Sanctions Weekly Update – Ukraine/Russia Conflict – March 27, 2023

US Sanctions | EU Sanctions | UK Sanctions | Russia/Ukraine Sanctions | Other Notable Developments

Week of March 27, 2023

I. US SANCTIONS

• OFAC Sanctions Belarusian State Enterprises and Officials for Complicity in Ukraine War: On March 24, the Treasury Department’s Office of Foreign Assets Control (OFAC) sanctioned three Belarusian state-owned entities and nine Belarusian government officials, as well as one presidential aircraft as blocked property, pursuant to Executive Order (E.O.) 14038. According to the Treasury, among other things, the sanctions highlight the US’s willingness to hold the Lukashenka regime in Minsk to account for its complicity in Russia’s ongoing war against Ukraine and assistance to the Putin regime. Read more>> and Read more>>
• US Calls on Allies to Sanction Chinese Satellite Company: On March 29, Bloomberg reported that US officials are pushing the EU and other allied countries to impose sanctions on Spacety, a Chinese satellite company that allegedly provided satellite images of the Ukrainian battlefield to entities like the Wagner group. The US imposed sanctions on Spacety in January of this year, but the EU has yet to impose restrictions on the company. Read more>>
• OFAC Sanctions Individual for Organizing Russia-North Korea Arms Deal: On March 30, the Office of Foreign Assets Control imposed sanctions on a Slovak national who helped North Korean officials obtain over two dozen kinds of weapons and munitions for Russia in exchange for raw materials and commercial aircraft for North Korea. Read more>>
• US Officials Condemn Arrest of WSJ Reporter, Urge Americans to Leave Russia: On March 30, Secretary of State Antony Blinken and White House press secretary Karine Jean Pierre released statements condemning Russia’s arrest of Wall Street Journal reporter Evan Gershkovich on espionage charges. Secretary Blinken and Jean-Pierre urged any US citizens still in Russian to leave the country immediately. Read more>>
• BIS Adds 2 Russian Entities to Entity List, Launches Export Controls and Human Rights Initiative Code of Conduct: On March 30, the US Department of Commerce’s Bureau of Industry and Security added two Russian entities based on Burma to the Entity List due to their support of the sale, procurement, and service of military equipment that permits the Burmese government to carry out human rights abuses. 9 other entities were added to the list for similar human rights reasons. The Bureau also released a new Export Controls and Human Rights Initiative Code of Conduct on the same day, which is intended to guide allied countries on how to incorporate human rights into their export control policies. Read more>> and Read more>>
• Top Agriculture Trader Cargill to Stop Exporting Russian Grain: Top global agricultural commodity trader Cargill is planning to stop exporting Russian grain this summer, while maintaining its other operations in the country. Cargill Russia has reportedly notified Russian Deputy Agriculture Minister Oksana Lut of its intentions to end its grain exports from Russia from the start of the next grain exporting season on July 1. Russia’s Agriculture Ministry told Reuters that its grain shipments abroad would not be affected by Cargill’s decision to end exports. Read more>>
• National Security Advisor and USAID Officials Meet with Belarusian Opposition Leader: On March 27 and 28, National Security Advisor Jake Sullivan and Deputy Administrator of United States Agency for International Development (USAID) Isobel Coleman respectively met with Svyatlana Tsikhanouskaya, the democratic opposition leader of Belarus. The leaders highlighted their continuous support and commitment in holding the Lukashenka regime accountable for its actions, including its facilitation of Russia’s war against Ukraine and the suppressing of peaceful dissents against the regime. They also criticized Putin’s threat to move nuclear weapons to Belarus. Read more>> and Read more>>
• Secretary Yellen Underscores Importance of Beneficial Ownership Transparency in Countering Corruption and Illicit Finance: On March 28, as part of the Biden-Harris Administration’s second Summit for Democracy, Secretary Yellen of the Treasury Department announced the launch of a commitment to enhance beneficial ownership transparency, in accordance with the revised FATF standards to improve transparency and prevent misuse of shell entities in corruption and illicit finance. Specifically, the Secretary highlighted the vulnerabilities observed in tracking sanctioned Russian assets and restricting the access of sanctioned Russians to the international financial system, and how this newly launched commitment could address these vulnerabilities. Read more>> and Read more>>
• Secretary Blinken Discusses Ukraine Peace Plan in Panel Session Ahead of Democracy Summit: On March 28, Secretary of State Anthony Blinken held a virtual panel on “A Just and Lasting Peace in Ukraine” ahead of the opening of the second Summit for Democracy. Leaders participating in the session shared their insights and commitment as to Russia’s aggression and continuous support to Ukraine in defending its country against invasion. Read more>>

