This post summarizes the state of affairs as of Friday, March 4, 2022. Please reach out to our team if you have any questions about these or future developments.

Current Status & What’s New

The current sanctions measures do not amount to a full embargo on Russia, and Russia has not been cut off fully from the global financial system. As a result, certain types of international trade with Russia remain permissible for U.S., EU, and other western companies. Cross-border payments also remain possible for certain types of transactions.

That said, the United States, EU, and other G7 countries significantly escalated sanctions on Russia this week, targeting Russia’s Central Bank, National Wealth Fund, and Ministry of Finance. The sanctions are designed to limit Russia’s ability to deploy its foreign currency reserves and support the value of the ruble, which has led to a sharp drop in the value of the Russian currency and the imposition of currency controls and other defensive monetary measures in Russia. U.S. measures also broadly prohibit U.S. persons from conducting any transaction or business dealing that directly or indirectly involves the Central Bank, National Wealth Fund, or Ministry of Finance without prior authorization.

This week, Western countries also closed their airspace to Russian aircraft, blacklisted the Russian Direct Investment Fund, imposed trading restrictions and sanctions on Belarus, expanded export controls on Russia, adopted additional financial sanctions targeting Russia, and blacklisted Russian elites and their family members.

Some Western companies responded to this week’s developments by suspending or limiting engagement with the Russian market, as firms assessed the new legal requirements and considered the risk of continued engagements with Russia. Western companies should continue to expect disruptions to legally permissible Russia-related business, as banks, logistics providers, and companies review the new restrictions and impose additional compliance measures.

Banks subject to blocking or asset freeze restrictions

Western countries implemented blocking sanctions or asset freeze restrictions on a number of large Russian financial institutions over the last two weeks. In the United States, banks were added to the List of Specially Designated Nationals (SDN List). Russian banks subject to blocking or asset freeze sanctions in at least one Western jurisdiction include: VEB, PSB, VTB Bank, Bank Otkritie, Sovcombank, Novikombank, Bank Rossiya, Black Sea Bank For Development And Reconstruction, Genbank, and IS Bank.

The sanctions generally prohibit any direct or indirect dealings with these banks, unless authorized pursuant to a “wind down” or other type of general license. We cover these sanctions in several posts, including here, here, here, here, and here.

Sberbank Restrictions

The United States imposed correspondent and payable-through sanctions on Sberbank last week, which will limit Sberbank’s ability to conduct U.S. dollar transactions. The sanctions also require U.S. financial institutions to reject future transactions involving Sberbank and its subsidiaries. The U.K. imposed similar measures this week. You can read more about sanctions on Sberbank here and here.

Financing Restrictions

The United States imposed financing restrictions on large Russian state-owned enterprises that prohibit U.S. persons from dealing in new debt of those companies with a maturity of more than 14 days or in new equity of those companies. The sanctions are very similar to existing U.S. sectoral sanctions that have been imposed on Russian companies pursuant to E.O. 13662 since 2014. As noted below, the EU expanded similar debt sanctions. More information is available here.

Embargo and Trading Ban on Separatist Regions

The United States and allies imposed embargoes or trading bans on the separatist Donetsk People’s Republic (DNR) and Luhansk People’s Republic (LNR) regions of Ukraine. We cover the U.S. and EU bans here and here, and provide initial thoughts on how to comply with the embargo here.

New SDNs and Asset Freezes

The United States and allies imposed blocking sanctions and asset freezes on a number of Russian elites, their family members, and Russian companies. Nord Stream 2 AG and the Russian Direct Investment Fund (RDIF) were also subject to sanctions. Blocking and asset freeze sanctions generally prohibit all business with the sanctioned parties and their majority-owned entities. We covered these sanctions in several of our posts.

Central Bank Sanctions

As noted above, G7 countries imposed broad sanctions on transactions involving Russia’s Central Bank, National Wealth Fund, and Ministry of Finance. These sanctions include a sweeping prohibition on direct or indirect transactions or other business dealings involving the sanctioned entities without authorization. The U.S. Office of Foreign Assets Control (OFAC) issued two new general licenses and expanded two existing general licenses this week that authorize limited interactions with the sanctioned entities. OFAC also issued important guidance explaining the intended scope of the U.S. sanctions.

You can read more here and here.

EU Banking, Financial, & SWIFT Restrictions

The EU imposed a series of financial sanctions on Russia last week, including limits on deposits by Russian nationals in the European Union, sanctions on the sale of euro-denominated securities to Russian nationals, limits on the listing of shares in the EU, sanctions on the provision of investment services, limits on supplying euro-denominated banknotes to Russian persons, and the expansion of existing securities and debt sanctions. The EU also imposed a ban on the provision of specialized financial messaging services on seven previously sanctioned Russian banks, a move that will effectively cut off those banks from the SWIFT interbank messaging system. We cover these developments here and here.

