Sanctions Weekly Update - Ukraine/Russia Conflict - August 4, 2023

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

I. US SANCTIONS

• OFAC Designation Updates: On August 3, 2023, the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) deleted one Russian-affiliated vessel from OFAC’s list of Specially Designated Nationals and Blocked Persons (“SDN” List), and made updates to a number of other Russia sanctions targets. Read more>>
• Treasury Official Discusses Russian Oil Price Cap at London Conference: On August 3, 2023, U.S. Treasury Department Acting Assistant Secretary for Economic Policy Eric Van Nostrand gave remarks on the Russian oil price cap policy at a conference in London. Specifically, Nostrand discussed the history of the price cap and the impact of the policy today, and emphasized that the U.S. remains confident on the ability of the price cap in achieving its twin goals of restricting Russian revenues while helping stabilize energy markets. Read more>>, Read more>>
• U.S. Helsinki Commission Calls for Sanctions Against Swiss Nationals Over Russian Tax Scandal: On July 28, 2023, U.S. Helsinki Commission Chairman Representative Joe Wilson (SC-02) and Ranking Member Representative Steve Cohen (TN-09) sent a letter to Secretary of State Antony Blinken and Secretary of the Treasury Janet Yellen, requesting that the U.S. consider sanctioning three Swiss nationals, Vinzenz Schnell, Patrick Lamon, and Michael Lauber, under the U.S. Magnitsky Act. The three individuals, who included a former attorney general and a former federal public prosecutor, are allegedly involved in abetting Russian nationals to regain funds originally frozen in connections with a fraudulent tax scheme exposed by Sergei Magnitsky, and accepting unauthorized gifts and trips paid for by Russian officials and oligarchs. The Office of the Attorney General of Switzerland (OAG) on July 29 rejected the accusations and demands for sanctions, according to reports. Read more>>, Read more>> 
• Ex-Goldman Sachs Banker Fights U.S. Sanctions Over Russia: On August 3, 2023, Bloomberg reported how Elena Titova, a former investment banker who held top jobs for Goldman Sachs, Morgan Stanley and UBS for almost three decades, fought U.S. sanctions against her for maintaining links with Bank Otkritie, a Russian bank sanctioned by the U.S. Titova was delisted from the SDN list after a yearlong legal battle with the Department of State. Read more>>
• Failure to Bring Russia’s Economy to its Knees Mirrors a Larger Stalemate on the Battlefield: On August 2, the Wall Street Journal reported how sanctions imposed on Russia by the West, despite the initial shock and awe on Moscow’s financial markets, had failed to quickly bring the country on its knees, at the same time mirroring a larger stalemate on the Ukraine battlefield. Read more>>
• Kyocera Sues New Jersey Treasury Department Over New Jersey State Russia Sanctions: On July 31, 2023, reports emerged that Kyocera Document Solutions America, represented by Lowenstein Sandler, has filed a suit against New Jersey’s Department of Treasury, in an attempt to overturn a state law that “undermines those federal sanctions authorities by obstructing the president’s authority to control economic sanctions against Russia and Belarus.” Specifically, the suit asserts that the New Jersey law bars Kyocera from doing business with the state because another branch of the company operates in Russia, but the same was not banned by federal sanctions, thus violating the Supremacy Clause. Read more>> 

