Alisher Usmanov, an oligarch with vast holdings, was among those added to the U.S. List of Specially Designated Nationals (SDN List). However, U.S. persons are authorized to continue to engage in transactions involving companies and other entities in which Usmanov holds a majority stake pursuant to the newly issued General License No. 15. The general license authorizes U.S. persons to conduct business with entities majority owned by Usmanov and unblocks those entities’ property subject to U.S. jurisdiction. The general license functionally exempts Usmanov’s companies from the 50 Percent Rule, which imposes blocking sanctions on entities that are directly or indirectly owned 50 percent or more by SDNs.

The Office of Foreign Assets Control (OFAC) also added seven Russian entities and 26 individuals to the SDN List for their involvement in spreading disinformation that justify Russia’s activities in Ukraine.

The most significant change announced today is the State Department’s decision to add Russia to the International Traffic in Arms Regulations’ (ITAR) list of “proscribed countries,” commonly known as the Section 126.1 list. Countries on this list are subject to a policy of denial for license applications, so the change will effectively subject Russia to a U.S. arms embargo, prohibiting the export of most ITAR-controlled defense articles and defense services to Russia. Limited exceptions to the policy of denial will be made for exports in support of government space cooperation. The State Department will also review licenses related to commercial space launches on a case-by-case basis, but only for six months, after which license requests related to commercial space launches will face a presumption of denial. As noted below, the Commerce Department has announced corresponding changes to its licensing policy regarding exports related to commercial space flight activities in Russia. Additionally, certain transactions with 126.1 countries are subject to mandatory disclosures to the DDTC, instead of the general rule that violations are subject to voluntary disclosures to the agency.

Below is a summary of the actions taken by other key U.S. regulators today, including the Treasury, State, and Commerce Departments:

• New SDNs: OFAC added seven Russian government officials and three entities to the Specially Designated Nationals (SDN) List and imposed new sanctions on existing Russian SDNs;
• Entity List Additions: The Commerce Department added 14 entities in Russia, Switzerland, and Germany to its Entity List due to their connection to WMD and chemical weapons production, barring exports of items subject to the Export Administration Regulations (EAR) to the designated entities.
• Dual Use Export Control License Restrictions: The Commerce Department will limit the availability of certain license exceptions and licenses for exports of NS-controlled items to Russia. Commerce indicated that exports of NS-controlled items to Russia will no longer be eligible for license exceptions Service and Replacement of Parts and Equipment (RPL), Technology and Software Unrestricted (TSU), and Additional Permissive Reexports (APR). Commerce will reverse its existing licensing policy and replace it with a presumption of denial to license requests related to exports of NS-controlled items for commercial end-users related to civil end-uses in Russia. In six months, Commerce will also adopt a policy of denial for license requests involving exports of NS-controlled items to Russia related to commercial space flight activities.
• Secondary Sanctions: The State Department added six scientific institutes to its Section 231 List of persons known to operate for or on behalf of the Russian defense or intelligence sectors. As a result of the designations, non-U.S. persons that conduct significant transactions with these parties could be subject to U.S. secondary sanctions in the future.

As of the date of designation, U.S. persons are prohibited from conducting business with CEIEC and its over 200 subsidiaries without authorization from OFAC and all property and interests in property of the company are blocked (i.e., frozen) under U.S. law. Because of the wide potential reach of the sanctions, OFAC issued General License 38 to allow U.S. persons to wind-down pre-existing business with the company and its subsidiaries over a 45-day period.

Please contact our economic sanctions team if you have any questions about the designation or your sanctions risk profile.

Subject to certain limitations, the general license authorizes U.S. persons to engage in activities that are ordinarily incident and necessary to:

• Wind down transactions involving any entity in which XPCC owns a 50% or greater interest;
• Divest or transfer of debt, equity ,or other holdings in an XPCC subsidiary to a non-U.S. person; or
• Facilitate the transfer of debt, equity, or other holdings in an XPCC subsidiary by a non-U.S. person to another non-U.S. person.

Foreign affiliates of U.S. companies are now generally prohibited from engaging in transactions directly or indirectly involving Iran, Iranian companies or persons, or Iranian-origin goods, unless a general license or exemption applies. U.S.-owned or -controlled affiliates require a license from OFAC before accepting payments for authorized Iran-related business that occurred during the wind down period leading up to November 4th. OFAC will review such requests on a case-by-case basis.

Non-U.S. companies face increased secondary sanctions risk for certain business involving Iran, as U.S. secondary sanctions on Iran have been fully re-imposed, including those with respect to: Iran’s purchase of U.S. dollar banknotes; the provision of graphite and raw or semi-finished metals, including steel and aluminum; certain transactions in the Iranian rial; Iranian sovereign debt; the automotive sector; shipping; petroleum, petroleum products, and petrochemical products; crude oil exports; certain Iranian financial institutions; financial messaging services; insurance services; and the energy sector.

Today OFAC also sanctioned over 700 Iranian individuals, entities, aircraft, and vessels associated with the Government of Iran, including state-owned enterprises, by designating the parties as Specially Designated Nationals (SDNs). Non-U.S. companies that conduct “significant” transactions with the newly listed parties face the threat of substantial U.S. secondary sanctions, unless an exception applies (such as those related to humanitarian transactions). Before the re-imposition of sanctions, these parties appeared on the less-restrictive E.O. 13599 List, which generally allowed foreign affiliates of U.S. companies to conduct commercial transactions with the parties under OFAC General License H. Now that the parties have been moved back to the SDN List, foreign affiliates of U.S. companies must ensure that these parties’ property and interests in property are not transferred, paid, exported, withdrawn, or otherwise dealt in. These steps may include, for example, foreign affiliates of U.S. companies moving funds owed to such parties to restricted escrow accounts outside of the United States, among other measures. Foreign affiliates of U.S. companies should consult with legal counsel familiar with U.S. sanctions rules on the appropriate steps to secure the property and interests in property of the newly designated parties.