Sanctions Weekly Update - Ukraine/Russia Conflict - August 28, 2023

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

I. US SANCTIONS

• OFAC Sanctions Russian Individual and Entity Supporting North Korea: On August 31, in coordination with the Republic of Korea (South Korea) and Japan, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned two individuals and one entity, including one Russian individual and one Russian entity, involved in generating revenue for the Democratic People’s Republic of Korea (North Korea)’s unlawful development of weapons of mass destruction and ballistic missiles. According to OFAC, the individuals allegedly coordinated the use of North Korean construction workers in Russia, procured items commonly used in the ship-building industry, and worked with Russian nationals to obtain identification documents to validate North Korean IT team’s accounts on freelance IT work platforms. Read more >> and Read more >>
• US Announces New Package of Military Assistance for Ukraine: On August 29, the Biden administration announced a new package of military assistance to aid Ukraine, which includes AIM-9M missiles for air defense, munitions for High Mobility Artillery Rocket Systems, 155mm and 105mm artillery ammunition, mine-clearing equipment, Javelin and other anti-armor systems and rockets, over 3 million rounds of small arms ammunition, ambulances, demolition munitions for obstacle clearing, as well as spare parts, services, training, and transportation. This package of weapons and equipment, which are valued at $250 million, is being executed under drawdowns previously directed for Ukraine. Read more >> and Read more >>
• India Asks US to Release Funds Frozen over Suspected Russia Diamond Link: On August 30, reports emerged that India has asked the United States to release $26 million belonging to at least two Indian diamond firms frozen due to their alleged trade links with sanctioned Russian diamond major Alrosa. The funds were frozen by OFAC when UAE-based units of the unspecified Indian companies tried to transfer them to buy rough diamonds, but the firms impacted by the action had informed the US government that the payments were meant either for non-sanctioned Russian entities or for orders completed before the sanctions on Alrosa came into effect in April last year, according to Indian government sources. Read more >>
• US Working with Romania and Moldova to Increase Grain Exports via Danube Route: The US is working with Romania and Moldova to increase Ukraine's grain exports via the Danube river as it explores alternative routes the exports after Russia pulled out of the Black Sea Grain Initiative. Since the collapse of the initiative, grain prices have surged as Russian forces have targeted Ukrainian ports with volleys of missiles and drones. Read more >> 

