Sanctions Weekly Update – Ukraine/Russia Conflict – June 26, 2023

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

I. US SANCTIONS

• OFAC Sanctions Russian Intelligence Officers Supervising Russian Election Influence Operations: On June 23, the Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) designated as Specially Designated Nationals (“SDNs”) two Russian Federal Security Service (FSB) officers recently indicted by the Department of Justice who played a significant role in the Kremlin’s attempts to conduct global malign influence operations, including efforts to influence a local election in the US.  The two individuals were charged with conspiring to use US citizens as illegal agents of the Russian government on April 18, 2023.  Read more>>, Read more >> and  Read more >>
• OFAC Sanctions Illicit Gold Companies Funding Wagner Forces and Wagner Group Facilitator: On June 27, OFAC designated four companies and one individual connected to the Russian military group PMC Wagner (Wagner Group).  The new SDNs, located in the Central African Republic, United Arab Emirates, and Russia, have engaged in illicit gold dealings to fund the Wagner Group, while the sanctioned individual have been central to activities carried out by the Wagner Group’s units in Mali. Read more >>  
• US Departments Jointly Issue New Africa Gold Advisory: On June 27, concurrent upon the OFAC’s sanctions on illicit gold companies funding Wagner Group, the Departments of State, the Treasury, Commerce, Homeland Security, Labor, and the United States Agency for International Development (“USAID”), issued a new business risk advisory focused on the gold sector across sub-Saharan Africa.  The advisory highlights the risks connected to the African gold trade, including conflict and terror financing, money laundering, corruption, sanctions evasion, human rights and labor rights abuses, and environmental degradation; and provides integrated guidance in adopting strengthened due diligence practices and appropriate mitigating measures.  Read more >> and  Read more >>
• Five Eyes Partners Agree to Formalizing Cooperation on Export Control Enforcement: On June 28, the Department of Commerce’s Bureau of Industry and Security (BIS) announced that, in a collaborative endeavor to enhance global security, the US is joining its Five Eyes partners – Australia, Canada, New Zealand, and the UK – in committing to formally coordinate on export control enforcement.  According to a statement by BIS, this new effort will “leverage enforcement resources to expand each country’s capacity to take action to prevent and deter evasion of export controls, including by restricting Russia’s access to technologies.”  Assistant Secretary of Commerce for Export Enforcement Matthew S. Axelrod said that the Five Eyes “stand united in our commitment to vigorous enforcement of the Russia and Belarus export restrictions.”  Read more >> and Read more >>
• US and UK Issue Joint Fact Sheet on Russia Sanctions and Provision of Humanitarian Assistance: On June 28, in furtherance of commitments by the US and UK to protect humanitarian activity from the unintended impacts of sanctions and enhanced partnership between OFAC and UK Treasury’s Office of Financial Sanctions Implementation (OFSI), OFAC and OFSI are publishing a joint Humanitarian Assistance and Food Security Fact Sheet to provide additional clarity on US and UK Russia-related sanctions and the relevant authorizations, exceptions, and public guidance.  Read more >>
• Biden Administration Announces Additional Security Assistance to Ukraine: On June 27, the Biden administration announced that it is authorizing its 41st drawdown of US arms and equipment for Ukraine, valued at up to $500 million.  This assistance package includes Bradley and Stryker vehicles, additional munitions for air defense systems, artillery, and multiple launch rocket systems, anti-tank weapons, anti-radiation missiles, precision aerial munitions, and other essential resources.  Read more >> and  Read more >>
• State Secretary’s Call With Ukrainian Foreign Minister: On June 24, Secretary of State Antony J. Blinken spoke with Ukrainian Foreign Minister Dmytro Kuleba to discuss the situation in Russia.  Secretary Blinken reiterated that US support for Ukraine will not change, and it will stay in close coordination with Ukraine as the situation develops.  Read more >>
• President Biden Speaks With President Zelenskyy of Ukraine: On June 25, President Biden spoke with President Zelenskyy of Ukraine to discuss support for Ukraine as it defends itself against Russian aggression.  They discussed Ukraine’s ongoing counter-offensive, and President Biden reaffirmed unwavering US support, including through continued security, economic, and humanitarian aid.  The leaders also discussed recent events in Russia.  Read more >>
• Defense Secretary’s Call With Ukrainian Minister of Defense: On June 25, Secretary of Defense Lloyd J. Austin III spoke with Ukrainian Minister of Defense Oleksii Reznikov to discuss regional security developments and dynamics on the ground in Ukraine.  Secretary Austin reiterated US support for Ukraine and discussed security assistance priorities to meet Ukraine's needs on the battlefield.  The two leaders pledged to remain in close contact.  Read more >>
• USAID Administrator’s Meeting With Ukrainian Finance Minister: On June 27, USAID Administrator Samantha Power met with Ukrainian Finance Minister Sergii Marchenko to discuss how USAID will continue to support and contribute to Ukraine’s immediate needs and long-term recovery.  The Administrator reiterated that USAID will support Ukraine’s work to rebuild critical infrastructure and advance progress on good governance, rule of law, anti-corruption measures, as well as facilitate private sector engagement, and access to finance in Ukraine.  Read more >>

