The Russian invasion of Ukraine continues to prompt sweeping sanctions and export controls from the United States, including, most recently, prohibitions on “new investment” in and the export/reexport/sale or supply of “services” to Russia (as to be determined by the U.S. Treasury Secretary), along with full blocking sanctions against Russia’s largest financial institution. Our team breaks down the latest measures:
Prohibitions on New Investment in Russia
On April 6, 2022, President Biden issued an expansive executive order (titled “Prohibiting New Investment in and Certain Services to the Russian Federation in Response to Continued Russian Federation Aggression”) that bans:
- “New investment” in Russia by a U.S. person (wherever located).
- The export, reexport, sale, or supply (directly or indirectly) from the U.S. or by a U.S. person (wherever located), of “any category of services” as may be determined by the U.S. Secretary of the Treasury, in consultation with the Secretary of State, to “any person located in [Russia].”
- “Any approval, financing, facilitation, or guarantee” by a U.S. person (wherever located) of a “transaction by a foreign person” where such transaction is prohibited by the EO.
Per a contemporaneous White House fact sheet, these measures — which, as noted above, are subject to further regulatory guidance from Treasury — are in lockstep with similar measures being taken by the European Union and member nations of the Group of Seven (G7).
Since our last update on U.S.-imposed sanctions, Treasury’s Office of Foreign Asset Controls (OFAC) has continued to designate a wide range of entities and individuals to its Specially Designated Nationals and Blocked Persons List (SDN List). Significant recent designations include the largest financial institution in Russia (Public Joint Stock Company Sberbank of Russia (Sberbank)), the largest privately owned financial institution in Russia (Joint Stock Company Alfa-Bank (Alfa-Bank)), top government officials throughout Russia (including 328 members of the Russian State Duma), and multiple entities operating in the defense and technology sectors.
Critical to note is that even if not identified on the SDN List, the new blocking sanctions apply to entities owned 50% or more (directly or indirectly) by a listed entity or individual.
The latest blocking sanctions are detailed below:
I. Sberbank and Alfa-Bank
On April 6, 2022, OFAC announced that it is adding Sberbank and Alpha-Bank to the SDN List. As noted by OFAC, Sberbank is the largest financial institution in Russia (holding roughly one-third of all bank assets in Russia) and is majority-owned by the Russian government, while Alfa-Bank is the largest privately owned financial institution in Russia.
As to Sberbank, OFAC also listed 42 of its subsidiaries to the SDN List. These subsidiaries — located, respectively, in Russia (35), Kazakhstan (2), Austria (1), Belarus (1), Cyprus (1), Luxembourg (1), and Ukraine (1)—include the following:
- Subsidiary Bank Sberbank of Russia Joint Stock Company (Kazakhstan)
- Joint Stock Company Sberbank (Ukraine)
- Open Joint Stock Company BPS-Sberbank (Belarus)
- Auction Limited Liability Company (Russia)
- IKS Joint Stock Company (Russia)
- Joint Stock Company Sberbank Leasing (Russia)
- Sovremennye Tekhnologii Limited Liability Company (Russia)
- Limited Liability Company Sberbank Capital (Russia)
- Joint Stock Company Sberbank Automated Trade System (Russia)
- Limited Liability Company Promising Investments (Russia)
- Limited Liability Company Sberbank Financial Company (Russia)
- Limited Liability Company Sberbank Investments (Russia)
- Joint Stock Company Sberbank Technologies (Russia)
- Joint Stock Company Loyalty Programs Center (Russia)
- Sberbank Europe AG (Austria)
- Insurance Company Sberbank Life Insurance Limited Liability Company (Russia)
- Joint Stock Company Business Environment (Russia)
- SB Securities SA (Luxembourg)
- Limited Liability Company Active Business Consult (Russia)
- Limited Liability Company Sberbank Service (Russia)
- Joint Stock Company Sberbank Private Pension Fund (Russia)
- Limited Liability Company Sberbank Insurance Broker (Russia)
- Insurance Company Sberbank Insurance Limited Liability Company (Russia)
- Limited Liability Company Korus Consulting CIS (Russia)
- Limited Liability Company Sberbank CIB Holding (Russia)
- Limited Liability Company Sberbank Factoring (Russia)
- Limited Liability Company Rutarget (Russia)
- Limited Liability Company Sberbank Real Estate Center (Russia)
- Limited Liability Company Digital Technologies (Russia)
- Joint Stock Company Raschetniye Resheniya (Russia)
- Vydayushchiesya Kredity Microcredit Company Limited Liability Company (Russia)
- Tekhnologii Kreditovaniya Limited Liability Company (Russia)
- Sber Legal Limited Liability Company (Russia)
- Arimero Holding Limited (Cyprus)
- Barus Limited Liability Company (Russia)
- Setelem Bank Limited Liability Company (Russia)
- Joint Stock Company Strategy Partners Group (Russia)
- Sber Vostok Limited Liability Partnership (Kazakhstan)
- Limited Liability Company Yoomoney (Russia)
- Bankruptcy Technology Center Limited Liability Company (Russia)
- Limited Liability Company Market Fund Administration (Russia)
- Joint Stock Company United Credit Bureau (Russia)
Prior to these designations, OFAC also announced on March 24, 2022, its designation of Herman Oskarovich Gref, the Chief Executive Officer of Sberbank and Chairman of its Executive Board.
