Sanctions Weekly Update – Ukraine/Russia Conflict – May 1, 2023

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

Week of May 1, 2023

I. US SANCTIONS

• U.S. Announces Additional Security Assistance to Ukraine: On May 3, the Biden administration announced that it had authorizing the 37^th drawdown of U.S. arms and equipment for Ukraine, valued at $300 million. This security assistance package includes additional ammunition for High Mobility Artillery Rocket Systems, howitzers, artillery and tank ammunition, anti-tank weapons, rockets, small arms and ammunition, trucks and trailers to transport heavy equipment, and spare parts and other field equipment. Read more>> and Read more>>
• State Department Leads Joint Statement against IOC Recommendations regarding Russian/Belarusian Athletes: On May 4, the U.S. Department of State’s Assistant Secretary of State for Educational and Cultural Affairs, together with the ministers of sport or equivalent counterparts of Ukraine allies, published a joint statement in response to the International Olympic Committee (IOC)’s recommendations published on March 28, 2023, regarding the conditions for Russian/Belarusian athletes and support personnel who are individually neutral to participate in international sports competitions. The officials maintained that Russia, which has broken the Olympic Truce twice, must not be allowed to use sport to legitimize its invasion of Ukraine, and highlighted outstanding concerns such as military connections of athletes, state funding, definition of what constitutes teams, and enforcement mechanisms. Read more>>
• U.S. Presses for Release of Journalist in Russia on World Press Freedom Day 2023: On May 3, on the occasion of World Press Freedom Day 2023, the Biden administration, among other things, once again called for the immediate release of Evan Gershkovich, a Wall Street Journal reporter detained in Russia for espionage charges. The Biden administration reiterated that it is dedicated to protecting press freedom at home as well as promoting it worldwide. Read more>> and Read more>>
• Department of State Announces Reward Offers for Russian Cybercriminal: On May 3, the Department of State announced a reward offer of up to $10 million for information leading to the arrest and/or conviction of Russian cybercriminal Denis Gennadievich Kulkov, as well as a second reward offer of up to $1 million for information leading to the identification of key leaders of the Try2Check transnational organized crime group. Try2Check is a popular credit card checking services in the cybercrime underworld which facilitated huge losses through credit card fraud each year; and Kulkov, its founder, was charged with access device fraud, computer intrusion and money laundering. Read more>> and Read more>>
• Department of State Releases 2023 Annual Report on International Parental Child Abduction: On May 2, the Department of State submitted to Congress its 2023 Annual Report on International Child Abduction, which cited 14 countries, including Russia, as demonstrating a pattern of noncompliance to the Hague Abduction Convention. The Department vows to continue to actively work with all countries that are parties to the Convention to encourage them to take more effective measures in resolving international child abduction cases. Read more>>