II. EU SANCTIONS

• EU Adopts 11th Sanction Package – Mayer Brown Analysis: On June 23, 2023, the European Union adopted its 11th Sanctions Package against Russia. The new package introduces additional asset freeze measures, as well as new prohibitions on the provision of services and on exports to Russia, such as the sale, licensing or transfer of intellectual property rights or trade secrets. It also focuses on tackling the circumvention of existing measures and on an increased cooperation between member states. Read more >>
• Clearstream Suspends Processing of New Russian Share Conversions After EU Sanctions: European clearing giant Clearstream has suspended processing new client instructions to convert or cancel their American and Global Depository Receipt holdings in Russian companies after the latest round of European Union sanctions against Moscow. Read more >>
• Georgia Takes Steps to Avoid Becoming Platform to Circumvent Sanctions Against Russia: Georgian authorities are taking very seriously the issue of not allowing the country to be used as a platform for circumvention, the EU Sanctions Envoy David O’Sullivan said yesterday in Tbilisi. Read more >>
• Commission Approves EUR 77.1 Million Hungarian Scheme to Support Companies in the Agricultural, Fishing and Food Sector in the Context of Russia's War Against Ukraine: The European Commission has approved a EUR 77.1 million (HUF 29 billion) Hungarian scheme to support companies active in the agriculture, fishing and food industry in the context of Russia's war against Ukraine. The scheme was approved under the State aid Temporary Crisis and Transition Framework. Read more >>
• Germany Pushes Back Against EU Plan to Raid Russian Assets - Berlin And Other Capitals Are Wary Of Legal And Financial Repercussions: Germany has voiced objections against Brussels’s plans to raid frozen Russian central bank assets for Ukraine’s reconstruction, warning that a hasty move could stir up legal or financial risks. Read more >> 

