Sanctions Weekly Update – Ukraine/Russia Conflict – May 29, 2023

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

Week of May 29, 2023

I. US SANCTIONS

• OFAC Issues New Russia-Related General License: On May 31, the Treasury Department’s Office of Foreign Assets Control (OFAC) issued Russia-related General License (GL) No. 69, “Authorizing Certain Debt Securities Servicing Transactions Involving International Investment Bank.” This new GL authorizes certain transactions prohibited under Executive Order (E.O.) 14024 that are ordinarily incident and necessary to the processing of interest or principal payments on debt securities issued by International Investment Bank before April 12, 2023, through June 30, 2023. Read more>>
• Suspension of 232 Tariffs on Ukraine Steel Extended for Another Year: On May 31, Secretary of Commerce Gina Raimondo announced that, pursuant to a Presidential Proclamation issued on the same day, the U.S. government is extending by one year the temporary suspension of tariffs on Ukrainian steel under Section 232 of the Trade Expansion Act 1962, as amended (“232 Tariffs”). The 232 Tariffs have been imposed on imports of steel articles since March 2018 to counter national security threats, but a temporary suspension has been granted for Ukrainian steel since May 27, 2022, to support the country’s steel industry amid Russia’s invasion. Read more>> and Read more>>
• Biden Administration Hosts Steering Committee of the Multi-Agency Donor Coordination Platform for Ukraine: On May 26, Deputy National Security Advisor for International Economics Mike Pyle, together with Finance Minister of Ukraine, Sergii Marchenko, and European Commission Director-General for Neighborhood and Enlargement Negotiations, Gert Jan Koopman, co-chaired the third meeting of the Steering Committee of the Multi-agency Donor Coordination Platform for Ukraine. During the meeting, the Ukrainian government, G7 members of the Steering Committee, and representatives from international financial institutions discussed the progress of Ukraine’s recovery priorities in energy infrastructure, civilian demining, critical and social infrastructure, housing, and support to the private sector. Read more>>
• Biden Administration Announces Additional Security Assistance for Ukraine: On May 31, the Biden administration announced that it is authorizing its 39^th drawdown of U.S. arms and equipment to Ukraine, valued at up to $300 million. This security assistance package includes significant air defense capabilities, additional ammunition for High Mobility Artillery Rocket Systems and artillery, anti-tank weapons, tens of millions of rounds of small arms munitions, and other essential field equipment. Read more>> and Read more>>
• Treasury Official Vows to Continue Pursuing Chinese Entities Aiding in Sanctions Circumvention: On May 31, Assistant Secretary for Terrorist Financing and Financial Crimes Elizabeth Rosenberg testified before the Committee on Banking, Housing and Urban Affairs Committee in the U.S. Senate on countering China and advancing U.S. national interests. Among other things, Rosenberg highlighted the growing concern of China’s role in geopolitical conflict around the world, including its economic relationship with Russia and the increase in transactions that are identified as circumventing U.S. sanctions and export controls, adding that the Treasury will continue to expose and disrupt Chinese entities that provide support to Russia’s war effort. Read more>>
• US and EU Reaffirm Commitments on Trade and Technology in Response to Ukraine War: On May 29-31, Secretary of State Antony Blinken, Secretary of Commerce Gina Raimondo, U.S. Trade Representative Katherine Tai, European Commission Executive Vice President Margrethe Vestager, European Commission Executive Vice President Valdis Dombrovskis, and European Commissioner Thierry Breton participated in the fourth ministerial meeting of the Trade and Technology Council (TTC) in Sweden. During the meeting, the leaders reaffirmed their support to Ukraine in light of Russia’s aggression, as well as their commitment to contribute to a coordinated and effective response in areas such as sanction-related export restrictions, combatting foreign information manipulation and interference (FIMI), and disinformation campaigns which undermine human rights and threaten the functioning of democracies. Read more>>, Read more>> and Read more>>