II. EU SANCTIONS

• EU Commission Issues Guidance Note on Ensuring Food Security through the Implementation of Firewalls: The EU Commission published a guidance note detailing safeguards to prevent designated persons from exercising control over the non-designated EU entity so they can continue business operations in the trade in agricultural and food product while keeping the funds and economic resources owned by the designated person frozen. Read more>>
• EU Commission Presents Plan to Extend Its Sanctions Regime to Target Foreign Nationals for Corruption Offences: The EU High Representative supported by the EU Commission presented a proposal, to establish a dedicated Common Foreign and Security Policy (CFSP) sanctions regime to target serious acts of corruption worldwide. Read more>>
• EU Adopts a New Sanctions Framework to Target Actions Aimed at Destabilising Moldova: The Council adopted a new framework for targeted restrictive measures which provides the EU with the possibility of imposing sanctions against persons responsible for supporting or implementing actions which undermine or threaten the sovereignty and independence of the Republic of Moldova, as well as the country’s democracy, the rule of law, stability, or security. Read more>>
• EU Aims to Target Nations through Which Russia Evades Sanctions: The European Union is discussing a new sanctions mechanism to target third countries it believes aren’t doing enough to prevent Russia from evading sanctions, particularly those that can’t explain spikes in trade of key goods or technologies. Read more>>
• Bulgarian Government Investigated over Russia Sanctions Implementation: The Bulgarian government is being investigated for how it has implemented EU sanctions against Russia. Read more>>
• Czech Republic Imposes Sanctions on Patriarch Kirill for Supporting Russian Invasion of Ukraine: The Czech government has imposed sanctions on Patriarch Kirill, the head of the Russian Orthodox Church, for his support of Russia’s invasion of Ukraine. Kirill’s inclusion on the national sanctions list means that any assets he has in Czechia will be frozen, he is barred from entering the country, and cannot undertake any financial transactions there. Read more>>
• German ECJ Reference on Whether Notary Services Infringe EU Russia Sanctions ‘Legal Services Prohibition’: The Berlin Regional Court has made a request in Case C-109/23 to the European Court of Justice for a preliminary ruling on the EU’s restrictions on the provision of legal services to entities established in Russia in Article 5n(2) of Council Regulation (EU) No 833/2014. Read more>>
• EU Justice Commissioner in Cyprus over Sanctions: Didier Reynders, the EU Justice Commissioner arrived in Nicosia on Thursday on a two-day visit to discuss with the island’s officials the enforcement of European Union sanctions on individuals and companies with ties to the Kremlin. Read more>>
• Commission Adopts Exceptional and Temporary Preventive Measures on Limited Imports from Ukraine: The European Commission has today adopted exceptional and temporary preventive measures on imports of a limited number of products from Ukraine under the exceptional safeguard of the Autonomous Trade Measures Regulation. Read more>>
• Russian Spy Network Smuggles Sensitive EU Tech Despite Sanctions: A Russian spy network has acquired sensitive technology from EU companies to fuel Vladimir Putin’s war in Ukraine even after a US-led crackdown on the covert smuggling ring according to the Financial Times. Read more>>
• Russian Tycoon Timchenko Tells Court Close Putin Ties Don't Mean He Supports Ukraine War: Russian billionaire Gennady Timchenko, in a legal move to challenge EU sanctions imposed on him over Russia's aggression against Ukraine, says his close ties with President Vladimir Putin do not mean that he is allied with the Kremlin in its policy on Ukraine. Read more>>
• Germany Raids Russian’s Superyacht in Sanctions Probe: German authorities raided a luxury yacht belonging to a wealthy Russian businessman as part of a probe into possible breaches of Western sanctions imposed over Russia’s invasion of Ukraine. Read more>>
• Western Sanctions Harm Russian Aviation with Technical Issues, Emergency Landings, and Pricey Tickets: There are more technical problems and emergency landings due to an acute lack of parts, maintenance and technical support. Passengers fly more and more unsafely while ticket prices have increased between 15 and 30 percent. Read more>>

III. UK SANCTIONS

• Despite War, Sanctions, Russians in London Commercial Courts Reach New Record: On May 4, 2023, the annual Commercial Courts Report showed that a record number of Russians have appeared in London's Commercial Courts during 2022, despite the war in Ukraine and global sanctions, while the number of Ukrainian litigants sank to zero. The number of Russian litigants in Commercial Court judgments jumped by 41% to 58 in the year to March 2023, second only to 441 British litigants. The report compiled data from 257 judgments, documenting amongst other things 38 Russian individuals and 19 companies listed in the judgments, including a case involving sanctioned Bank Otkritie and the founder of the Museum of Russian Impressionism, Boris Mints. Read more>>
• General Licence INT/2022/1710676 Amended: On May 4, 2023, OFSI amended General Licence (GL) INT/2022/1710676 under regulation 64 of the Russia (Sanctions) (EU Exit) Regulations 2019 in relation to Evraz plc. The GL amended the definition of the North American Subsidiaries, to clarify that Evraz North America plc; Evraz Inc. NA; and Evraz Inc. NA – Canada, and their subsidiary companies, are covered by the GL. Under the GL a Person may continue business operations involving the North American Subsidiaries including, but not limited to:
  • Payments to or from the North American Subsidiaries under any obligations or contracts; 
  • Payments to or from any third party under any obligations or contracts; and
  • Receipt of payments made by the North American Subsidiaries for audit services. Read more>>
• UK General Licence for Russia & Belarus Legal Fees Extended: On April 28. 2023, OFSI issued a new General Licence (GL) INT/2023/2954852 under Regulation 64 of the Russia (Sanctions) (EU Exit) Regulations 2019 and Regulation 32 of the Republic of Belarus (Sanctions) (EU Exit) Regulations 2019. Replacing expired GL INT/2022/2252300, the new GL INT/2023/2954852 authorises until 28 October 2023 the payment of legal fees by people and entities designated under the Russia or Belarus sanctions regimes to law firms and counsel. In summary the payment for legal services is now authorised in relation to any matter, except a claim for defamation or malicious falsehood. Like the previous version of the licence, the GL distinguishes between legal services commenced ‘pre-designation’ (Part A) and legal services commenced ‘post-designation’ (Part B).
  