III. UK SANCTIONS

• Financial Sanctions Update: Russia: On June 23, 2023, the Foreign, Commonwealth and Development Office updated the UK Sanctions List. Under the Russia sanctions regime, the list was updated to (i) amend the alias of individual Demetris Ioannides; and (ii) amend the details of individual Galina Evgenyevna Pumpyanskaya and Dmitry Alexandrovich Pumpyansky to the designation. Read more >>
• OFSI Extends Evraz Plc’s North American Subsidiaries General Licence INT/2022/1710676: On June 26, 2023, the Office of Financial Sanctions Implementation extended the General Licence (GL) INT/2022/1710676 “Continuation of Business of Evraz Plc’s North American Subsidiaries” under Regulation 64 of the Russia (Sanctions) (EU Exit) Regulations 2019 until 31 March 2024. The GL allows for the continuation of business operations of the Evraz Plc’s North American Subsidiaries which includes:
  -  Evraz North America plc;
  -  Evraz Inc. NA;
  -  Evraz Inc. NA – Canada; and
  -  Their subsidiary companies.  Read more >>
• OFSI Amends Telecommunications Services and News Media Services General Licence INT/2022/1875276: On June 26, 2023, the Office of Financial Sanctions Implementation updated the General Licence (GL) INT/2022/1875276 “Continuation of Business and Basic Needs for Telecommunications Services and News Media Services” under Regulation 64 of the Russia (Sanctions) (EU Exit) Regulations 2019. The GL allows Designated Persons (DP), to continue business operations involving the provision of Civilian Telecommunication Services. The GL was updated to:
  -  remove certain entities, which OFSI does not believe are owned or controlled by designated persons (DP);
  -  add Rossiya Segodnya as a News Media Services DP; and
  -  adjust the definition of Civil Telecommunications DPs to include certain subsidiaries of ZAO TransTeleCom.  Read more >>  
• UK Updates Sanctions Guidance: Belarus: On June 26, 2023, the Office of Financial Sanctions Implementation added new licensing grounds to the Belarus sanctions guidance under the Republic of Belarus (Sanctions) (EU Exit) Regulations 2019. In Schedule 3 to Belarus Regulation a designated person may be granted an individual licence for a variety of purposes which includes amongst other things: 
  -  basic needs;
  -  legal fees;
  -  maintenance of frozen funds and economic resources;
  -  medical goods;
  -  production of food; and
  -  humanitarian assistance activities. Read more >> and  Read more >>  
• UK Issues Guidance on Blocking Regulation: On June 26, 2023, the Department for Business and Trade published guidance on the Protection of Trading Interests legislation (Blocking Regulation), which protects legitimate trade between UK persons and countries affected by the extraterritorial application of certain laws. Among other things the Blocking Regulation guidance:
  -  provides an explanation of who constitutes protected persons;
  -  states what to do if your interests are affected;
  -  explains when authorisation will be made to comply with extraterritorial sanctions and how to apply for authorisation; and
  -  provides a list of extraterritorial proscribed sanctions, currently US sanctions against Iran and Cuba. Read more >>
• OFAC/OFSI Humanitarian Factsheet Published: On June 28, 2023, the UK Office of Financial Sanctions Implementation and US Office of Foreign Assets Control jointly published a humanitarian Factsheet on Humanitarian Assistance and Food Security in relation to Russia sanctions to provide additional clarity on US and UK Russia-related sanctions and the relevant authorizations, exceptions, and public guidance. Read more >> and Read more >>
• New UK Legislation Imposes New Sanctions on Russia Accessing UK Legal Expertise: On June 29, 2023, Foreign, Commonwealth & Development Office announced new legislation that will prevent UK lawyers from advising Russian companies in certain business deals - preventing Russia from benefitting economically from the UK’s legal expertise. This could include trade deals between global corporations, or international money lending. The new rules will extend existing regulations on Russia using UK legal professionals to facilitate certain commercial activity which benefits the country – and may block legal professionals from advising international companies on lending decisions. The legislation introduces new measures which includes:
  -  A restriction on legal advisory services (though the restriction does not cover legal representation services);
  -  An exception that enables services providers to offer expert evidence in connection with legal proceedings, even where the services activity would otherwise be prohibited to a person connected with Russia; and
  -  Permitting auditing services to continue where there are statutory or regulatory obligations. Read more >>, Read more >> and Read more >>