II. EU SANCTIONS

• EU High Representative/Vice-President of the European Commission (HRVP) Josep Borrell Says EU Sanctions against Russia are Working: On August 26, 2023, the HRVP Josep Borrell published a blog post explaining that EU sanctions have already limited Moscow's options and degraded Russia's industrial and technological capacity. Compared to 2021, 58% of total EU imports from Russia were already cut off in 2022, which the HRVP qualifies as "an unprecedented decoupling". In addition, since August 10, 2022, EU imports of Russian coal have stopped completely affecting around one fourth of all Russian coal exports. According to the HRVP, the G7+ energy sanctions on oil have proven effective as the International Energy Agency estimates that total Russian oil revenues are down 27% from a year ago. On the export side, EU exports on dual-use items and advanced technologies dropped by 78% in 2022 compared to 2019-2021. Even EU exports in non-sanctioned sectors are down by over 10% on average. The HRVP concluded that to stop the war, the EU needs to stay the course. Read more >>
• EU Welcomes the Alignment of Certain Countries with Council Decision Expanding the List of Sanctioned Individuals and Entities: On August 28, 2023, the HRVP Josep Borrell welcomed on behalf of the EU the alignment of candidate countries to the EU such as North Macedonia, Montenegro, Albania, Ukraine and Bosnia and Herzegovina, as well as of Iceland, Liechtenstein and Norway, members of the European Economic Area, with Council Decision from July 28, 2023 adding seven individuals and five entities to the list of persons, entities and bodies subject to EU restrictive measures. Read more >>
• EU Welcomes the Alignment of Certain Countries with Council Decision Extending EU Sanctions against Russia for a Further Six Months: On August 28, 2023, the HRVP Josep Borrell welcomed on behalf of the EU the alignment of candidate countries to the EU such as North Macedonia, Montenegro, Albania, Ukraine and Bosnia and Herzegovina, as well as of Iceland, Liechtenstein and Norway, members of the European Economic Area, with Council Decision extending EU sanctions measures for a further six months, i.e. until January 31, 2024. Read more >>
• European Commission Closely Monitors the Situation of Russian Citizens and Entities Relocated to Serbia: The European Commission stated that it is aware of the high number of Russian companies and citizens relocated to Serbia following Russia’s war against Ukraine and works closely with Serbian authorities to prevent the circumvention of EU sanctions via Serbia with support of the EU Sanctions Envoy. Nevertheless, the European Commission expressed its concerns regarding the envisaged changes to the Serbian citizenship law that entail Serbian citizenship being obtained after only one year of uninterrupted residence in the country given the fact that Serbian citizens enjoy visa-free access to the EU. Read more >> andRead more >>
• EU Parliament Member Urges Kyrgyz Compliance with Sanctions against Russia: The European Parliament's Foreign Committee chair David McAllister has urged Kyrgyzstan to ensure compliance with international sanctions against Russia amid growing concerns countries in Central Asia are being used to bypass the measures. The EU has expressed concerns about the increasing demand for EU products from Russia's neighboring countries, including Armenia, Kazakhstan, and Kyrgyzstan, as well as other nations maintaining trade relationships with Moscow, such as the United Arab Emirates, Turkey, and China. Read more >>
• European Commission Advances Efforts to Redirect Frozen Russian Assets to Support Ukraine: The European Commission is ready to provide proposals on how to use Russia's frozen assets in the interests of Ukraine, a representative of commission, Christian Wiegand, has said. He said that this issue had been discussed by EU leaders at the last European Council meeting in late June. Intensive work is also underway with the EU’s partners in the G7. According to Wiegand, it is "very important for EC to coordinate this internationally." Read more >>
• Russian Billionaire Pleads for EU Sanctions Relief after Decrying War: Arkady Volozh, co-founder of Russian tech giant Yandex, has formally requested that the EU lift sanctions against him days after he condemned Vladimir Putin's "barbaric" invasion of Ukraine. The case has raised the issue of whether policymakers should include “off-ramps” for sanctioned Russian elite figures who speak out against the invasion. The request will be discussed by EU officials next month. Read more >>
• Germany Arrests Alleged Russia Drone Supplier: A German businessman Waldemar W. has been detained for allegedly providing electrical components to Russia that were used to make Orlan-10 drones deployed in the war in Ukraine. Prosecutors said Waldemar W. ran two companies in Germany that deal in electronic components. In 26 instances between January 2020 and March 2023, Waldemar W. exported such components to a company in Russia that produced military gear and materiel, including the Orlan-10 drones. The case underscores the mounting scrutiny that western exports of high-tech goods to Russian firms have been subjected to since the start of Russia’s full-scale invasion of Ukraine in February 2022. Read more >>