II. EU SANCTIONS

• EU Updates Its Guidance on Russian/Belarus Sanctions regarding Media: On 31 May 2023, the EU Commission updated its FAQ on Media regarding subdomains and new domains of sanctioned entities. Read more>>
• 7 Individuals Listed under EU Sanctions for Their Destabilizing Actions and for Undermining the Territorial Integrity of Ukraine: The Council decided to impose restrictive measures against 7 individuals under two distinct sanctions frameworks: a recently established regime targeting persons responsible for actions aimed at destabilizing, undermining or threatening the sovereignty and independence of the Republic of Moldova, and the regime addressing the actions which undermine or threaten the territorial integrity, sovereignty and independence of Ukraine. Read more>>
• New Sanctions against Russia Stuck in Limbo over Greek-Hungarian Protest: The EU is currently discussing its 11th sanctions package against Russia after the start of Moscow’s full-scale invasion of Ukraine more than a year ago. After largely playing solo in its opposition against Russian sanctions, Budapest is now getting support from Athens in its skepticism over the freshest measures against Russia. Read more>>
• EU Wants to Sanction Russians Involved in Child Abductions, Dutch PM Says: The European Union is looking to broaden sanctions against Russia to target people involved in the abduction of children from Ukraine, Dutch Prime Minister Mark Rutte said. Read more>>
• Russian Oligarch Wins Rare Legal Battle over Property Searches: The Uzbek-Russian billionaire Alisher Usmanov has won a rare legal victory after a court in Frankfurt ruled that a series of searches of his property in Germany last year were unlawful. Read more>>
• China Says It Will Monitor EU Talks on Russia Sanctions: China will closely follow the progress of European Union discussions on an 11^th tranche of sanctions against Russia that could result in trade restrictions with China. Read more>>
• Plywood Russia Completely Lost the European Plywood Market Due to the EU Sanctions: The production volume of plywood in Russia in the first four months of 2023 amounted to 1.02 million cubic meters, which is 24.1% lower than the previous year, reported Rosstat, the Russian state statistics agency. Russia completely lost the European plywood market due to the EU sanctions. Read more>>
• EU Publishes List of Non-Accepted Russian Documents: The EU published the list of documents from Russian Federation (Russian travel documents) issued in or to persons resident in regions or territories in Ukraine which are occupied by the Russian Federation or breakaway territories in Georgia which are not under the control of the Georgian government and which are not accepted by the EU. Read more>>
• Poland Imposes Sanctions on 365 Belarusian Citizens: Among the 365 Belarusian citizens sanctioned by Poland, there are 159 parliamentarians, media representatives, and civil officers. The list also includes persons “connected with Russian capital”. The sanctions were imposed due to the support by the Belarusian Supreme Court of the “draconian” sentence of imprisonment of the Polish journalist Andrzej Poczobut and “repressions by the Belarusian authorities against political opponents”. Read more>>

III. UK SANCTIONS

• Financial Sanctions Update: Russia: On May 31, 2023, the Foreign, Commonwealth and Development Office updated the UK Sanctions List. Under the Russia financial sanctions regime, the list was updated to: (i) amend the name of individual Vladimir Nikolaevich Lepin; and (ii) amend the statement of reasons for the designation of individual Dmitry Vladimirovich Konov. Read more>>
• UK Foreign Office Publishes Russia Common High Priority Items List: On May 30, 2023, the Foreign, Commonwealth & Development Office published a notice identifying items Russia is using in its weapons systems. All of the listed items are subject to UK sanctions and many of these items have been found on the battlefield in Ukraine. The list, which will be updated when required, also includes items that are essential for the manufacturing and testing of the electronic components and circuits retrieved from the battlefield. The list is divided into four Tiers:
  • Tier 1: integrated circuits;
  • Tier 2: electronic items related to wireless communication, satellite-based radio navigation, and passive electronic components;
  • Tier 3: discrete electronic components, electronics cabling and connectors, digital cameras and related optical components; and
  • Tier 4: manufacturing, production and quality testing equipment of electric components and circuits. Read more>>
• OFSI Publishes Guidance on Trust Services Sanctions: On May 30, 2023, OFSI published a blog post, aiming to provide further clarity on issues relating to trust services sanctions. Since December 16, 2022, it has been prohibited to provide new trust services to or for the benefit of persons connected with Russia. OFSI engaged with over 500 stakeholders and international partners (including the Crown Dependencies and Overseas Territories) to address general and case specific questions OFSI received on providing UK’s trust services to persons connected with Russia. Read more>>
• ECJU Offers Training Events: On May 26, 2023, the Department for Trade’s Export Control Joint Unit has published its training event calendar for programmes running between June 2023 and December 2023. The events cater for companies of all sizes and include licence workshops and seminars on controlled items. For more information on how to sign up to attend an event check here. Read more>>
• ECJU Export Control Penalties: On May 26, 2023, the Department for Trade’s Export Control Joint Unit published a notice summarising the UK’s recent control penalties. On 28 November 2022, a company was fined for bringing 4kg of sodium sulphide (a dual use good) without a licence to the UK for the purposes of exporting; and between January and May 2023, HMRC issued compound settlement offers to 4 UK exporters totalling over £1.1 million for unlicensed exports of dual use goods, military goods and related activity. Read more>>