IV. RUSSIA/UKRAINE SANCTIONS

• Russian Ruble Briefly Hits 15-Month Low After Prigozhin Rebellion: On June 26, 2023, it was reported the Russian ruble temporarily fell to its lowest level since March 2022. The currency initially slumped by more than 2%, falling past 87 against the U.S. dollar in the first minutes of trading in Moscow. The ruble has traded with extreme volatility in the 16 months since Russia invaded Ukraine as the West has targeted Moscow’s foreign currency reserves and crucial energy exports through sanctions designed to cripple Russia’s economy. Read more >>
• Putin Supported the Idea of a Tax Deduction for Russian Winemakers: On June 28, 2023, it was reported that the Russian President Vladimir Putin supported the idea of the Ministry of Economic Development and the head of the Republic of Dagestan, Sergei Melikov, of a tax deduction for Russian winemakers in the period from 2024 to 2026. In March 2023, the Federal Service for Alcohol Regulation reported that the volume of grape wine production in Russia in January-February 2023 increased by 10.2% compared to the same period in 2022 and amounted to 3.4 million decaliters (1 decaliter is equal to 10 litres). Read more >>
• Mordashov's Superyacht returned to Russia: On June 28, 2023, it was reported that the Russian Nord yacht, supposedly owned by the main shareholder of Severstal, Alexei Mordashov, arrived at the port of Vladivostok in Russia. Mordashov was sanctioned by the European Union and the United States. The businessman challenged the restrictions in court, referring to the measures as illegal and unfair. In December 2022, Mordashov estimated the losses of Severstal due to the blocking of accounts and warehouses as a result of sanctions at $400 million. Read more >>
• Chanel Won a Lawsuit Against Customs in The Case of Understatement of Payment of Duties: On June 28, 2023, it was reported that the Ninth Arbitration Court of Appeal of Moscow declared illegal the decisions of the Central Excise Customs to find Chanel LLC liable for false information about the weight of goods - jewellery and nylon handles for bags. The violation led to an understatement of the company's payment of customs duties in the amount of 3735 rubles, and the company was threatened with a fine of 50 thousand to 300 thousand rubles. under the administrative law article "on the provision of invalid documents in the commission of customs operations." Read more >>
• Russia Has Increased Imports of Cement Amid Growing Demand: On June 28, 2023, it was reported that Russian cement plants have gradually increased production since the beginning of 2023: from 2.6 million tons in January to 5.2 million tons in April (a total of 15.4 million tons were produced in January-April, which is 2.5% less than in the first four months of 2022). At the same time, demand increased from 2.5 million to 5.4 million tons, reaching the same level in 2022 (15.8 million tons). Against this background, in the first four months of 2023, cement imports from Belarus, Iran, Kazakhstan and Turkey increased sharply - by 61.9%, to 0.84 million tons. Read more >>
• Russia's Magnit Triples Buyback Offer After Strong Foreign Demand: On June 28, 2023, it was reported that Russian retailer Magnit would almost triple the number of blocked shares it will buy back from foreign shareholders in response to strong demand from Western investors keen to exit Russian holdings. More than 60% of Magnit's shares are free-float, with shareholders including major Western asset managers such as Blackrock, Pictet and Dodge & Cox. Magnit reports substantial interest from shareholders that significantly exceeded initial expectations had led to it increasing the offer to 29.8% of shares outstanding from 10% previously. Read more >>  
• Russian Car Production 11 Times Higher Year-on-Year in May 2023: On June 28, 2023, it was reported Russia's car factories produced 42,200 passenger cars in May 2023, 11 times more compared to the same month in 2022. The volume of production in May 2023 was up 59.7% from April 2023. Read more >> 

V. OTHER NOTABLE DEVELOPMENTS

• Australia Sanctions Pro-Russian Soldiers Involved in Downing of MH17 Flight: On June 24, Australia’s Minister of Foreign Affairs Penny Wong announced that, in coordination with the Netherlands and EU, the Australian government is imposing financial sanctions and travel bans on three persons involved in the downing of Malaysia Airlines Flight MH17, including two pro-Russian soldiers and one Russian army colonel.  Two of the sanctioned individuals were sentenced to life imprisonment by the District Court of The Hague last November.  The MH17, a Malaysia Airlines flight from Amsterdam to Kuala Lumpur with 298 onboard, was shot down by Russian-controlled forces when flying over eastern Ukraine in 2014, leaving no survivors.  Read more >> and Read more >>