• Portuguese Think Tank Warns that Portugal Has Made No Efforts on Sanctions on Russian Oligarchs Since Start of the War in Ukraine: On August 29, 2023, Portugal's Frente Cívica (Civic Front) association published a letter addressed to the Portuguese prime minister, and to the Portuguese president and foreign minister, in which it states that "in the last year and a half, the Portuguese state has made no effort to remove any assets that may be hidden in Portugal from the Russian leadership". The Civic Front maintains that Portugal must apply the sanctions defined by the Council of the EU, which oblige it to identify and freeze the assets of people and entities sanctioned in Portugal and regrets that earlier recommendation to create a task force to apply the sanctions has not been followed. Read more >>
• Slovakia Stops Relying on Russia for Nuclear Fuel: Slovakia is close to completely replacing Russian nuclear fuel supplies for its nuclear power plants after signing a deal with US company Westinghouse. Almost 60% of energy produced by Slovakia comes from nuclear power plants, which, in turn, come exclusively from Russian nuclear fuel. That will no longer be the case after an international tender secured an agreement with Westinghouse to supply the electricity producer in Slovakia. Read more >>
• EU Set to Import Record Volumes of Liquefied Natural Gas from Russia: The EU is set to import record volumes of liquefied natural gas (LNG) from Russia this year, despite aiming for the bloc to wean itself off Russian fossil fuels by 2027. Belgium and Spain are reported to be world's second and third-biggest importers of Russian LNG this year. Earlier in 2023, the EU's energy commissioner Kadri Simson urged EU companies to refrain from signing new contracts with Russian LNG suppliers. Countries like the Netherlands and Spain are taking steps to stop buying Russian LNG, but in the absence of any sanctions abandoning Russian gas for good could take a while.Read more >> andRead more >>
• Czechia Investigates Raiffeisen Bank Due to Its Activities in Russia: Czechia has opened an investigation of the Raiffeisen Bank International (RBI) over its ongoing business activities in Russia. The authorities are responding to a criminal complaint filed by the local Association for the Rights of Citizens and Entrepreneurs, which said that by conducting business in Russia, the RBI is financing Moscow's aggression against Ukraine. The group pointed out that in 2022, Raiffeisen's Russia-based companies have paid up to $720 million from their profits to the Russian state budget in taxes. As Austria's second-largest bank lender, Raiffeisen plays a significant role in Russia's financial system. Read more >>
• German Company under Investigation for Selling Drone Components to Russia: Investigators in Germany suspect a company of selling electronic components used to produce Russian Orlan-10 drones. The Federal Prosecutor's Office is investigating a man, identified as Waldemar W., for 26 cases of violating the Foreign Trade and Payments Act. The Orlan-10 is a reconnaissance drone used by the Russian military. The total value of the components the man sold are estimated to be around EUR 750,000. The investigators believe the businessman, who has both German and Russian citizenship, sent the components to Russia via third-party countries such as Lithuania and the United Arab Emirates. Read more >>
• Russian Billionaire Pleads for EU Sanctions Relief after Decrying War: Arkady Volozh, co-founder of Russian tech giant Yandex, has formally requested that the EU lift sanctions against him in the first big test of whether the bloc will reward prominent figures who publicly break with the Kremlin. Lawyers for Volozh petitioned the EU to repeal the measures days after Volozh condemned Vladimir Putin’s “barbaric” invasion of Ukraine. The request will be discussed by EU officials next month. The case has raised the issue of whether policymakers should include “off-ramps” for sanctioned Russian elite figures who speak out against the invasion. Read more >>
• Uniper Considering Legal Options over Sale of Assets in Russia: German state corporation Uniper said on Friday that it was considering all legal options over the sale of its assets in Russia. "In recent months, it has become apparent that the Russian government is unwilling to allow certain companies, including Uniper, to dispose of its investments in Russia," said a company spokesperson, "Uniper is examining all options to take legal action against these actions by Russia." Uniper said the forced administration of its Russian division Unipro had "deprived Uniper of the fundamental ownership rights to its investment." Read more >>
• "Tinkoff Insurance" Refused by Belgian Authorities in Request to Unblock Assets Frozen under EU Sanctions: The Belgian Treasury denied Tinkoff Insurance the release of the company's own funds frozen in the Euroclear depository. In June 2022, the European Union imposed sanctions against NSD, the assets of the Russian depository, along with the securities of investors, were frozen. Read more >>