IV. RUSSIA/UKRAINE SANCTIONS

• Remaining Western Firms Face Tricky Russian Exits: On June 1, 2023, it was reported that after months of negotiations, Finland's Nokian Tyres was on the cusp late lasty ear of finalising a 400-million-euro ($440.32 million) sale of its Russian business before Moscow changed the rules for companies leaving Russia. Nokian Tyres dropped the agreed sale price to Russian oil major Tatneft to 286 million euros, finally securing the approval of the government commission that monitors foreign investment in March 2023, nine months after initiating its controlled exit. Read more>>
• Zelensky Arrives in Moldova for European Political Community Summit: On June 1, 2023, it was reported that Ukrainian President Volodymyr Zelenskyy arrived in Moldova to participate in a summit of the European Political Community, bringing together 50 European leaders. The European Political Community is a platform for political coordination among European countries, created in 2022, with the aim to foster political dialogue and cooperation to solve issues of common interest as well as to strengthen Europe's security and stability. Read more>>
• Ukrainian Court Seizes $13.6 Million of Assets from Former Kherson Oblast Official Suspected of Treason: On May 31, 2023, the Security Service of Ukraine (SBU) announced that a Ukrainian court has seized Hr 500 million ($13.6 million) of assets of a former Kherson Oblast Council deputy who is suspected of treason and collaboration with Russia. The seized assets of the ex-deputy and his family include 400 pieces of real estate and 1,200 hectares of land in southern Ukraine. According to the SBU’s investigation, the former official was a member of the now-banned pro-Kremlin party Opposition Platform, For Life, and switched sides when Russia occupied part of Kherson Oblast after the beginning of the full-scale invasion in February 2022. Read more>>
• Mechel Reduced Coal Production By 25% Due to Problems with Logistics: On May 31, 2023, it was reported that Russian mining company Mechel announced that it had reduced coal production in the first quarter of 2023 compared to the same period in 2022 by 25%, to 2.1 million tons, respectively, the sale of coking coal concentrate decreased by 34%, to 0.6 million tons. Mechel attributes the reduction to a shortage of carrying capacity of the railway infrastructure at the Eastern landfill. Read more>>
• Volkswagen Sells Plant in Russia without the Possibility of Repurchase: On May 31, 2023, Russian Deputy Minister of Industry and Trade Albert Karimov announced that the deal to buy Volkswagen's Russian assets by the Avilon structure does not involve a buyback option. The company, Art-Finance (part of the "Avilon" group) closed the deal to buy the assets of the German concern on May 22, 2023, Volkswagen Group Rus LLC and its subsidiaries: Volkswagen Components and Services LLC, Scania Leasing, Scania Finance and Scania Insurance came under its control. Read more>>
• Minsk Proposes to Increase the Cost of Transit of Russian Oil by 84%: On May 31, 2023, it was reported that the operator of the Belarusian section of the Druzhba oil pipeline, Gomeltransnafta Druzhba, proposed to the Russian Transneft to increase the cost of tariffs for fuel transit from July 2023 by 84% to the current level. If the proposal is agreed to, supplies will rise in price for countries on the Druzhba pipeline, which includes Germany, Poland, the Czech Republic, Slovakia and Hungary. Read more>>
• Ukraine Proposes Massive Sanctions against Iran: On May 28, 2023, it was reported that Ukrainian President Volodymyr Zelenskyy introduced a bill proposing additional sanctions against Iran for 50 years. The bill is a response to what Kyiv says is Tehran's weapons supplies to Moscow. The draft includes a complete ban on trade with Iran, on investments, and transferring technologies. If the bill becomes law, Ukraine will forbid Iranian transit across the Ukrainian territory as well as use of its airspace and freeze Iranian assets. Read more>>
• Michelin Sells Russian Tire Business to Local Distributor: On May 26, 2023, French tire maker Michelin announced in a statement that it had agreed to sell its Russian assets to a local distributor in the latest international business exit following Russia’s invasion of Ukraine. The Russian authorities have approved the sale of Michelin's two local companies, Michelin Russia Tyre Manufacturing Company and Camso, for an undisclosed sum. A known partner of Michelin, Power International Tires is one of the main tire distributors in Russia and has a presence throughout the country and employed 750 people at the Davydovo tire plant located outside Moscow. Read more>>