As to Alfa-Bank, OFAC listed 6 of its subsidiaries to the SDN List, including:
- Alfa Capital Markets LTD (Cyprus)
- Alfa-Direct (Russia)
- Alfa-Forex LLC (Russia)
- Alfa-Lizing OOO (Russia)
- Amsterdam Trade Bank NV (Netherlands)
- Subsidiary Bank Alfa-Bank JSC (Kazakhstan)
OFAC also identified five vessels owned by Alfa-Lizing OOO as blocked property, including: (1) products tanker Lady Leila (IMO 9683740), (2) chemical/oil tanker Lady Rania (IMO 9784893), (3) products tanker Lady Sevda (IMO 9683738), (4) general cargo vessel Sv Konstantin (IMO 9203710), and (5) general cargo vessel Sv Nikolay (IMO 9482926).
In addition to providing identifying information on the listed individuals and entities described above, OFAC also issued the following general licenses:
- General License 8B (authorizing certain transactions related to energy)
- General License 9B (authorizing certain transactions related to dealings in debt or equity)
- General License 21 (authorizing the “wind down” of certain transactions involving Sberbank CIB USA, Inc.)
- General License 22 (authorizing the “wind down” of certain transactions involving Sberbank)
- General License 23 (authorizing the “wind down” of certain transactions involving Alfa-Bank)
II. Russian Government Officials and Individuals Close to Vladimir Putin
- Members of the Russian State Duma: As listed in the March 24 announcement, OFAC has designated 328 members of the Duma.
- Russian Security Council Members and “Putin Facilitators”
Pursuant to Executive Order 14024, OFAC has previously designated several members of Russia’s Security Council (RSC), including Russian President Vladimir Putin, Russian Foreign Minister Sergey Lavrov, Defense Minister Sergey Shoigu, Chief of the General Staff of the Russian Armed Forces Valery Gerasimov, and Federal Security Service (FSB) Director Alexander Bortnikov. On April 6, 2022, OFAC designated the remaining members of the RSC and other high-level government officials — a list that includes, most notably, former Russian President Dmitry Medvedev:
- Aleksandr Dmitrievich Beglov: Member of RSC and Governor of Saint Petersburg.
- Vladimir Ivanovich Bulavin: Member of RSC and head of Russia’s Federal Customs Service.
- Yuriy Yakovlevich Chayka: Member of RSC and Presidential Plenipotentiary Envoy to the North Caucasus Federal District.
- Konstantin Anatolyevich Chuychenko: Member of RSC and Russia’s Minister of Justice.
- Aleksandr Vladimirovich Gutsan: Member of RSC and Presidential Plenipotentiary Envoy to the Northwestern Federal District.
- Vladimir Alexandrovich Kolokoltsev: Member of RSC and Russia’s Minister of Internal Affairs.
- Igor Anatolyevich Komarov: Member of RSC and Presidential Plenipotentiary Envoy to the Volga Federal District.
- Igor Victorovich Krasnov: Member of RSC and Russia’s Prosecutor General.
- Valentina Ivanovna Matviyenko: Member of RSC and the Speaker of the Federation Council of the Federal Assembly of the Russian Federation.
- Dmitry Anatolievich Medvedev: Deputy Chairman of the RSC and former President and Prime Minister of Russia.
- Mikhail Vladimirovich Mishustin: Member of RSC and the Prime Minister of Russia.