II. EU SANCTIONS

• EU Aims to Boost Russia Sanctions Enforcement with New Project: On March 29, 2023, the European Union said it was planning to launch a project with nine member states to identify gaps in the sanctions regime against Russia and to improve coordination between national authorities when enforcing penalties. The partnership between the European Commission and the national governments, which are currently responsible for the implementation of sanctions, could be a precursor to a new EU body to coordinate sanctions oversight, added the officials, speaking on condition of anonymity because the discussions are private.Read more>>
• EU Will Respond to Kremlin's Nuclear Blackmail with New Sanctions According to EU’s High Representative: The EU considers the Kremlin's statements about its intention to station tactical nuclear weapons in Belarus as an irresponsible escalation and is ready to introduce new economic sanctions in response to increased threats to European security. Read more>>
• EU Official Calls on Kyrgyzstan to Prevent Russia from Evading Sanctions: David O'Sullivan, the European Union's special envoy for the implementation of sanctions, has called on Kyrgyzstan and other nations in Moscow's political and economic sphere to avoid assisting Moscow's attempts to evade sanctions imposed on Russia over its ongoing full-scale invasion of Ukraine. Read more>>
• EU High Representative Confirms that EU is Considering Strengthening Sanctions against Belarus: In a reply to a parliamentary question, the EU High Representative confirmed that the Council is considering a proposal to further align the sanctions regime of Belarus with that of Russia, with the twofold objective of putting pressure on Belarus to stop its involvement in the illegal aggression of Russia against Ukraine and avoiding circumvention via Belarus of the restrictive measures imposed on Russia. Read more>>
• EU Countries Seek Legal Option to Stop Russian LNG Imports: European Union countries agreed on Tuesday 28 March to seek a legal option to stop Russian companies sending liquefied natural gas to EU nations, by preventing Russian firms from booking infrastructure capacity. Read more>>
• EU Could Threaten to Sanction Washing Machine Trade Helping Russia Fix Its Army: The European Union could slap trade restrictions on countries helping Russia acquire washing machines and used cars to repair its battle-stricken fleet of tanks. Read more>>
• EU Looks at Investing Frozen Russian State Assets to Raise Cash for Ukraine: The EU has been looking into the legal options for using Russian foreign reserves frozen in the bloc, including investing them to generate returns that could be used to help fund Ukraine's reconstruction. Read more>>
• Commission Approves EUR 109 Million Bulgarian Scheme to Support Farmers in the Context of Russia's War against Ukraine: The European Commission has approved an approximately EUR 109 million (BGN 213 million) Bulgarian scheme to support farmers in the context of Russia's war against Ukraine. The scheme was approved under the State aid Temporary Crisis and Transition Framework. Read more>>
• Commission Approves EUR 100 Million Lithuanian Scheme to Support Companies in the Context of Russia's War against Ukraine: The European Commission has approved a EUR 100 million Lithuanian scheme to support companies in the context of Russia's war against Ukraine. The scheme was approved under the State aid Temporary Crisis and Transition Framework. Read more>>
• Commission Approves EUR 126 Million Polish Scheme to Support the Wheat and Maize Production Sector in the Context of Russia's War against Ukraine: The European Commission has approved an approximately EUR 126 million (PLN 600 million) Polish scheme to support the wheat and maize production sector in the context of Russia's war against Ukraine. The scheme was approved under the State aid Temporary Crisis and Transition Framework. Read more>>
• Austria's Raiffeisen Bank Eyes Sale of Russian Operations: Austrian banking group Raiffeisen, one of the last major Western lenders in Russia, said Thursday it was considering a "sale or spin-off" of its subsidiary in the country. The RBI Group, which owns the bank, has been under scrutiny over its links to Russia since Moscow invaded Ukraine in February last year. Ukrainian President Volodymyr Zelensky has singled out Raiffeisen Bank for criticism while the U.S. Treasury Department's Office of Foreign Assets Control requested information about its business in Russia in January. Read more>>

