On May 19, 2023, the US Department of the Treasury’s Office of Foreign Assets Control, in coordination with the G7 leaders and other international partners, announced that it was imposing additional Russia-related sanctions aimed at impeding Russia’s ability to wage war against Ukraine. The sanctions were imposed on the first day of the G7 Summit during which G7 leaders made several commitments to facilitate the end of the Russia’s war with Ukraine, including commitments to impose further sanctions that target sanctions evasion efforts and key sectors of the Russian economy used to support the war; to hold Russia accountable for violating international law; to support the recovery and reconstruction of Ukraine; and to ensure that Russia pays for Ukraine’s long-term reconstruction. In light of these commitments, OFAC designated a total of 22 individuals and 104 entities targeting a wide-range of areas, including those involved in Russia’s efforts to evade sanctions, the acquisition of critical technology, the financial services sector, and its future energy extraction capabilities. As a result of these new designations, all property and interests in property of these designees within the United States or within the possession or control of a US person are blocked, and US persons are generally prohibited from engaging in transactions involving the designated persons. In addition, entities owned 50 percent or more by one or more designated persons are also blocked, unless they are exempt or transactions are authorized by a general or specific license issued by OFAC.
This action was taken in coordination with the US Department of State and the US Department of Commerce. On the same day, the Department of State designated or blocked almost 200 individuals, entities, vessels and aircraft involved in, among other things, the production and export of future energy in Russia; military-related procurement and sanctions evasion; and persons connected to the Russia-Iran maritime logistics network. The Department of State also targeted individuals and entities engaged in the systematic theft of grain from Ukraine; numerous airlines with ties to the private military company Wagner; and two entities that operate in Russia’s metals and mining sector, including individuals and entities associated with the Public Joint Stock Company Polyus (“Polyus”), the largest gold producer in Russia.
The Department of Commerce also added 71 entities to it Entity List and significantly expanded the territories and categories covered by it export controls. In addition, the Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) and the Department of Commerce’s Bureau of Industry and Security (“BIS) combined efforts to issue a new joint alert on methods used by Russia to evade export controls – an alert that builds upon and supplements their first joint alert issued in June 2022.
In response to commitments made by G7 leaders to target additional key sectors of Russia’s military base, OFAC also expanded US Russia-related sanctions authorities by issuing Determination Pursuant to Section 1(a)(i) of Executive Order 14024. The new determination enables the US to issue sanctions that target new sectors of Russia’s economy, including architecture, engineering, construction, manufacturing and transportation. OFAC also joined the UK and EU in severing Russia’s access to architecture and engineering services by issuing Determination Pursuant to Section 1(a)(ii) of EO 14024, which prohibits the exportation, reexportation, sale or supply of such services from the US or a US person. This prohibition goes into effect on June 18, 2023. To offer guidance on these determinations, OFAC issued new Frequently Asked Questions 1126-1128 and amended FAQ 1059 and 1061-1062, resulting in the removal of FAQs 964, 1037, and 1085.
G7 leaders also made commitments to determine the holdings of Russian sovereign assets that will remain immobilized in G7 jurisdictions until Russia pays Ukraine for its damages. To this end, OFAC amended Russia-related Directive 4 under Executive Order 14024, to require US persons to report any property under their control in which the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation has an interest. OFAC reports that US entities are now required to report such assets to OFAC on or before June 18, 2023, and on an annual basis thereafter. OFAC also updated FAQs 998-1002, 1004-1005, and 1118 to reflect this amendment and emphasized that all existing licenses or authorizations that were issued pursuant to the prior version of Directive 4 remain in effect.
OFAC also issued FAQ 1129, which relates to a newly-designated person, and four new general licenses issued pursuant to Russian Harmful Foreign Activities Sanctions Regulations (“RuHSR”), 31 CFR part 587. General License 13E enables US persons to continue to pay taxes, fees, or import duties and purchase or receive permits and licenses that would otherwise be prohibited by Directive 4 under EO 14024. GL 13E, which replaces and supersedes GL 13D in its entirety, authorizes these actions until August 17, 2023. General Licenses 66 and 67 relate to the newly-designated Russian gold producer, Polyus. General License 66 allows for wind down transactions involving Polyus until August 17, 2023, while General License 67 permits, until August 17, 2023, certain transactions that enable the divestment or transfer of debt or equity of Polyus, or any entity which Polyus owns a 50 percent or greater interest, to a non-US person. GL 67 also authorizes transactions related to the wind down of derivative contracts involving Polyus until August 17, 2023. Finally, General License 68 enables wind down transactions, until July 18, 2023, that involve one or more of the following universities and institutes:
- Federal State Budgetary Educational Institution of Higher Education Grozny State Oil Technical University Named After Academician M.D. Millionshchikov;
- Federal State Budget Educational Institution of Higher Education Saint Petersburg Mining University;
- Federal State Budgetary Educational Institution of Higher Education Sergo Ordzhonikidze Russian State University for Geological Prospecting;
- Federal State Budgetary Educational Institution of Higher Vocational Education Gubkin Russian State University of Oil and Gas;
- State Budgetary Educational Institution of Higher Education Almetyevsk State Oil Institute; or
- Any entity in which one or more of the above persons owns a 50 percent or greater interest.