Expanded Russia Dual-Use Licensing Requirements

The United States, European Union, and other countries amended export control regulations to impose license requirements on exports of a broad array of goods, software, and related technical knowhow to Russia. The U.S. restrictions apply to all items listed in Categories 3 through 9 of the Commerce Control List, including a number of less sensitive items. Subject to a limited number of exceptions, the U.S. government will review license applications related to these exports under a presumption of denial, which means that licenses will rarely be granted. The EU and UK imposed corresponding broad-based dual use export bans on Russia this week, subject to limited exceptions.

The United States extended prohibitions on the export of specified items to Military End Users and Uses in Russia and added a significant number of Russian companies to the Entity List, broadly prohibiting the transfer of items subject to the EAR to the listed parties. The United States also expanded existing controls on the transfer of certain items in support of the Russian oil and gas industry and imposed a heightened license review policy. The EU imposed license requirements on the transfer of enumerated items that could contribute to Russia’s military or technological enhancement and on transfers of specified goods and technology suited for use in oil refining, aviation, and space industries.

The United States also extended its “Foreign Direct Product Rule” (FDPR) to apply to exports to Russia and to Russian Military End Users (including supporters of Military End Users or the Russian military). The FDPR operates differently depending on whether military end users are involved. The complex changes to the FDPR significantly increase the scope of non-U.S. origin items that are now subject to the EAR’s Russia-related license requirements.

For more on the new U.S., EU, and U.K. export control measures, see our posts here, here, here, and here.

Trade Controls & Sanctions on Belarus

Western countries imposed additional sanctions, export controls, and import restrictions on Belarus this week in response to the country’s growing involvement in the conflict in Ukraine. The measures imposed additional asset freeze restrictions on Belarusian companies and officials, extended the new Russia dual-use export controls to Belarus, and limited imports of certain wood, cement, iron, steel, rubbery, and machinery products to the EU.

We cover Belarus-related developments here, here, here, and here.

Airspace

The United States, EU, and other jurisdictions closed their airspace to Russian aircraft this week. You can read more about these measures here and here.

Global considerations

While the United States, EU, and other allies are closely coordinating new sanctions measures, there are meaningful differences between the measures imposed by different jurisdictions. To ensure compliance with applicable law, it is important to review the new sanctions measures in all of the jurisdictions in which you operate.

Today, the United States announced another round of significant sanctions and export control restrictions on Russia and Belarus in response to the deteriorating situation in Ukraine. Today’s actions subject Belarus to the same harsh export control restrictions that were imposed on Russia last week and effectively close U.S. airspace to Russian aircraft. The White House also announced that United States would impose new restrictions on exports of oil and gas equipment to Russia and blocking sanctions on Russian defense companies. We expect the Commerce and Treasury Departments to implement those restrictions in the coming days.

U.S. Belarus Export Controls

In coordination with the European Union, the U.S. Commerce Department announced amendments to the Export Administration Regulations today that subject Belarus to the same sweeping export control restrictions as those imposed on Russia last week.

The new rules effectively prohibit the export, re-export, or transfer of a broad range of dual-use items to Belarus, including all items listed in Categories 3 through 9 of the Commerce Control List, the U.S. dual use control list. With limited exception, the U.S. government will review license applications related to these exports subject to a presumption of denial, which means that licenses will rarely be granted. The rules also impose broad restrictions on exports of items to Military End Users and Uses in Belarus and added add two Belarusian entities to the Entity List as “military end users,” broadly prohibiting the transfer of items subject to the EAR to the listed parties.

Today’s amendments also extend the “Foreign Direct Product Rule” (FDPR) to apply exports to Belarus and Belarusian Military End Users, expanding the scope of items manufactured outside the United States that are now subject to U.S. export control and licensing requirements.

Additional information on the nature of these expanded controls is available in our prior post on Russia, available here.

Oil & Gas Equipment Restrictions

The White House announced that the United States would adopt new export controls on oil and gas extraction equipment shipped to Russia. The new controls are designed to limit the ability of Russia to support its refining capacity over the long term. Additional information about the oil and gas export controls is available here. The EU also recently imposed similar restrictions on an array of items used for oil refining.

Defense Sanctions

The White House also announced that 22 Russian defense-related entities would be added the List of Specially Designated Nationals (SDN List), including companies that manufacture “combat aircraft, infantry fighting vehicles, electronic warfare systems, missiles, and unmanned aerial vehicles for Russia’s military.” As of this writing, the SDN List had not yet been updated with these entities.

On March 4, 2022, BIS added 91 entries to its Entity List, effectively prohibiting exports of items “subject to the EAR” to the listed parties. The entities, which are located in Belize, Russia, Singapore, and the United Kingdom, were sanctioned for their involvement or support of Russian security, military, and defense efforts.

Airspace Restrictions

In coordination with U.S. allies, the United States also announced the closure of U.S. airspace to Russian aircraft. The new measures ban aircraft certified, operated, registered or controlled by any person connected with Russia from the United States. Accordingly, the Department of Transportation issued a notice today revoking Russian passenger and cargo airlines’ ability to operate to and from U.S. destinations and refusing entry of Russian-operated aircraft into U.S. airspace.