• Ukrainian Parliament Adopts Legislation Nationalizing Banks Owned by Sanctioned Figures: Ukraine's parliament adopted a bill allowing the government to nationalize banks owned by sanctioned individuals. It is yet to be signed into law by President Volodymyr Zelensky. It is reported that the bill, when signed into law, will allow to nationalize Alfa Bank Ukraine – one of the largest Ukrainian banks owned by sanctioned Russian individuals Mikhail Friedman, Piotr Aven and Andrey Kosogorov. Read more>>
• Ukraine Expands Sanctions Lists: On 27 May April 2023 Ukraine added 51 individuals and 220 legal entities to the sanctions list. The amendments were implemented by the Order of the President of Ukraine which entered into force on 30 May. Read more>>
• Ukrainian Foreign Minister to Embark on African Tour: Foreign Minister Dmytro Kuleba said late on May 29 that he is seeking support for Ukraine’s UN General Assembly resolutions among African states. Ukraine’s Foreign Minister began his Africa tour on May 22 by visiting Morocco. Since then, he has visited Ethiopia, Rwanda, Mozambique, and Nigeria. This remains a difficult task due to Russia’s extensive investments in African countries, Kuleba admitted. According to the minister, for the past thirty years, the continent developed under the “inertia of the Soviet times” and Ukraine gradually “lost Africa.” Russia has leveraged this to systematically build up its influence. Read more>>
• Ukraine Plans to Insure Investments against War Risks: Ukraine's parliament adopted in its first reading a bill to allow the Export Credit Agency to insure investments of Ukrainian and foreign companies in Ukraine against war risks. The proposed insurance will be provided exclusively for investments in facilities and infrastructure necessary for the development of the processing industry and the export of goods and services of Ukrainian origin. Read more>>
• Ukraine Adopts Law on Advertising in Line with EU Rules: Ukraine's parliament adopted a new law on advertising consistent with European Commission recommendations. The law brings national legislation closer to the relevant EU acquis in the field of audiovisual services. Read more>>
• Poland to Close Border for Russian, Belarusian Trucks: Polish Interior Minister Mariusz Kaminski signed an order on May 29 suspending freight traffic for Russian and Belarusian vehicles across the border with Belarus. The restriction applies to trucks, tractor-trailers, trailers, and semi-trailers registered in Belarus or Russia, PAP wrote. It will last from June 1 “until further notice.” The move is Warsaw’s reaction to the recent imprisonment of Andrzej Poczobut, a journalist and activist of Polish origin. Read more>>
• Putin Signs Law Denouncing Arms Control Treaty: Vladimir Putin signed a bill into law on May 29 denouncing the Treaty on Conventional Armed Forces in Europe, according to a Russian government website. The treaty, originally signed in Paris in November 1990, aimed at arms control and was initially agreed upon by 16 NATO members and six countries of the former Warsaw Pact, including the former USSR. The decision to denounce the treaty holds little practical significance as Russia already suspended its participation in 2007 and fully withdrew from it in 2015. Read more>>
• Putin Signs ‘Law’ Allowing Elections, Forced Deportations in Russian-occupied Territories of Ukraine: Russian President Vladimir Putin signed a bill on May 29 allowing regional “elections” in occupied territories of Ukraine in September of this year, along with forced deportations of the local population. Previously, Russian law did not allow to hold a vote in a territory under "martial law," which is still in effect in the Russian-occupied parts of Donetsk, Luhansk, Kherson, and Zaporizhzhia oblasts. The bill also allows the possibility of "forced and controlled movement of citizens from the territory where martial law is imposed to territories where martial law is not imposed." Read more>>
• Russian Government Extends Ban on the Entry of Trucks from "Unfriendly Countries": The Russian government has extended the ban on entry into Russia of trucks from "unfriendly countries" until December 30. The ban was introduced on October 10 last year as a response to "unfriendly and contrary to international law actions of some foreign states." Read more>>
• Russian Government Plans to Shrink List of Parallel Imports: As the Russian market is saturated with its own products, the list of goods eligible for parallel imports will narrow, said the head of the Russian Ministry of Industry and Trade Denis Manturov. According to Manturov, initially there were about 1.3 thousand items on the list, and about 300 remained. In the future, the number of goods on the list “will decrease”. In March last year, Russia partially abolished legal liability for parallel (shadow) imports. Read more>>