III. UK Sanctions

• OFSI Adds to Belarus Sanctions Lists: On August 31, 2023, the Foreign, Commonwealth and Development Office updated the UK Sanctions List. Under the Belarus sanctions regime, the statement of reasons for entity Dana Holdings A.K.A Dana Astra, which is still subject to an asset freeze, being on the list was amended. Read more >>
• OFSI Uses Disclosure Power for First Time: On 31 August 2023, OFSI used its new Disclosure enforcement power for the first time. In brief, this power allows OFSI to publish details of financial sanctions breaches - including the person/entity who committed the breaches – where OFSI decides that the breaches are not serious enough to justify a civil monetary penalty. Such publication is referred to as a “Disclosure”. OFSI acquired this power last year via the Economic Crime (Transparency and Enforcement) Act 2022. Guidance on OFSI’s approach to Disclosures are in the updated Monetary Penalty and Enforcement Guidance. Read more >> and Read more >>
• OFSI Publish a Disclosure Notice of Wise Payments Breach of Financial Sanctions Regulations: On August 31, 2023, the Office of Financial Sanctions Implementation published a report naming Wise Payments Limited for breaching regulation 12 of Russia Regulations. The breach relates to a cash withdrawal of £250 made from a business account with Wise held by a company owned or controlled by a person designated under the Russia Regulations. In permitting the withdrawal, Wise made funds available to a company owned or controlled by a designated person. On the facts as known, OFSI does not assess the breach as sufficiently serious to impose a monetary penalty on Wise. However, the nature and circumstances of this breach were assessed as moderately severe and in OFSI’s judgement a Disclosure was the appropriate and proportionate enforcement response. Read more >> and Read more >>
• OFSI Updates General Licence: On August 23, 2023, the Office of Financial Sanctions Implementation updated General Licence (GL) INT/2023/3263556, under the Russia Regulations. The General Licence allows payments and other permitted activities to take place in relation to insolvency proceedings associated with GTLK Europe Designated Activity Company (DAC) and GTLK Europe Capital DAC and their subsidiaries. The was updated to make clear that STLC Europe Nine Leasing Limited is covered by the general licence. Read more >> and Read more >>
• OFSI Amends Telecommunications Services and News Media Services General Licence INT/2022/1875276: On August 23, 2023, the Office of Financial Sanctions Implementation updated General Licence (GL) INT/2022/1875276, under the Russia Regulations. The GL allows Designated Persons (DP), to continue business operations involving the provision of Civilian Telecommunication Services. The GL was updated to was updated to clarify that PJSC MegaFon is a Civilian Telecommunications DP and PJSC MegaFon is a News Media Services DP, and therefore, subject to the general licence, persons and entities may continue business operations with them. Read more >> and Read more >>

IV. Russia/Ukraine Sanctions

• Russia Reported to Face Domestic Fuel Crunch, Braces for More Shortages: On August 31, 2023, it was reported that Russia, one of the world's biggest oil producers, has faced shortages of fuel crucial for gathering the harvest in some parts of its southern breadbasket and the situation may get worse in coming months. A government decision to cut subsidies for refineries is likely to worsen the availability of fuel in the world's biggest grain exporter. Regional oil product depots in Russia's southern regions have had to cut or even suspend fuel sales, while retail filling stations were forced to limit fuel sale volumes to customers.Read more >>
• Russia Says It Will Have Talks with Turkey About Alternative to Black Sea Deal: On August 30, 2023, it was reported that the Russian Foreign Minister Sergei Lavrov and Turkish counterpart Hakan Fidan will discuss a proposal by Moscow for an alternative to the Black Sea grain deal when they meet this week. Under the plan, Russia would send a million tons of grain to Turkey at a discounted price, with financial support from Qatar, to be processed in Turkey and sent to countries most in need. Read more >>
• Ukrainian Government Agency Launches Database of Sanctioned Art: On August 30, 2023, it was reported that the Ukrainian government, National Agency on Corruption Prevention (NACP) has launched a database, which tracks the circulation of art products that are bought or sold by designated Russian individuals. Currently, the section contains information on more than 300 art objects of an estimated value of $2 billion and allows users to report relevant information relating to such assets to the agency. Read more >> and Read more >>
• Russian Contractor Files Lawsuit against H&M for RUB 246 million: On August 28, 2023, it was reported that the company LLC "Logisticspetstrans" appealed to the Moscow Arbitration Court with a claim against H&M with a demand to recover 245.8 million rubles. Logisticspetstrans, apparently relying on the promises of H&M, purchased 50 vehicles, organized a transport base according to the company's requirements. However, in July 2022, H&M Group ceased business in Russia, contrary to its earlier obligation. Read more >>
• Russian Airlines Import $1.2Bln Worth of Western Parts Despite Sanctions: On August 23, 2023, it was reported that Russian airlines have continued to import spare parts for Western aircraft despite sanctions designed to cut off the flow of key equipment. Ural Airlines, Norwdind Airlines, S7, Aeroflot and others have imported $1.2 billion worth of spare parts from third parties between May 2022 and June 2023. The actual value of the imports is likely higher as the reported calculations only account for direct shipments to Russian airlines and their maintenance units. It did not include shipments to other companies in Russia. Read more >>