  
  • There is a £500,000 (inc. VAT) cap on the amount that can be claimed for legal work carried out in satisfaction of a prior obligation (e.g. where a law firm or barrister is engaged before the designation of the person / entity), and a cap of 5% of the legal fees (or £25,000) on expenses associated with the provision of legal services.
  • There is a cap of £500,000 (inc. VAT) on overall fees for legal work started post-designation and a cap of 5% of the legal fees (or £25,000) on expenses associated with the provision of legal services. The hourly rate charged by a ‘Legal Advisor’ must not exceed those set out in the GL, and the hourly rate for counsel must not exceed £1,500 (including VAT).
    
    

The GL also permits the two legal fees caps to be combined, subject to the terms of the licence being met. Professional legal fees and expenses for cases involving defamation or malicious falsehood are not permitted to be paid under the GL. Read more>> and Read more>>

• OFSI Issues New General Licence INT/2022/1679676: On April 27, 2023, OFSI issued a new General Licence (GL) INT/2022/1679676 under Regulation 21 of the Global Anti-Corruption Sanctions Regulations 2021 and Regulation 64 of the Russia (Sanctions) (EU Exit) Regulations 2019. Under the GL an officer of a Non-Crown Relevant Organisation is permitted to carry out their duties including through making use of powers available to them under UK legislation or common law for Asset Recovery Purposes. The GL also permits persons to carry out any action necessary to comply with or otherwise give effect to any of the following for asset recovery purposes: (i) a negotiated settlement to which a Relevant Organisation is a party; or (ii) an approved deferred prosecution agreement to which a Crown Relevant Organisation is a party. Read more>> and Read more>>