- Sergey Yevgenyevich Naryshkin: Member of RSC and the Director of Russia’s Foreign Intelligence Service (SVR).
- Rashid Gumarovich Nurgaliev: Deputy Secretary of RSC.
- Anatoliy Anatolievich Seryshev: Member of RSC and the Presidential Plenipotentiary Envoy to the Siberian Federal District.
- Igor Olegovich Shchegolev: Member of RSC and the Presidential Plenipotentiary Envoy to the Central Federal District.
- Anton Germanovich Siluanov: Member of RSC and Russia’s Finance Minister.
- Sergey Semyonovich Sobyanin: Member of RSC and the mayor of Moscow.
- Yuriy Petrovich Trutnev: Member of RSC, Deputy Prime Minister of Russia, and Presidential Plenipotentiary Envoy to the Far Eastern Federal District.
- Vladimir Vasilyevich Ustinov: Member of RSC and the Presidential Plenipotentiary Envoy to the Southern Federal District.
- Anton Eduardovich Vaino: Member of RSC and Chief of Staff of the Presidential Executive Office.
- Vladimir Vladimirovich Yakushev: Member of RSC and the Presidential Plenipotentiary Envoy to the Urals Federal District.
- Family Members of President Putin and Foreign Minister Lavrov
- Katerina Vladimirovna Tikhonova and Maria Vladimirovna Vorontsova: According to OFAC, they are the daughters of President Putin.
- Maria Aleksandrovna Lavrovais and Yekaterina Sergeyevna Vinokurova: According to OFAC, Lavrovais is the wife of and Vinokurova is the daughter of Foreign Minister Lavrov.
III. Russia’s Defense-Industrial Base
As part of its announcement on March 24, 2022, OFAC also designated 48 companies that operate in “Russia’s defense-industrial base” and, according to OFAC, “produce weapons that have been used” by Russia during its invasion of Ukraine. Per the announcement, the designations are intended to “cut off [these] companies from western technological and financial resources” and “have a deep and long-lasting effect on Russia’s defense-industrial base and its supply chain.” Below is a rundown of the designated entities:
- Tactical Missiles Corporation JSC (aka KTRV): Described by OFAC as a “large, state-owned Russian defense conglomerate” that “produces materiel in support of Russia’s defense-industrial base, including airborne weapons and weapon systems for Russia’s navy.” OFAC also designated KTRV’s General Director, Boris Viktorovich Obnosov and multiple entities “owned or controlled by, or having acted or purported to act for or on behalf of, directly or indirectly, KTRV” including:
- Globus Ryazan Design Bureau JSC
- Joint Stock Company Ural Design Bureau Detal
- Temp-Avia Arzamas Research and Production Association JSC
- Vympel State Engineering Design Bureau JSC
- Joint Stock Company Salute
- AO GNPP Region
- Joint Stock Company Machine Building Design Bureau
- Raduga State Machine Building Design Bureau Joint Stock Company
- Joint Stock Company Azovski Optiko Mechanichesky Zavod
- Joint Stock Company Smolensk Aircraft Plant
- Soyuz Turaevo Engineering Design Bureau JSC
- JSC MBDB Iskra
- Joint Stock Company 711 Aircraft Repair Plant
- TRV Auto Limited Liability Company
- Joint Stock Company Central Design Bureau of Automatics
- State Scientific Research Institute of Mechanical Engineering Imeni V.V. Bakhireva
- Joint Stock Company Concern Granit-Electron (and six (6) affiliated entities)
- Joint Stock Company Concern Sea Underwater Weapon Gidropribor (and four affiliated entities).
- JSC NPO High Precision Systems: Described by OFAC as a “state-owned holding company that develops, produces, modernizes, and repairs weapons and military equipment.”
- NPK Tekhmash OAO: Described by OFAC as a “state-owned holding company that produces and supplies ammunition for the Russian Armed Forces.”
- Joint Stock Company Russian Helicopters: Described by OFAC as a “state-owned holding company that oversees the design, manufacturing, testing, and maintenance of civilian and military helicopters.” OFAC also designated 15 entities that are “owned 50 percent or more, directly or indirectly” by JSC Russian Helicopters.
- Joint Stock Company Kronshtadt: Described by OFAC as a “private Russian defense contractor that develops and manufactures equipment, software, and integrated solutions for the unmanned aviation and defense industries of Russia.”