III. UK SANCTIONS

• New UK Russia General Licence for Bond Amendments and Restructurings for Non-Designated Persons: On March 29, 2023, OFSI issued General Licence (GL) INT/2023/2824812, ‘Bond amendments and restructurings for non-Designated Persons’ (Notice), under the Russia (Sanctions) (EU Exit) Regulations 2019. In summary, the general licences authorises: 
  • A company, entity or institution which has issued a bond which considers that it has or may have Bondholders who are Designated Persons to effect the terms of any Bond restructuring or amendments agreed between itself and its Bondholders, provided that:
    • as part of any such Bond restructuring or amendments, no funds or economic resources (or any legal or equitable interests or rights therein) are made available, directly or indirectly, to or for the benefit of, a Designated Person; and
    • insofar as a Designated Person would have been (but for their designation) entitled to any funds or economic resources (or any legal or equitable interests or rights therein) under the terms of the Bond restructuring or amendments, such funds or economic resources shall be frozen and not made available to that Designated Person, until such time as they are no longer designated.
  • A UK Person (including a Relevant Institution) to take any steps necessary to effect a Bond restructuring or amendment as set out above, provided that:
    • as part of any such Bond restructuring or amendments, no funds or economic resources (or any legal or equitable interests or rights therein) are made available, directly or indirectly, to or for the benefit of, a Designated Person; and
    • insofar as a Designated Person would have been (but for their designation) entitled to any funds or economic resources (or any legal or equitable interests or rights therein) under the terms of the Bond restructuring or amendments, such funds or economic resources shall be frozen and not made available to that Designated Person, until such time as they are no longer designated. Read more>>
• OFSI Extends General Licence – INT/2022/1834876: On May 30, 2022, OFSI issued General Licence INT/2022/1834876 under Regulation 64 of the Russia (Sanctions) (EU Exit) Regulations 2019 which allows for Interim Managers and trustees to act as receiver(s) and manager(s) in respect of the property and affairs of a charity. On March 28, 2023, the licence was extended and it now expires at 23:59 on May 20, 2025. Read more>>
• English Judgment Says UK & US Sanctions Didn’t Affect Obligation to Pay under Letter of Credit: On March 24, 2023, the Commercial Court gave judgment in Celestial Aviation Services v UniCredit Bank and Celestial Aviation Services Limited v. UniCredit Bank AG. UniCredit refused to make payment to aircraft lessors under letters of credit opened in relation to the lease of aircraft to Russian companies, on the basis that it would be unlawful to make payment under UK and US sanctions. The High Court said sanctions did not suspend UniCredit’s obligation to pay because: i) payment did not breach Regulation 28 of the UK’s Russia sanctions regulations because it wasn’t the provision of funds in connection with the supply of aircraft to Russia, it was a separate obligation to pay pre-dating Regulation 28; and ii) even if payment in dollars breached US sanctions, it would have been possible for UniCredit to pay by other means (e.g. cash). Read more>>

