February 27, 2023

One-Year Anniversary of Russian Invasion of Ukraine Brings New Sanctions, Export Controls and Tariffs

On February 24, 2023, the White House marked the one-year anniversary of the Russian invasion of Ukraine by announcing a sweeping package of new sanctions, export controls and tariffs aimed at “holding Russia accountable for its war of aggression.”

As detailed below, the package includes:

  • Expanded Sanctions Authority: The Office of Foreign Assets Controls (OFAC) issued a new determination that targets the metals and mining sector of the Russian economy, thus opening the door for new and potentially forthcoming sanctions on individuals or entities determined to be operating or to have operated in that sector.
  • New Blocking Sanctions: OFAC also announced sanctions targeting 22 individuals and 83 entities across multiple sectors, including aerospace, defense, financial services and technology.
  • New Export Restrictions: The Bureau of Industry and Security (BIS) announced four new export control rules, which, in part, add nearly 90 Russian and third-country companies — including those in China — to the Entity List “for engaging in sanction evasion and backfill activities in support of Russia’s defense sector.”
  • New Tariffs: The White House issued proclamations raising tariffs on aluminum and derivative articles, as well as other products originating from Russia.

The U.S. announcement was made in conjunction with new sanctions/export control announcements from allies, including the United Kingdom and the European Union.

Expanded Sanctions Authority (Metal and Mining Sector)

One of the most significant components of the announcement is OFAC’s determination to expand sanctions authority under Executive Order 14024 (April 15, 2021) to include individuals and entities that operate or have operated in Russia’s metals and mining sector.

As an initial exercise of this new authority, OFAC designated the following entities and individuals to its Specially Designated Nationals and Blocked Persons List (SDN List):

  • Joint Stock Company Burevestnik Central Scientific Research Institute, described by OFAC as “a Russia-based arms and artillery manufacturer that is also involved in manufacturing metals.”
  • OOO Metallurg-Tulamash, which, according to OFAC, is “a Russia-based steel manufacturer that also manufactures armaments for Russia’s navy.”
  • TPZ-Rondol OOO, described by OFAC as “a Russia-based company that specializes in coating metals and is a subsidiary of one of Russia’s leading ammunition manufacturers.”
  • Mtsenskprokat, which, according to OFAC, is “a Russia-based company that produces unique metal alloys and products for Russia’s aviation and defense industries.”

New Blocking Sanctions

In addition to the four entities listed above — all of which are tied to the metal and mining sector — OFAC also designated the following entities and individuals to its SDN List:

Financial Institutions

  • Credit Bank of Moscow Public Joint Stock Company, described by OFAC as one of Russia’s ten largest banks by asset value.
  • Joint Stock Company Commercial Bank Lanta Bank
  • Public Joint Stock Company Commercial Bank Metallurgical Investment Bank (Metallinvestbank)
  • Public Joint Stock Company MTS Bank
  • Novosibirsk Social Commercial Bank Levoberezhny Public Joint Company
  • Bank Saint-Petersburg Public Joint Stock Company
  • Joint Stock Commercial Bank Primorye
  • SDM-Bank Public Joint Stock Company
  • Public Joint Stock Company Ural Bank for Reconstruction and Development (UBRD)
  • Public Joint Stock Company Bank Uralsib
  • Bank Zenit Public Joint Stock Company
  • OOO Zenit Finance, OOO Zenit Leasing, and OOO Zenit

Factoring MSP In conjunction with the newly announced sanctions related to financial institutions, OFAC also issued general licenses authorizing certain affected transactions, including those related to energy and the winding down or rejection of transactions involving certain designated financial institutions.

Wealth Management-Related Entities and Individuals

  • CONFIDERI Pte Ltd and Vend Ore GmbH, along with its founders/owners Olga Borisovna Raykes and Marat Maratovich Savelov
  • IC Veles Capital LLC and its leadership, Dmitry Vitalyevich Bugayenko and Aleksei Dmitrievich Gnedovskii
  • Veles International Limited and Hadlerco Limited
  • Ulan Vladimirovich Ilishkin, Deputy Chairman of the Management Board of U.S.-sanctioned Public Joint Stock Company Rosban
  • Alina Olegovna Nazarova, head of A-Club, the private banking department of U.S.-sanctioned Joint Stock Company Alfa-Bank.
  • Evgeniya Sergeyevna Tyurikova, leader of the private banking department of U.S.-sanctioned Public Joint Stock Company Sberbank of Russia.

“Russian Elite-Linked Businessman Tied to Illicit Financial Activity”

  • Aleksandr Yevgenyevich Udodov, who, according to OFAC, is the former brother-in-law of Russian Prime Minister Mikhail Mishustin. OFAC also added the following entities owned by Udodov to the SDN List:
    • Limited Liability Company Aforra Management
    • Limited Liability Company Aforra Development
    • Limited Liability Company Aforra Engineering  Limited Liability Company Aforra Property
    • Limited Liability Company Aktiv R
    • Limited Liability Company Arendoff
    • Limited Liability Company Atlas Real Estate
    • Limited Liability Company Ayaks
    • Limited Liability Company Garantiya
    • Limited Liability Company Mushroom Rainbow
    • Limited Liability Company New City
    • Limited Liability Company Nikoliya
    • Limited Liability Company Optima Invest
    • Limited Liability Company Russul
    • Limited Liability Company Stork
    • Avrora Capital SRO
    • Leading Capital Investment Ltd
    • Caliber Wealth Management Ltd

Entities That Produce Carbon Fiber and Related Advanced Materials for Russia’s Military Supply Chain

  • UMATEX Joint-Stock Company, described by OFAC as Russia’s largest producer of a wide range of carbon fibers and fiber-based items, along with the following subsidiaries: UMATEX Group Europe S.R.O., Argon and Zavod Ulgerodnykh I Kompozitsionnykh Materialov.
  • UVICOM LTD, which, according to OFAC, is a Russia-based company that produces carbon fibrous materials and develops technologies for carbon fiber materials.