IV. RUSSIA/UKRAINE SANCTIONS

• Ukraine's Anti-Corruption Agency Designates Hungary's OTP Bank an "International Sponsor of War": The decision was made due to the bank's continued operations in Russia and adherence to a credit law directly referring to the proxy regimes in Russian-occupied Donetsk and Luhansk oblasts. OTP Bank is Hungary's largest commercial bank and one of the largest in Central and Eastern Europe. Read more>>
• Russian Billionaires Line Up to Buy Yandex: On May 4, 2023, it was reported several Russian billionaires are vying to buy the majority stake in the domestic entity of splintered tech giant Yandex. Russian sanctions have forced Yandex, once the crown jewel of Russia's tech sector, to split into two new companies: one overseeing its operations in Russia and a second Amsterdam-based firm that will focus on new technologies for the international market. Read more>>
• Russia Projected to Start Purchasing Chinese Yuan for Its Foreign Reserves: On May 4, 2023, it was reported that Russia will start to purchase Chinese yuan for its international reserves. Analysts project that the purchases will be small and symbolic in the beginning and will demonstrate a turnaround in the Russian economy. The purchase of these funds in Chinese yuan will help the country to keep piling up its reserves, which had been cut by the seizures of more than $300 billion in assets as a result of Western sanctions. Read more>>
• Zelensky Criticizes Idea of 'Hybrid' Tribunal During Speech at the Hague: Zelensky said the world "should not refer to the shortcomings of the current international law but make bold decisions" that would correct them in order to receive "full" justice, citing the Nuremberg trials as a precedent. "This is exactly what the creators of Nuremberg did, and this is what we should do now. It would be a weakness for Europe and for us and for all nations to leave justice to history" Zelensky added. Read more>>
• Zelensky: 'We Didn't Attack Putin or Moscow': President Volodymyr Zelensky denied Russia’s claims that the Kremlin residence of Russian President Vladimir Putin was targeted by two Ukrainian drones overnight on May 3. "We do not attack Putin or Moscow. We are fighting on our territory, defending our villages and cities" Zelensky said during the press conference in Finland. Read more>>
• Ukraine Seeks to Join Trans-Pacific Trade Pact: President Volodymyr Zelensky has approved the delegation that will participate in negotiations on Ukraine’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Economy Minister Yulia Svyrydenko was appointed as head of the delegation. The Ministry of Economy expects to join the Trans-Pacific Partnership Agreement in early 2024. At the same time, there is a prospect of joining the agreement this year. Currently, the members of the agreement include Australia, Brunei, Canada, Chile, Malaysia, Mexico, Japan, New Zealand, Peru, Singapore, and Vietnam. Read more>>
• Zelensky Calls for Removal of EU Restrictions on Ukrainian Food Exports: President Volodymyr Zelensky called for the removal of what he termed the "destructive" impact of bans of Ukrainian food products by five EU members during a phone call with European Council President Charles Michel. EU member states Poland, Slovakia, Hungary, Romania and Bulgaria also on April 28 agreed to restrictions of Ukrainian grain products as part of a deal with the EU that replaced unilateral bans on imports each country had put in place in response to plummeting domestic prices. Read more>>
• Russian Gold Changes Its Destination: The main destinations for Russian gold after Western sanctions were the UAE, Hong Kong and Türkiye. After the restrictions of the G7 countries and the European Union regarding Russian gold, dozens of little-known companies took up its sale. Sanctions prevent Russia from sending gold to the vaults of leading banks such as JPMorgan Chase & Co. and HSBC, as well as use the services of Brink's and Loomis, which occupy a dominant role in the transportation of precious metals. Read more>>
• Zelensky Announces Sanctions against Russian Companies Working for the Military Industry: Ukraine is preparing a new package of sanctions against individuals and legal entities working for the Russian military industry. President Volodymyr Zelensky stated this in his daily address to citizens. Read more>>
• Moscow to Support Businesses & Employees Impacted by Western Sanctions: On May 4, 2023, it was reported that the Moscow government presented measures to support citizens and businesses in the face of Western sanctions. The priority plan is reported to include the preservation of jobs, ensuring the smooth functioning of enterprises, import substitution and social support for citizens, with other Russian regions soon expected to follow suit. The Russian government and the Central Bank are developing programs to subsidize interest rates on loans to refinance previous obligations, replenish working capital and pay salaries for enterprises that have pledged to keep jobs. Read more>>
• Sberbank's Tech Push Shows Russia's Growing Reliance on Its Top Bank: On May 4, 2023, it was reported that Russian state-owned Sberbank has become one of the country's leading technology players by taking on an increasingly important role as sanctions and exiting rivals create gaps in the market. Sberbank's image has been transformed under CEO German Gref, who has overseen investments into artificial intelligence, cloud services, big data and smart devices. Cementing its banking credentials is Sberbank’s $530 billion in assets and 107 million retail clients. Read more>>
• Staging Partial Recovery, Russia's April Car Sales Leap: On May 4, 2023, analytical agency Autostat reported that car sales in Russia leapt by 170.4% year-on-year in April. Sales of new cars plunged by 59% in 2022 and Russia's auto industry had been heavily reliant on investment, equipment, and parts from overseas and was hit hard by the fallout from Western sanctions and the carmaker exodus. Autostat reported that 75,622 vehicles were sold in April 2023 compared to 27,965 in April 2022, which was still down on the 150,000 units sold in April 2021. Read more>>
• Wall Street Journal Profiles Tanker Companies Still Willing to Sell Russian Oil: The Wall Street Journal published a profile of George Economou, a Greek shipping and transit magnate whose company, TMS, is one of the leading companies still willing to move Russian oil to buyers worldwide. The company has moved tens of millions of barrels since the invasion of Ukraine, second only to Sovcomflot. Read more>>
• Russian-US JV Scraps Plan to Build Large Gas Turbines in Russia: On May 3, 2023, it was reported that a Russian-U.S. joint venture between GE and Russian state energy holding InterRAO has said it has abandoned plans to build large-capacity gas turbines in Russia under license from General Electric Co. The joint venture planned to produce its own medium and large capacity gas turbines for power plants by 2025-26, making 90% of the components in Russia. The annual financial report from the joint venture, Russian Gas Turbines, said "external developments" had caused "significant changes to the format and extent of General Electric's involvement in joint projects to localise gas turbine production, with unfavourable consequences for the company". Read more>>