IV. RUSSIA/UKRAINE SANCTIONS

• Putin Admits Sanctions May Hurt Russia’s Economy: On March 29, 2023, it was reported that Russian dictator Vladimir Putin admitted that Western sanctions imposed on Russia due to its invasion of Ukraine could negatively affect the country’s economy. Putin made comments at a meeting with the members of the Russian government, according to RIA Novosti. Putin is reported as saying sanctions "can really have a negative effect on the economy". "In this regard, we need to ensure a sustainable increase in domestic demand." Putin has previously repeatedly claimed that sanctions imposed on Russia had not affected the country's economy.Read more>>
• Russia Forcing Western Companies Looking to Leave to Make Obligatory Donation to Moscow: On March 29, 2023, Western companies looking to depart Russia and sell their properties in the country will now be required to make a straight donation to the Vladimir Putin's government, according to the country's Commission on Foreign Investments. Ultimately, this increases the pressure on business that have not yet left Russia since the invasion of Ukraine began. Nataliia Shapoval, chair of the Kyiv School of Economics' analytics centre, has said this decision was anticipated and emphasises the need for businesses to make faster choices because the process may become more difficult in the future. Ms. Shapoval told the Financial Times: "It just highlights that companies should be making decisions faster, because it won’t be getting any easier in the future." Read more>> and Read more>>
• Russia’s Oil Cut Will Please Its OPEC+ Partners: On March 29, 2023, Russia said it was close to fully implementing the output cut threatened in response to Western sanctions and price caps on its oil exports. Russia vowed to retaliate against both the ban on oil imports from its closest customers and the price caps that prevent shipments to buyers elsewhere from accessing industry-standard services unless the cargoes are sold at prices below externally imposed thresholds. Moscow’s retribution is to cut crude production by 500,000 barrels a day until the end of June. The loss of nearby markets in Europe has forced Russia to ship crude and refined products on long voyages from the Baltic Sea to India and China, and to offer big discounts to the buyers in its remaining two major markets. The intention of the Russian government in cutting supply is to punish those nations arrayed against it by pushing up oil prices and, in the words of Alexander Novak, Russia’s deputy prime minister, reducing the discount for its barrels. But time and the oil market have moved against Moscow. Read more>>
• Zelenskyy to Xi Jinping: Come to Ukraine: On March 28, 2023, Ukrainian President Volodymyr Zelenskyy invited his Chinese counterpart Xi Jinping to Ukraine, for what would be the first direct communication between the two leaders since the beginning of Russia’s all-out war on Ukraine. “We are ready to see [Xi] here,” Zelenskyy said in an interview with the Associated Press, adding, “I want to speak with him.” “I had contact with him before full-scale war. But during all this year, more than one year, I didn’t have [contact],” Zelenskyy said. In spite of being a key ally to Russia, Xi has sought to position Beijing as a peace broker between Moscow and Kyiv in recent months — spurring criticism from EU and NATO officials, who raised doubts over China’s capacity to act as a neutral intermediary. Read more>>
• Russia’s Economy Is Starting to Come Undone: On March 28, 2023, The Wall Street Journal published an article detailing the economic downturn now facing Russia. As the war continues into its second year and Western sanctions bite harder, Russia’s government revenue is being squeezed and its economy has shifted to a lower-growth trajectory, likely for the long term. Oligarch have reported “There will be no money next year”. Read more>>
• Kyiv Wants Sanctions on Russian Nuclear Sector: On March 28, 2023, it was reported that Ukraine wants Russia’s nuclear energy sector and liquefied natural gas to be part of future sanctions packages. Read more>>
• Russia Embraces China’s Renminbi in Face of Western Sanctions: On March 26, Russia has adopted the renminbi as one of the main currencies for its international reserves, overseas trade and even some personal banking services as it pivots towards China in the face of western sanctions. The shift has made Russia a rare example of a country adopting the renminbi rather than the US dollar or euro as a reserve currency, but poses risks for Moscow given Beijing’s history of abrupt currency devaluations. China’s desire for international adoption of the renminbi has gone largely unfulfilled, but Russia has been driven towards the Chinese currency by international sanctions, the freezing of $300bn of its international assets and moves to exclude its main banks from global markets. Read more>>
• Kyiv Envoy Continues to Ask Switzerland to Allow Re-Export of Arms to Ukraine: On March 27, Reuters reported that according to the Ukrainian ambassador to Switzerland, the Swiss foreign policy tradition of neutrality should not include blocking re-exports of Swiss weapons to Ukraine, adding that the weapons were urgently needed to win the war against Russia, and that the world expects “nothing more than a fair position.” Switzerland’s government had reiterated earlier this month that its long-standing policy of banning any country that buys Swiss arms from sending them to parties of a conflict will not change, turning down requests from Germany, Denmark and Spain to re-export Swiss war materiel to Ukraine. Read more>> and Read more>>
• Wall Street Journal Correspondent Arrested in Russia for Espionage: On March 30, The Associated Press reported that a correspondent for the Wall Street Journal, Evan Gershkovich, has been arrested for espionage charges, according to Russia’s top security agency, the Federal Security Bureau (FSB). Gershkovich was detained in the Ural Mountains city of Yekaterinburg, while allegedly “acting on the U.S. orders to collect information about the activities of one of the enterprises of the Russian military industrial complex that constitutes a state secret,” according to the FSB. This is the first time since the Cold War that a reporter for an American news outlet has been arrested in Russia for espionage, amid escalating tensions between Moscow and Washington over the war in Ukraine. Read more>>
• Russia Supplies Iran with Cyber Weapons as Military Cooperation Grows: Russia is helping Iran gain advanced digital-surveillance capabilities as Tehran seeks deeper cooperation on cyberwarfare, people familiar with the matter said. The potential for cyberwarfare collaboration comes after Iran has, according to U.S. and Iranian officials, sold Russia drones for use in Ukraine, agreed to provide short-range missiles to Moscow and shipped tank and artillery rounds to the battlefield. Read more>>
• Russian Foreign Ministry Rules Out Russian Withdrawal from the WTO: According to the Director of the Department of Economic Cooperation of the Russian Ministry of Foreign Affairs Dmitry Birichevsky, Russia is not going to withdraw from the World Trade Organization (WTO), although some countries are trying to force it out. The Foreign Ministry, according to the diplomat, is considering all options for Russia's participation in multilateral trade and is analyzing "the balance of benefits and costs of full membership in the WTO." Birchevsky said, “We proceed from the fact that there are reasons to remain in the organization as a full member in order to maintain stable ties with developing states.” Read more>>