Dual Use Export Controls

The UK updated its dual use export control regulations to remove Russia as a permitted destination from open general export licenses, including licenses involving the export of chemicals, cryptographic development, and oil and gas exploration. The UK has also suspended approval of new export licenses for exports of dual-use items to Russia. The moves align the UK’s approach with the broad dual use export control restrictions imposed by the United States, EU, and other allies in recent days.

Sanctions: Asset Freezes & Financial Restrictions

Matching sanctions imposed by other countries, the UK imposed asset freeze restrictions on the Russian Direct Investment Fund, its CEO, Kirill Alexandrovich Dmitriev, VEB.RF, Bank Otkritie, and Sovcombank in Russia. The UK also imposed sanctions on JSC 558 Aircraft Repair Plant and JSC Integral in Belarus and four Belarusian individuals. All accounts, and other funds or economic resources, and any funds owned or controlled by designated individuals and entities in the UK must be frozen and UK persons must refrain from dealing with frozen funds or assets unless authorized. As with U.S. blocking restrictions, reporting and anti-circumvention requirements apply.

The UK also imposed financial and investment restrictions on PJSC Sberbank limiting, among other things, the ability of UK credit or financial institutions to process sterling payments involving Sberbank.

The latest UK sanctions can be found here, here, here, and here.

• Bank Rossiya
• Black Sea Bank For Development And Reconstruction
• Joint Stock Company Genbank
• IS Bank
• Public Joint Stock Company Promsvyazbank
• Gennadiy Nikolayevich Timchenko
• Boris Romanovich Rotenberg
• Igor Arkadyevich Rotenberg

OFAC Provisions

On February 21, 2022 President Biden issued an Executive Order (E.O.) imposing an embargo on the “so-called Donetsk People’s Republic (DNR) and Luhansk People’s Republic (LNR)” following Russian recognition of the breakaway regions of Ukraine.

The embargo is similar in scope to that imposed on the Crimea region, prohibiting:

• New investment in the “Covered Regions;”
• The direct or indirect import of goods, services, or technology from the Covered Regions to the United States;
• The export or reexport of services from the United States or by a U.S. person directly or directly to the Covered Regions;
• The approval, financing, facilitation, or guarantee by a United States person of a transaction or other business dealings by a foreign person where the transaction by that foreign person would be prohibited if performed by a U.S. person.

• Operate or have operated in the Covered Regions since the effective date of the order;
• Be or have been a leader, official, senior executive officer, or member of the board of directors of an entity operating in the Covered Regions;
• Be owned or controlled or acted on behalf of parties subject to blocking sanctions under the E.O.; or
• Materially assist, sponsor, or provide financial, material, or technological support for, or goods or services to or in support of parties subject to blocking sanctions under the E.O.

Following the issuance of the E.O., the Office of Foreign Assets Control (OFAC) issued a series of general licenses authorizing certain limited dealings with the Covered Regions, including:

• General License No. 17, authorizing transactions that are ordinarily incident and necessary to the wind down of transactions involving the DNR or LNR regions through 12:01 a.m. EST March 23, 2022. Authorized transactions include the winding down of operations, contracts, or other agreements in effect prior to February 21 involving the exportation, reexportation, sale, or supply of goods, services, or technology to, or importation of any goods, services, or technology from the DNR or LNR;
• General License No. 18, authorizing certain exports of food, medicine, medical devices, and certain COVID-19 treatments to the Covered Regions;
• General License No. 19, authorizing certain transactions ordinarily incident and necessary to the receipt or transmission of telecommunications;
• General License No. 20, authorizing activities by certain international organizations;
• General License No. 21, authorizing certain personal, non-commercial remittances, and the operation, maintenance, and closure of certain personal accounts; and
• General License No. 22, authorizing the export of certain services and software incident to the exchange of personal communications over the internet.

On February 24, 2022, the Commerce Department’s Bureau of Industry and Security (BIS), the primary U.S. export control regulator, updated the EAR to impose additional embargo provisions on the DNR and LNR. The new rules expand the territorial reach of the EAR’s Crimea embargo to apply to the DNR and LNR. The rules prohibit the export, re-export, or transfer of goods, software, or technology subject to the EAR to the embargoed regions, with limited exceptions. (This post has additional background on how to determine when an item is “subject to the EAR.”) mirrors preexisting embargo provisions that apply to the Crimea region.

License applications related to exports to the embargoed regions are subject to a policy of denial, meaning that BIS is highly unlikely to approve the application.

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Companies with dealings in these regions or with persons who ordinarily reside in these regions should carefully review the E.O., general licenses, and the EAR. A first step will include determining how to update sanctions screening systems to identify customers and transactions involving the Covered Regions.

Please contact our sanctions compliance team with any questions regarding these developments.