V. OTHER NOTABLE DEVELOPMENTS

• Ukraine Allies Looking to Tackle Russia Sanctions Loopholes and Tighten Net on Putin: On May 3, Bloomberg reported that the U.S., Europe, and other key allies of Ukraine are preparing fresh penalties against Russia to try and tighten the net on President Putin’s economy, according to people familiar with the matter. The plans, which will be unveiled around a G7 leaders meeting in Japan later this month, would be individually implemented but coordinated, aiming to close loopholes in existing penalties and tackle overall sanctions circumvention. Read more>>
• Canada Sanctions Iranian Regime for Supporting Russian Invasion of Ukraine: On May 3, Canada announced that it is imposing additional sanctions on one entity and nine individuals for their role in systematic human rights violations in Iran and abroad. Specifically, the individuals listed included the senior leadership of Paravar Pars, a key Iranian drone producer that is supporting Russia’s invasion of Ukraine by supplying drones to Moscow. Read more>>
• New Zealand Increases Support to Ukraine, Further Sanctions War Facilitators: On May 3, New Zealand announced that it is significantly extending its defence commitments as well as humanitarian, legal and economic support for Ukraine. The package of measures included extending the deployment of defence personnel to train and support the Ukrainian armed forces; additional personnel to conduct space training programmes for the Ukrainian armed forces; additional funding for the provision of healthcare, food assistance, clean water, shelter, humanitarian support to Ukrainian refugees, and ensuring legal accountability and justice for victims in Ukraine. In addition, it is also imposing sanctions on 18 entities and 9 individuals that support Russia’s war against Ukraine, including the Russian Federal Security Service (FSB) and its senior leaders, Russian individuals and entities that facilitate Russia’s ability to wage war, and Iranian individuals and entities that provide direct military support to Moscow. Read more>>
• Light Heavyweight Champion Not Eligible for Belt Due to Russia Sanctions: On May 2, the World Boxing Council (WBC) announced that Russian light heavyweight champion Dmitry Bivol is not eligible to fight for the WBC title due to ongoing sanctions for Russian and Belarusian fighters. Following Russia’s invasion of Ukraine, the WBC, like other sanctioning bodies in the sport, has chosen not to recognize champions or rank fighters from Russia and Belarus. Read more>>
• South Africa Allows Landing of Sanctioned Russian Plane at Air Force Base: On May 4, The New York Times reported that South African officials had allowed a cargo plane sanctioned by U.S. for shipping weapons for Russia’s defense forces to land at an air force base near the country’s capital Pretoria last week, a move that could further increase tensions with the U.S. South Africa’s Department of Defense said in a statement that the plane had been delivering diplomatic mail for the Russian embassy, but refused to say precisely what was loaded on to and taken off the plane. Read more>>
• South Africa Warns Putin Could Face Arrest While Attending BRICS Summit: The South African authorities have been attempting to dissuade Russian President Vladimir Putin from attending the BRICS summit it is hosting in Gauteng in August over fears that it would be compelled to arrest him following a warrant for his arrest issued by the International Criminal Court in The Hague in March. As South Africa has ratified the Rome Statute, the main document governing the ICC, it is obliged to obey its decisions, including arrest warrants for suspected war criminals. Read more>>