V. OTHER NOTABLE DEVELOPMENTS

• Switzerland Implements Tenth Package of Sanctions against Russia: On March 29, the Swiss Federal Council enacted further sanctions against Russia in response to its military aggression against Ukraine, aligning itself with the EU, which adopted a tenth package of sanctions in February. Apart from requiring mandatory reporting in the financial sector, banning Russian nationals from serving on governing bodies of critical infrastructure owners and operators, and imposing further restrictions on various exports, the latest measures also included humanitarian exemptions and new means of safeguarding Swiss economic interests in specific circumstances. Read more>> and Read more>>
• Australia Imposes New Sanctions on Russian Officials: On March 30, Australia announced new sanctions and travel bans on seven Russian officials. The impacted individuals hold regional governance positions in the Crimean city of Sevastopol. Australia has imposed sanctions on more than 1000 individuals since Russia invaded Ukraine in 2022. Read more>>
• Japan Provides Additional Assistance for Recovery and Reconstruction in Ukraine: On March 30, the Japanese government announced that it would provide two grant aid projects for recovery and reconstruction in Ukraine, totaling $470 million. The projects include the provision of equipment necessary for mine action and debris clearance, livelihood reconstruction, recovery of agriculture, as well as support to the restoration of energy infrastructures damaged by Russian attacks through the United Nations Development Program. Read more>>
• IOC Defends Plans to Allow Russian and Belarusian Athletes in International Competitions: On March 28, CNN reported that the International Olympic Committee (IOC) President Thomas Bach defended plans to allow Russian and Belarusian athletes to participate in international competitions, saying that participation of athletes with Russian and Belarusian passports in international competitions “works.” The comments came after more than 300 fencers petitioned to the IOC, urging it to uphold the sanctions against Russian and Belarusian athletes for the countries’ aggression against Ukraine. The Executive Board of the IOC reiterated that it has yet to decide whether athletes holding a Russian or Belarusian passport would be allowed to participate at the Paris 2024 Olympics. Read more>> and Read more>>
• Chinese-Made Protective Equipment Used by Russian Soldiers on Ukraine Battlefield: On March 28, Politico reported that Russian body armor manufacturer, Klass, has been importing Chinese components for its vests, some of which are being used on the battlefield in Ukraine, according to trade data, photographs and Ukrainians who recovered the vests at the frontlines. This is the first confirmation that Chinese-made protective equipment is being used by Russian soldiers on the Ukraine battlefield, highlighting how Russia continues to rely on China for support of its war against Ukraine, despite the West’s continuous pressure on Beijing. Read more>>
• Bankers Helping Putin’s Friend Set Up Swiss Bank Account Convicted in Swiss Court: On March 30, Reuters reported that four bankers who helped a close acquaintance of Vladimir Putin, concert cellist Sergey Roldugin, move millions of francs across Swiss bank accounts between 2014 and 2016, were convicted of lacking diligence in financial transactions. The four executives were found guilty at a hearing in the Zurich District Court and were given suspended sentences of seven months each, highlighting how people like Roldugin were used as “strawmen” to hide the true owners of money, according to the indictment. The cellist was well known as a member of Putin’s inner circle, who also faced sanctions from the West after Russia invaded Ukraine in 2022. Read more>>
• International Community Takes Light Touch on Turkey’s Trade with Russia: On March 30, The Wall Street Journal published an article saying that, while Turkey has emerged as a transit hub for high-tech electrical equipment bound for Russia, countries that have otherwise aggressively enforced sanctions on Russia, like the United States, have backed off of Turkey, as the country tries to rebuild after a major earthquake. Read more>>
• Record Volumes of Russian Fuel Oil Arrived in Singapore and Malaysia in March: Record volumes of Russian fuel oil and vacuum gas oil (a product of distillation of fuel oil in a vacuum column for further processing) went to Singapore and Malaysia in March. Russian supplies increased the oversupply of these goods in Asian markets: in March, shipments of fuel oil and VGO from Russian ports to Singapore and Malaysia amounted to over 1.1 million tons, which corresponds to the volume of deliveries from the United Arab Emirates. Read more>>