V. OTHER NOTABLE DEVELOPMENTS

• Japan Imposes Additional Sanctions on Russia after G7 Summit: On May 26, Japan’s Chief Cabinet Secretary Hirokazu Matsuno said the country is placing additional sanctions on Russia after the G7 summit last week agreed to step up punishment on Moscow’s invasion of Ukraine, according to reports. In a coordinated action with G7, Japan will freeze assets of 78 groups and 17 individuals including army officers in Russia and ban exports to 80 Russian entities such as military-affiliated research labs, according to a foreign ministry statement. Read more>>
• Canada Sanctions Moldovan Oligarchs and Politicians over Russian Connections: On June 1, Canada’s foreign ministry announced that it is imposing sanctions on Moldovan oligarchs, business people and politicians over their connections to Russia, and to counter Russian destabilization efforts in the region. Those sanctioned include seven individuals and one entity being the pro-Russian opposition Shor Party, according to a statement published by the ministry. Read more>>
• Nintendo Ends Online Sales of Games in Russia: On June 1, 2023, it was reported that Nintendo will no longer sell games in Russia through its online store as the Japanese giant winds down operations there. In a statement Nintendo said it will permit Russian customers re-download previously purchased content but no new payments can made or new accounts created. Read more>> 
• South Africa’s Central Bank Warns of Capital Outflows and Sanctions: On May 29, South Africa’s central bank warned of risks to the country’s financial stability due to capital outflows and the possibility of sanctions following a U.S. diplomat’s accusation of the country supplying weapons to Russia, according to reports. In its biannual report, the South African Reserve Bank (SARB) said that local issues such as inflation, threat of grid failure, and decreased foreign participation in government bonds due to the country being “greylisted” by the Financial Action Task Force (FATF) have contributed to the systemic risks, and any further sanctions on South Africa due to the recent diplomatic stand-off would make it “impossible to finance any trade or investment flows.” Read more>> 
• Singapore’s Tanker Seizures Soar as Russian Dark Oil Fleet Grows: On May 31, South China Morning Post reported that Singapore has increasingly detained oil and chemical tankers that failed safety inspections since early last year, highlighting growing concerns on the Russian dark oil fleet using ageing vessels to transport sanctioned oil to buyers in China, India and elsewhere. According to reports, these ships often operate with substandard insurance and are usually past an age at which they would normally be sent for scrapping, inviting environment and safety risks on major shipping lanes and ports. Read more>> 
• Switzerland Rejects Criticism of Insufficient Sanctions on Russia: On May 26, Swiss Secretary for Economic Affairs Helen Budliger Artieda rejected criticism that Switzerland is not doing enough to freeze Russian assets under its sanctions regime, according to reports. In an interview published in local news, the SECO head said it was a “major challenge for [their] sanctions teams to find out who is the beneficial owner of any company construct,” emphasizing that despite the concerns, Switzerland is not being used as a “bypass platform.” Read more>> 
• India Records a 14-fold Increase in Russian Oil Imports: India's oil imports from Russia increased 14 times in fiscal year 2022-2023, according to an annual report of the Reserve Bank of India. Imports of Russian crude oil increased to $31.02 billion from $2.2 billion last year, according to the regulator. The Russian share in the supply of hydrocarbons to the Indian market increased by 17.1 percentage points, from 2 to 19.1%, the document says. Read more>> 
• Kazakh President Warns against Further Integration of Russia-Led Economic Bloc: Kazakhstan’s president on Thursday criticized the Russia-led Eurasian Economic Union (EAEU) and appeared to caution against political integration between its members. Speaking at a plenary session of the EAEU in Moscow, President Kassym-Jomart Tokayev said Kazakhstan sees the union as an exclusively economic bloc. Read more>> 
• Kenya and Russia to Sign Trade Pact, President Ruto Says: On May 29, 2023, it was reported that Kenyan President William Ruto's office announced that Kenya will sign a trade pact with Russia aimed at boosting cooperation between businesses after hosting Russian Foreign Minister Sergei Lavrov in Nairobi. Russia has stepped up its drive to boost economic ties with Africa to help offset a big chill in relations with the West and plans to hold an Africa-Russia summit in St Petersburg in July 2023. Read more>>