Entities That Operate in Russia’s Aerospace Sector

  • Joint Stock Company Prepreg Advanced Composite Materials
  • Limited Liability Company Alabuga-Fibre
  • Limited Liability Company Prepreg-Dubna
  • Joint Stock Company Research Institute of Graphite-Based Materials NIIGRAFIT
  • Joint Stock Company the Urals Scientific Research Institute of Composite Materials

Entities That Operate in the Defense and Related Material Sector

  • Perm Scientific Research Technological Institute
  • Joint Stock Company Military-Industrial Corporation NPO Mashinostroyenia

Persons Operating in Russia’s Technology and Electronics Sectors

  • 0Day Technologies
  • OOO Iteranet
  • OKB Spektr OOO
  • Limited Liability Company Maxtech, along with its co-owners, Anastasiya Olegovna Eshstrut and Maksim Valeryevich Safonov
  • Novilab Mobile, LLC
  • Limited Liability Company Promtekhekspert
  • PSV Technologies LLC, along with its owner, Sergei Valentinovich Petrov
  • Tamimed, along with its owner and CEO, Svetlana Alekseyevna Moretti
  • AO Russian High Technologies
  • Forward Systems, R&DC
  • ZAO Akuta
  • Joint Stock Company Vakuum.ru
  • By Trade OU
  • OOO Lavina Puls and AO Inforus, along with the head of both companies, Andrey Igorevich Masalovich
  • Open Joint Stock Company Ilyenko Elara Research and Production Complex, along with its General Director, Andrey Aleksandrovich Uglov.

Other Entities Supporting Russia’s War against Ukraine

  • Stella Leone, and its owner, Nurmurad Kurbanov
  • Federal State Unitary Enterprise Central Scientific Research Institute of Economics, Informatics and Management Systems
  • Independent Insurance Group LTD
  • Private Military Company Redut
  • The following individuals and entities purportedly tied to Walter Moretti, who, according to OFAC, is a “Swiss-Italian businessman” with a “network of associates and companies” that have “covertly procured sensitive Western technologies and equipment for Russian intelligence services and the Russian military, including hydraulic presses, armament packages, and armor plating.”
    • Taerio Limited
    • Taerio International LTD EOOD
    • Tamyna FZE
    • Tamyna AG
    • Interpolytrade Limited Company
    • Swisstec 3D AKUS AG
    • Stratton Investment Group LTD
    • Markus Gerhard Mueller
    • Ronald Eric Cosman
    • Bruno Koller
    • Frederic Pierre Villa
    • Hans-Peter Bomatter
    • Lutwin Schommer

It is critical to note that, even if not identified on the SDN List, the new blocking sanctions also apply to entities owned 50% or more, directly or indirectly, by one of the entities or individuals listed above. Identifying information on the listed individuals and entities can be found here.

New Export Restrictions

As described below, BIS also announced four new export control rules, all of which have an effective date of February 24, 2023:

  • Entity List Additions: Per two unpublished final rules (Docket No. 230221-0048 and Docket No. 230221-0050), BIS is adding 86 entities to the Entity List (79 of which are based in Russia, five based in China, two based in Canada, and three based in France, Luxembourg and the Netherlands, respectively).
  • Russian and Belarusian Industry Sector Restrictions: Per an unpublished Final Rule, BIS is expanding the scope of the Russian and Belarusian industry sector restrictions (oil and gas production; commercial and industrial items; chemical and biological precursors) and the “luxury goods” sanctions to “better align them with the controls that have been implemented by U.S. allies and partners imposing substantially similar controls on Russia and Belarus.”
  • EAR Expansion to Target Iranian Unmanned Aerial Vehicles (UAVs): Finally, per another unpublished Final Rule, BIS is imposing new export control measures on Iran to “address the use of Iranian UAVs by Russia in its ongoing war against Ukraine. The new restrictions will (1) impose requirements for a subset of generally low-technology (EAR99) items, including semiconductors exported to Iran, regardless of whether a U.S. person is involved in the transaction; (2) establish a new list (Supplement No. 7 to part 746) identifying these EAR99 items by HTS-6 Code; (3) create a new “Iran Foreign Direct Product (FDP) Rule” specific to Iran for items in certain categories of the Commerce Control List (CCL) and EAR99 items; and (4) revise the existing Russia/Belarus Foreign Direct Product (FDP) rule to cover EAR99 items that have been found in UAVs containing parts and components branded U.S. or U.S.-origin.

New Tariffs

The Biden administration also announced an increase in tariffs from 35%to 70% on most metal and metal products originating from Russia and imported into the United States, as well as an increase in non-most-favored-nation tariffs to 35% on some minerals and chemicals from Russia. In total, these measures will affect more than 100 Russian products worth approximately $2.8 billion.

Additionally, Section 232 tariffs on aluminum and derivative articles produced in Russia will increase to a 200% ad valorem duty rate beginning on March 10, 2023; while a tariff of 200 percent will be imposed on aluminum and derivative articles where any amount of primary aluminum is used to manufacture articles smelted or cast in Russia beginning on April 10, 2023. In other words, the Biden administration will still impose tariffs regardless of whether these products were substantially transformed outside Russia.

Looking Ahead

In the coming days, we expect more guidance on the latest U.S. sanctions and export controls from OFAC and BIS, as well as the announcement of additional trade measures against Russia and Belarus from the U.S. and other G7 countries.

Please note that we’ll 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.

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