II. EU SANCTIONS

• EU Extends Individual Sanction Lists Against Russia: On July 28, 2023, the European Union seven Russian persons and five entities to the list of individual sanctions. The sanctions were imposed for digital information manipulation made in the context of the Russia’s war of aggression against Ukraine. Read more>>
• EU Agrees to Extend the Scope of Sanctions on Belarus to Fight Circumvention: On August 3, 2023 the European Union added 38 Belorussian individuals and three entities to the list of sanctioned persons. It is reported that the measures expand the ban on exports to Belarus to a number of highly sensitive goods and technologies which contribute to Belarus's military and technological enhancement. The Council also imposes an additional export ban on firearms and ammunition, and on goods and technology suited for use in aviation and the space industry. The changes also align the Belarus sanctions with the Russia sanctions regime. Read more>>, Read more>>
• EU Published New FAQs on Russian Sanctions: On July 26, 2023 the European Commission published several new FAQs on sanctions applicable to Russia covering, in particular, customs related matters, imports, purchase and transfer of listed goods, and transit of listed goods via Russia. On 2 August the FAQs were supplemented with the new clarifications regarding the oil price cap and oil imports. Read more>>
• First Russian Investor Obtains License From Belgian Ministry of Finance to Unblock Securities in Euroclear: The Belgian Ministry of Finance revised its decision to refuse to unblock securities on the accounts of a private investor in the Euroclear international depository. At first, the investor - the owner of the EU residence permit - was only allowed to obtain a license to unlock coupons and dividends. After an appeal, he was issued a license to unlock securities on the account of one of the brokers, the securities to be kept in the EU or Switzerland. Read more>>
• EU Warns That Russia Aims to Create New Dependencies with Cheap Grain: The European Union has warned developing countries that Russia is offering cheap grain "to create new dependencies by exacerbating economic vulnerabilities and global food insecurity," according to a letter seen by Reuters on Wednesday. EU foreign policy chief Josep Borrell wrote to developing and Group of 20 countries on Monday to urge them to speak "with a clear and unified voice" to push Moscow to return to a deal that allowed the safe Black Sea export of Ukraine grain and to stop targeting Ukraine's agricultural infrastructure. Read more>>
• Irish Prime Minister Says Ireland Must ‘Do More’ to Monitor Russian Naval Threat: Irish Prime Minister Leo Varadkar acknowledged that Ireland must better defend its waters from potential Russian sabotage, but denied claims that Ireland’s longstanding military neutrality meant it was freeloading off its strategic partners. Russian ships were spotted close to Ireland’s north-west and south-west coastline earlier this year, sparking fears they could be mapping and monitoring international data transmission cables and gas pipelines located there. Read more>>
• European Industry Groups Urge London Metal Exchange To Resist Calls To Ban Russian Aluminium: On July 28, 2023, it was reported that five European industry associations asked the London Metal Exchange (LME) to ignore calls to ban Russian aluminium from its system. In a joint statement, the Federation of Aluminium Consumers in Europe (FACE) and four other groups said any restriction of Russian primary metal supplies would have a devastating impact on the EU aluminium industry value-chain. Read more>>

III. UK SANCTIONS

• UK Parliament Foreign Affairs Committee Publishes Report on the Wagner Network: On July 26, 2023, the House of Commons’ Foreign Affairs Committee published its report, Guns for Gold: the Wagner Network Exposed. The report focuses on:
  • detailing the development over the last decade of the Wagner Network;
  • outlining and criticising the UK’s response to the Wagner Network, noting that the UK has designated less than half the individuals and entities connected to the Wagner Network designated by the US/EU, and describing the Government as “remarkably complacent” about the growing practice of states using Private Military Companies;
  • naming individuals and entities in Russia, Central African Republic, and Syria who are not sanctioned by the UK but who the Committee believes are associated with the Wagner Network (Appendix 2), asking the Government to assess the names and impose sanctions as appropriate;
  • recommending further coordination with allies, in particular Turkey, and prioritising travel bans; and
  • recommending the proscription of the Wagner Network as a terrorist organisation. Read more>>, Read more>>
• UK Sanctions Russian Judicial Figures Involved in Trial of Kara-Murza: On July 31, 2023, OFSI designated 6 individuals involved in the trial of Vladimir Kara-Murza, an opposition politician, journalist, and human rights activist in Russia who is facing 25 years in a penal colony after the rejection of his appeal. The designations include:
  • Vitaly Alexsandrovich Belitsky, Ekaterina Mikhailovna Dorokhina, and Natalia Nikolaevna Dudar, judges who oversaw the prosecution;
  • Boris Georgievich Loktionov and Anna Evgenievna Potychko, prosecutors in the criminal proceedings; and
  • Danila Yurievich Mikheev, the state prosecution’s expert witness in the trial. Read more>>, Read more>>
• UK ECJU Updates Open General Export Licences: On July 31, 2023, the UK Export Control Joint Unit published a notice updating six Open General Export Licences (OGELs). The OGELs have been revised to address updates to the lists of controlled items in the dual-use regulations. This includes:
  • OGEL export for repair/replacement under warranty: dual-use items;
  • OGEL export after repair/replacement under warranty: dual-use items;
  • OGEL export after exhibition: dual-use items;
  • OGEL low value shipments;
  • OGEL technology for dual-use items; and
  • OGEL dual-use items India. Read more>>
• Financial Sanctions Update: Russia, Central African Republic and Mali: On July 28, 2023, the Foreign, Commonwealth and Development Office amended the UK Sanctions List. Under the Russia, Central African Republic (CAR) and Mali sanctions regimes the designations were amended to include:
  • the statement of reasons for listing for Andrey Vladimirovich Sharonov and Eugene Tenenbaum in Russia;
  • the name of Alexander Alexandrovich Ivanov and DOB of Vitalii Viktorovitch Perfilev in CAR; and
  • the date of birth of Ivan Aleksandrovitch Maslov in Mali. Read more>>, Read more>>, Read more>>
• OFSI Publishes New General Licence: On August 1, 2023, the Office of Financial Sanctions Implementation (“OFSI”) issued 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. GTLK Europe DAC and GTLK Europe Capital DAC were wound up by the Irish High Court on 31 May 2023. Read more>>