V. Other Notable Developments

• Switzerland Implements New Sanctions against Belarus: In view of Belarus's continued involvement in Russia's ongoing military aggression against Ukraine, the Swiss Federal Council adopted further sanctions against Belarus on August 30, 2023. The new sanctions include an export ban on goods and technology for use in the aviation and space industry (vehicles, turbojets, turbopropellers and rubber tires). The measures also extend the list of goods which contribute to Belarus's military and technological enhancement. For example, no semiconductor devices or electronic integrated circuits may now be exported to Belarus from Switzerland. Finally, the existing export bans on dual-use goods and technologies, and on goods contributing to the military and technological enhancement of Belarus have been aligned with the export bans applicable to Russia. Read more >>
• Binance Restricts Russian Clients to Rouble Transactions: The world’s largest crypto exchange Binance said Monday that it has banned Russia-based users from trading in all currencies besides the rouble. Binance’s peer-to-peer exchange continued to handle substantial rouble trading volumes before the latest restrictions. Binance’s restrictions follow reporting by Bloomberg and The Wall Street Journal on a US Justice Department investigation into the company's possible violation of financial sanctions on Russia despite its public commitment to comply with them after the February 2022 invasion of Ukraine. Russians have increasingly turned to using crypto exchanges after Western sanctions cut off Russian banks from global payment networks. Read more >>
• Heineken Exits Russia at a Loss of 300 Million Euros: On August 25, 2023, it was reported that Heineken has finally sold its Russian operations, at a loss of €300mn, after criticism of the time it took the Dutch brewing group to exit the country. Heineken will sell the business, which has seven breweries and 1,800 employees, to Russian manufacturer Arnest Group for €1. The deal would result in an expected loss of €300mn. Read more >>
• International Working Group on Russian Sanctions Publishes Report on Foreign Components in Russian Military Drones: The report states that the main supplier of critical components for Russian drones is China, which accounts for 67% of shipments, while Turkey and the United Arab Emirates account for 5% and 2% of the components, respectively. According to the International Working Group's report, many details are available through publicly available platforms, making regulatory oversight difficult. The group proposes to harmonize the sanctions lists between partner countries, to unify the lists of dual-use goods based on the codes of the Harmonized System and to expand the categories of goods subject to sanctions. Read more >> and Read more >>
• UAE– Italian Joint Venture in Talks to Obtain European Type Certificate for the Russian Aircraft: UAE MarkAB Capital wants to acquire the stake of the Russian United Aircraft Corporation (UAC) in SuperJet International (a joint venture between UAC and Italy's Leonardo), which is currently arrested under anti-Russian sanctions, in order to start production of Russian SSJ-100 aircraft in the UAE. The Emirati company expects to receive a European type certificate for the SSJ-100 aircraft, whose validity is suspended due to sanctions in 2022. The transfer of the certificate and "all technical documentation for the aircraft" is one of the conditions under which MarkAB Capital is ready to purchase UAC's stake in SJI. Read more >>