Identifying information on the listed individuals and entities described above can be found on Treasury’s website.
IV. Companies Engaged in “Sanctions Evasion Networks” and Technology Sector
On March 31, 2022, OFAC announced the designation of 21 entities and 13 individuals as part of its “crackdown on the Kremlin’s sanctions evasion networks and technology companies,” which OFAC described as “instrumental” to Russia’s capacity to wage war in Ukraine. The designated parties include the following:
- OOO Serniya Engineering, OOO Sertal and OOO Robin Tried (Russia-based)
- OFAC also designated the following individuals connected to Serniya: Irina Viktorovna Nikolaeva, Yevgeniya Aleksandrovna Podgornova, Anton Alekseevich Krugovov, Andrey Georgiyevich Zakharov, and Yevgeniy Aleksandrovich Grinin, Sergey Aleksandrovich Yershov and Viacheslav Yuryevich Dubrovinskiy.
- Majory LLP and Photon Pro LLP (U.K.-based)
- Invention Bridge SL (Spain-based) and Tamara Aleksandrovna Topchi (designated as “a leader, official, senior executive officer, or member of the board of directors of Invention Bridge SL”)
- Alexsong Pte Ltd (Singapore-based)
- AO NII-Vektor (Russia-based)
- T-Platforms (Russia-based)
- Joint Stock Company Mikron (Russia-based)
- Molecular Electronics Research Institute (Russia-based)
- OOO Nauchno-Tekhnicheskii Tsentr Metrotek and OOO Pamkin Khaus (Russia-based)
- OOO Foton Pro (Russia-based)
- Malberg Ltd (Malta-based) and two of its key operators: Evgeniya Vladimirovna Bernova and Nikita Aleksandrovich Sobolev
- Djeco Group LP (U.K.-based)
- Djeco Group Holding Ltd (Malta-based)
- Maltarent Ltd (Malta-based)
- SCI Griber (France-based)
- Sernia-Film Co Ltd (Russia-based)
- Quantlog OY (Finland-based)
Identifying information on the listed individuals and entities described above can be found on Treasury’s website.
V. Companies Engaging in “Darknet” Market
Per an announcement on April 5, 2022, OFAC also designated Hydra Market, described as “the world’s largest and most prominent darknet market” that provides “malicious cybercrime services, dangerous drugs, and other illegal offerings available through [its] Russia-based site.” Relatedly, OFAC also designated Garantex, which it describes as “a virtual currency exchange” that “allows customers to buy and sell virtual currencies using fiat currencies.” According to OFAC, over $100 million in known Garantex transactions are associated with illicit actors and darknet markets.
Identifying information on the listed entities described above can be found on Treasury’s website.
On April 1, 2022, the Department of Commerce’s Bureau of Industry and Security (BIS) announced the issuance of a final rule adding 120 entities to the BIS Entity List. Specifically, 95 entities have been added as military end-users (MEUs) under the destinations of Belarus (24 entities) and Russia (71 entities) for “acquiring and attempting to acquire items” subject to the Export Administration Regulations (EAR) in support of the militaries of Belarus and Russia. Moreover, 25 entities have been added under the destination of Russia for “acquiring and attempting to acquire items” subject to the EAR in support of Russia’s military modernization efforts.
More recently, on April 7, 2022, BIS announced that it has denied export privileges (via Temporary Denial Orders) for three Russian Airlines — Aeroflot, Azur Air and UTair — due to violations of newly-issued EAR requirements that impose expanded license requirements for the export, reexport or transfer (in-country) to Russia of any aircraft or aircraft parts on the Commerce Control List. This announcement follows BIS’s identification on March 18, 2022, of 100 commercial and private aircraft recently exported to Russia in contravention the new EAR requirements. In its March 18 announcement, BIS warned that “any subsequent actions” involving the 100 identified aircraft, including, but not limited to, “refueling, maintenance, repair, or the provision of spare parts or services” are subject to General Prohibition Ten (GP 10) of the EAR (Section 736.2(b)(10)), which prohibits an individual or entity from proceeding with a transaction knowing that a violation of the EAR has occurred or is about to occur.
For More Information
Please note that we will continue to closely monitor this situation and provide timely updates, as warranted. In the meantime, please do not hesitate to reach out to a member of the Faegre Drinker Customs and International Trade Team if you have any questions.