• Switzerland Widens Sanctions on Russia, In Step With EU: Switzerland has expanded financial and travel sanctions against Russian entities and persons in step with the most recent sanctions imposed by the European Union on Moscow after the invasion of Ukraine. Read more >>
• Switzerland Sanctions Businessmen and Politicians Involved in Russian Destabilization of Moldova: On June 28, the Swiss Federal Council announced that it is joining the EU in imposing targeted sanctions on five businessmen and politicians who have been involved in acts that undermine Moldova’s sovereignty and independence.  In a published statement, the Federal Council expressed its concern over the “intensification of direct threats since the start of Russia’s military aggression against Ukraine,” and said that “[d]omestic groups and Russia are engaging in these activities in attempt to destabilize Moldova.” Read more >>
• Switzerland Formally Added to EU ‘Partners’ List on Russia Sanctions Implementation: On June 24, the EU formally considers Switzerland a partner country in the implementation of Russia sanctions over war in Ukraine, adding the Alpine nation to the list of countries that set export control measures largely equivalent to those adopted by the EU, according to reports.  In a tweet by Swiss government spokesman André Simonazzi, the Federal Council “welcomes this decision as a further sign of the excellent cooperation in this area.”  Read more >>
• South Korea Sanctions Russian National Over North’s Weapons Programs: On June 28, South Korea’s foreign ministry announced sanctions on two individuals and two entities over their alleged involvement in North Korea’s weapons programs, according to reports.  The sanctions targeted a former South Korean national who acquired Russian citizenship, two companies he owns, and a North Korean who supported him. He is accused of facilitating North Korea’s illegal financial activities in violation of UN Security Council sanctions after acquiring Russian citizenship.  Read more >>
• Allies Demand UN Investigation of Russia’s Sanctions-Busting Use of Iranian Drones in Ukraine: On June 23, the US, UK and France demanded that the United Nations (“UN”) urgently investigate Russia’s reported use of hundreds of Iranian-provided drones in its war against Ukraine, which would violate UN sanctions, according to reports.  US Ambassador Linda Thomas"-Greenfield said that the US released further information this month documenting Iran’s provision of unmanned aerial vehicles (UAVs) and equipment that can be used in their production, and that Ukraine and the UK had also submitted evidence to the UN of Iranian drones recovered by the Ukrainian military.  The statement calling for investigation, which was delivered to the UN Security Council, was also signed by Albania and Ukraine.  Read more >>
• Canadian MPs Call for Sanctions on Foreign Aggressors Targeting Canada with Disinformation: On June 26, reports emerged that Canada’s House of Commons defence committee is urging the government to levy sanctions against individuals and organizations who target Canadians with disinformation.  In a report calling for stronger cybersecurity defences, the committee warns of increasingly sophisticated disinformation and foreign influence campaigns, including Russia’s use of offensive cyberweapons in its ongoing war against Ukraine.  Read more >>
• Japan Continues Importing Russian Fishery Products Despite Sanctions: On June 26, Nikkei Asia reported that imports of Russian fishery products to Hokkaido, Japan, including sea urchins and crabs, continue to hover at high levels despite economic sanctions against Russia over the Ukraine war.  The country had stopped importing lumber and alcohol from Russia since 2022, but, contrary to actions by the US and EU, had exempted fishery products from the import ban on the grounds of a potentially big negative impact on the domestic industry.  Trade statistics from the Japanese Finance Ministry showed that Japan’s imports of Russian fishery products in 2022 reached the highest level since 1992.  Read more >>
• Japan and EU to Boost Economic Security Ties, with Russia in Mind: On June 27, Japan and the EU agreed to deepen economic security cooperation by strengthening supply chain resilience for semiconductors and other critical materials, apparently with China and Russia in mind, according to reports.  In a high-level dialogue on economic issues such as trade and energy, EU representative Dombrovskis said that the EU was able to partially decouple its economy from Russia through sanctions, which were imposed with like-minded partners to degrade Moscow's military capacity.  Read more >>
• Danish Company Carlsberg Reaches Deal to Sell Russian Business: On June 23, 2023, it was reported that Carlsberg has reached an agreement to sell its business in Russia more than year after the brewer announced its intention to dispose of the assets. The Danish group, which had more exposure to the market than any other international brewer, previously warned it would suffer a $1.4bn writedown from the sale. It did not name the buyer of the business or provide any financial details on the sale.  Read more >>