Sanctions Update – The First 50 Days

In its first 50 days, the Biden administration has been busy utilizing sanctions and export controls to support its foreign policy priorities of human rights, multilateralism and support for democratic regimes. The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), the U.S. Commerce Department’s Bureau of Industry and Security (BIS) and the U.S. State Department (State) have all taken actions against a number of persons and entities in response to recent international developments related to Russia, Myanmar/Burma and Saudi Arabia.

Russia

On March 2, the administration undertook a series of coordinated, multi-agency actions to impose sanctions and export controls on Russia. These actions, which were mirrored by similar actions in the E.U., come in response to a number of recent provocations by Russia, according to the Biden administration, including the poisoning and subsequent imprisonment of dissident Alexei Navalny, the SolarWinds cyberattack, and allegations that Russia sought to interfere in the 2020 U.S. election and offered bounties to Taliban fighters to kill U.S. soldiers in Afghanistan.

Specifically, OFAC added seven Russian senior officials to the Specially Designated Nationals and Blocked Persons List (SDN List), effectively prohibiting transactions with a U.S. nexus with these individuals and any entities owned 50% or more by them (either individually or in the aggregate). BIS is scheduled to publish a Federal Register notice adding additional Russian entities to the Entity List on March 4, 2021, effectively cutting them off from exports of goods, software and technology subject to the Export Administration Regulations (EAR). Finally, State terminated all sales of defense articles or defense services to Russia and all foreign military financing to Russia, denied any U.S. Government credit or other financial assistance to Russia (including from the Export-Import Bank), and terminated exports of national security-sensitive goods and technology to Russia.

Myanmar/Burma

In response to the Burmese military’s coup following the outcome of the November 2020 election, on February 1, 2021, President Biden issued Executive Order (EO) 14014 authorizing sanctions against certain individuals and entities. Myanmar, also known as Burma, was formerly subject to an embargo by the U.S. Government for its human rights abuses and repression of free elections. The embargo was lifted by President Obama in 2016 following democratic elections in November 2015.

In response to the EO, OFAC has added 12 high-ranking military officers in Myanmar and three Burmese entities to the SDN List. Additionally, BIS announced new licensing requirements, including suspension of some license exceptions and a presumption of denial policy of license applications for exports to Myanmar’s current government and military.

Saudi Arabia

On February 26, the U.S. State Department declassified its report on the murder of journalist Jamal Khashoggi. The State Department found that Saudi Arabia’s de facto ruler, Crown Prince Mohammed bin Salman, approved the killing of Khashoggi, a vocal critic of the royal family and its policies. The administration deliberately chose to not sanction the crown prince, citing its desire to focus instead on the future conduct of Saudi Arabia to improve its human rights record. The decision has been criticized by human rights groups, but OFAC did sanction others deemed responsible for the murder, and State imposed visa restrictions on a total of 76 Saudi nationals.

Saudi Arabia has been a key U.S. ally in the Middle East, notwithstanding recent strains, including a freeze on the sale of certain arms to Saudi Arabia and the end of U.S. involvement in the conflict in Yemen. The Biden administration has indicated it prefers a “recalibration” in the relationship with Saudi Arabia, rather than a “rupture”. But President Biden has taken a more aggressive approach to Saudi relations than his predecessor, former President Trump, and further action is possible pending the royal family’s response.

Takeaways

Although the actions by OFAC, BIS and State fall short of imposing a full-scale embargo on Russia and Myanmar/Burma, the new actions by the administration mean that U.S. businesses should continue to screen parties involved in transactions, as well as perform due diligence on those parties’ beneficial owners, and carefully review license determinations made for those transactions. Additionally, U.S. investors in or exporters to Saudi Arabia should keep a close eye on potential developments related to individuals and entities in the Kingdom. For more information on the above, please do not hesitate to contact Matt Levy, Mollie Sitkowski, or Qiusi Newcom.