.
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 post for more information about the expanded foreign direct product rule.
Treasury Designates Broad Swath of Russian Assets and Individuals to the Specially Designated National (SDN) List and the Sectoral Sanctions Identifications (SSI) List
On June 2, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) designated numerous yachts and aircraft, a yacht brokerage company, Russian political officials, and President Putin’s money manager in an attempt to disrupt networks utilized by Russian elites to evade sanctions.
Blockings against property, companies, and individuals connected to President Putin
OFAC designated two yachts, the Russian-flagged Graceful and Cayman Islands-flagged Olympia, as blocked property in which President Putin has an interest. OFAC also designated entities and an individual involved in the ownership of or management of the yachts: Olympia: SCF Management Services Cyprus Ltd; Ironstone Marine Investments; JSC Argument; O’Neill Assets Corporation; and Andrei Valeryevich Gasilov, JSC Argument’s sole shareholder and former director.
In addition, yachts named Shellest and Nega were identified as linked to President Putin and owned respectively by Non-Profit Partnership Revival of Maritime Traditions and its Russian subsidiary, Limited Liability Company Gelios. The Shellest and Nega were designated as blocked property, and both Non-Profit Partnership Revival and its subsidiary were designated for operating or having operated in Russia’s marine sector.
OFAC designated Imperial Yachts SARL (Imperial), a yacht brokerage based in Monaco that designs, charters, and manages mega yachts for many Russian elites. OFAC asserted that Imperial has an office in Moscow and provides services to Russia’s elite, including President Putin’s inner circle. OFAC also blocked Imperial’s CEO, Evgeniy Borisovich Kochman, and Flying Fox, the largest of Imperial’s yachts. OFAC also designated four other entities linked to Kochman:
- OOO Nord Marine
- OOO Yakht-Treid
- OOO Bilding Management
- OOO Nord Marin Inzhiniring
In addition, OFAC designated a close confidant and advisor to President Putin, Sergei Pavlovich Roldugin, apparently the godfather to President Putin’s daughter and manages much of President Putin’s overseas wealth. Roldugin’s wife, Elena Yuryevna Mirtova, was also designated.
Additional blocked properties and companies
OFAC designated SRL Skyline Aviation, a San Marino-based company, aircraft T7-OKY, and the yacht Sea Rhapsody for connections to Andrei Kostin, designated in 2018 for being an official of the Government of Russia.
OFAC identified Madame Gu, a yacht, helicopter 3A-MGU, and a plane P4-MGU for connections to Andrei Vladimirovich Skoch, a member of the Russian Duma, who has been designated twice by OFAC, in 2018 and 2022, for being an official of the Government of Russia.
Designated Top Officials of the Russian Government
OFAC designated five other senior Russian officials:
- Yury Slyusar – president of United Aircraft Corporation (UAC). UAC is 88% owned by Rostec, a Russian state-owned defense company. Slyusar was previously designated by the European Union, Australia, Canada, New Zealand, and the United Kingdom.
- Vitaly Savelyev – minister of transport of the Russian Federation, a member of the board of directors of Russian Railways, and chairman of the board of directors of Aeroflot. Savelyev was previously designated by the European Union and the United Kingdom.
- Maxim Reshetnikov – minister of economic development of the Russian Federation and on the board of sanctioned Russian entities, including VTB Bank, VEB.RF, and Russian Railways. Reshetnikov was previously designated 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 a member of the board of directors of Russian Railways. Faizullin was previously designated by the European Union and the United Kingdom.
- Dmitriy Yuryevich Grigorenko – deputy prime minister and chief of the government staff of Russia. Grigorenko was previously designated by the European Union, Australia, Canada, New Zealand, and the United Kingdom.
OFAC Issues General Licenses; Amends one General License
- GL 25B – authorizes certain transactions that (1) are ordinarily incident 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 the exchange of communications over the internet. The GL does not authorize transactions with specifically designated Russian entities. GL 25B supersedes GL 25A, which was issued on May 8.
- GL 36 – authorizes transactions that are ordinarily incident and necessary to wind down transactions involving Public Joint stock Company Severstal. GL 36 expires on August 31, 2022.
- GL 37 – authorizes transactions that are ordinarily incident and necessary to wind down transactions involving Nord Gold PLC. GL 37 expires on July 1, 2022.
- GL 38 – authorizes transactions ordinarily incident and necessary to the processing of pension payments to U.S. persons. The GL does not authorize debits to an account of a U.S. 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 Russia’s Oligarchs and Elites – Parties added to OFAC Lists
On June 2, the U.S. Department of State designated the following individuals and entities. These individuals and entities are added to OFAC SDN List or SSI List.
- God Nisanov, an oligarch with close ties to numerous Russian officials.
- Evgeny Novitskiy, a Russian elite with close ties to the Government of Russia.
- Maria Zakharova, spokesperson for the Foreign Ministry. Zakharova was previously designated by the European Union, Australia, New Zealand, Japan, and the United Kingdom.
- Sergey Gorkov, head of RosGeo and a former executive of sanctioned banks.
- Severgroup Limited Liability Company (Severgroup), a multi-billion-dollar investment company with holdings and subsidiaries in multiple sectors of the Russian economy such as metallurgy, engineering, mining, technology, and banking.
- Alexey Mordashov, leader 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 allows some wind-down activities related Severstal until 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 allows some wind-down activities related Severstal until July 1, 2022.