IV. RUSSIA/UKRAINE SANCTIONS

• Ukraine to Create Sanctions Register and Extends Court Deadlines for Claims Related to Confiscation of Russian Assets: On July 29, 2023, the Law amending Ukraine sanctions legislation, adopted earlier last month, entered into force. The law requires the establishment of a publicly available sanctions register of designated individuals, to also include the statement of reasons for the designation, and the type of sanctions imposed. The amendments also extend the procedural deadlines in cases concerning confiscation of Russian assets, which are considered by the High Anticorruption Court of Ukraine. The Court will now have up to 30 days from date of receipt of the claim (currently 10 days) to consider such claims, and the Appeal Chamber will have up to 15 days (currently 5 days). Read more>>
• Cabinet of Ministers of Ukraine Initiates Sanctions Against Russia and Belarus Military Industry: The suggested sanctions include full ban on transactions in goods subject to export control with the residents of Russian and Belarus, ban on transfer of technologies to Russian and Belarus, ban on investments from residents of Russian and Belarus into Ukrainian military industry. TO become effective, sectoral sanctions shall be approved by the National Security and Defence Council, the President and the Parliament. Read more>>
• Ukraine Considers Assuming All Insurance Risks Related to Grain Corridor: The Ukrainian government is considering the possibility of insuring ships and companies that will travel along the "grain corridor". This was announced by Prime Minister Denys Shmyhal at the conference of ambassadors of Ukraine. The Prime Minister noted that the possibility of the state taking on such risks in the Black Sea, following the example of the Danube, is currently being discussed. Read more>>
• Ukraine Summons Polish Ambassador Over ‘Unacceptable’ Comments About Gratitude: Ukraine’s Ministry of Foreign Affairs invited Polish ambassador to Kyiv to discuss the comments made on Monday by Marcin Przydacz, secretary of state. In an interview with Polish media, Przydacz spoke in favor of extending an EU ban on certain Ukrainian exports, saying Ukraine had received a lot of support from Poland and it should “start appreciating the role Poland has played for Ukraine in recent months and years.” In response, the deputy head of the Ukrainian President’s Office, Andrii Sybiha, said: “We categorically reject the attempts by some Polish politicians to impose on Polish society the baseless idea that Ukraine does not appreciate the help from Poland,” adding that Ukraine thanks Poland and its allies every day. Read more>>, Read more>>
• Russia Launches Digital Ruble: On August 1, 2023, it was reported that Russia passed a law introducing a new form of the national currency, the digital ruble. The law sets out the use of the digital ruble in payments and transfers, measures to be taken to prevent possible fraud, its potential use in international settlements, procedures in the event of bankruptcy and inheritance cases. Its adoption means that the Central Bank of Russia and other banks participating in its pilot programme can now begin testing digital rubles on real transactions with real clients. Read more>>
• Putin Reaffirms Russian Stance on Grain Deal in Call to Erdogan: On August 1, 2023, it was reported that Russian President Vladimir Putin told his Turkish counterpart Tayyip Erdogan that Moscow was ready to return to the Black Sea grain deal as soon as the West met its obligations with regard to Russia's own grain exports. Read more>>
• Russia Says Expansion Will Strengthen BRICS: On August 3, 2023, it was reported that BRICS group of countries would be strengthened by adding new members, in its most explicit endorsement yet of the idea of expansion. The BRICS group of emerging economies currently comprises Brazil, Russia, India, China and South Africa. Moscow sees the group as an increasingly important and influential counterweight in global affairs to the U.S.-led West. Read more>>
• Russia Includes Norway in List of “Unfriendly” Countries: The Russian Government has included Norway in the list of states that commit “unfriendly” actions against Russian diplomatic and consular missions abroad. The measure was adopted as part of Vladimir Putin's decree of 2021, which was signed after the mass expulsion of Russian diplomats by Western countries. “Unfriendly” countries have limited the ability to hire employees in embassies, consulates and representative government agencies located in Russia. Read more>>
• Russian Ministry of Industry and Trade Approves Updated List for Parallel Imports: An updated list of goods for which parallel imports are allowed has been approved by the Ministry of Industry and Trade and will soon be sent to the Ministry of Justice for registration. Russian enacted a law allowing parallel imports - the importation of products without the consent of the copyright holder - a year and a month ago. The list includes goods and materials from hundreds of foreign brands, such as Apple, Land Rover, IKEA, etc. Read more>>
• Russian Government Does Not Support Communist Party Bill to Withdraw from IMF: The Russian Government did not support the bill proposed by the Communist Party of the Russian Federation on Russia's withdrawal from the International Monetary Fund. “The unilateral decision to leave the membership of the IMF and the World Bank Group is associated with significant risks in terms of the return of Russian assets invested in them” – explained the Government. Read more>>

V.  OTHER NOTABLE DEVELOPMENTS

• Russian Companies Move Legal Battles to Hong Kong Courts: On August 3, 2023 Nikkei Asia reported that Russian companies are turning to Hong Kong for dispute arbitration services, as sanctions over the Ukraine war restrict their access to Western courts. Lawyers in the city say Russian companies are also increasingly adopting Hong Kong’s governing law in their commercial contracts for similar reasons. Read more>>
• Georgia Limits Export of American and European Cars to Russia: In accordance with the 11th package of EU sanctions on Russia, Georgia introduced restrictions on the export and re-export of American cars to Russia from August 1 and EU cars to Russia as of September 26. Read more>>
• Japan to Extend Luxury Cars Export Ban to Russia: On July 28, 2023 the Japanese government announced that it will extend an export ban on luxury cars to Russia to cover all new and used vehicles over 1900 cc, according to reports. The wider ban will become effective August 9, 2023, covering automobiles over 1900 cc, hybrid engine passenger cars and large vehicle tires, as well as hybrids, plug-in hybrids and electric vehicles, according to Yasutoshi Nishimura, Japan’s Minister of Economy, Trade and Industry. Read more>>
• Japan Pledges More Support to Ukraine During Finance Dialogue: On August 2, Japan’s vice finance minister for international affairs Masato Kanda, in meeting in Kyiv with Ukrainian Finance Minister Serhii Marchenko during a finance dialogue, said that the country is ready to provide additional housing, technical and other support to Ukraine. Kanda told reporters that the additional assistance is ready to be given via a World Bank project aimed at repairing and rebuilding war-damaged dwellings. Read more>>
• Saudi Arabia To Host Russia-Ukraine Peace Talks: Saudi Arabia will host a two-day meeting with countries from around the world this weekend, in an attempt to kick-start peace talks in Russia’s war on Ukraine. It follows Ukrainian President Volodymyr Zelenskyy’s surprise stop-off in Jeddah en route to the G7 summit in May when he addressed the Arab League and met Saudi Crown Prince Mohammed bin Salman. Brazil, India, Turkey, Japan, a host of European countries and the United States are expected to join the talks. Read more>>
• Russian Fuel Oil and Naphtha Trade Above G7 Price Cap Despite Sanctions: On August 2, reports emerged that several of Russia’s refined oil products, including fuel oil and naphtha, are trading above the price cap of $45 as imposed by Group of Seven (G7) nations since February, in another sign that the value of its barrels is rising in defiance of sanctions. Russia’s Urals crude had pierced the price cap last month, the first time since the imposition of the price cap. Read more>>
• Raiffeisen Bank Boosts Pay for Russian Staff by €200mn: On August 1, 2023, it was reported that Raiffeisen Bank increased pay for its Russia-based staff by €200mn in the past six months even as the Austrian lender comes under increasing pressure to leave the country. The move by the bank, which is the largest western lender still operating in Russia, represents a doubling in staff costs in its subsidiary compared with the same period in 2022. The raise is equivalent to a €22,000 payout per employee. Read more>>
• UBS Drops Credit Suisse’s Russian Clients: On July 30, reports emerged that UBS will drop up to three-quarters of Credit Suisse’s Russian clients, due to a “lower appetite for risk” and a plan to “anchor its risk management principles and corporate structure throughout the combined organization” of UBS and Credit Suisse. In a report published by NZZ am Sonntag, the Russians affected are said to be primarily Russian offshore clients: clients with a Russian passport who live abroad and who are currently serviced by Credit Suisse from Switzerland on a cross-border basis; though it is not clear exactly which Russians are affected. Read more>>
• Heineken Announces the Depreciation of Russian Assets By € 201 Million: On August 31, 2023, it was reported that the Russian assets of the Heineken brewing concern depreciated by € 201 million. According to the semi annual report the company did not derive any financial benefit from current operations, will not make a profit from the sale of the business, and have suffered an impairment loss to date of €201 million (€88 million in December 2022 and €113 million in June 2023), resulting in a net book value of zero as of June 30, 2023. Read more>>, Read more>>

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