Sanctions Weekly Update - Ukraine/Russia Conflict - August 7 2023

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

I. US SANCTIONS

• OFAC and State Department Expand Sanctions and Visa Restrictions on the Belarusian Regime, OFAC Issues New Belarus General Licenses: On August 9, 2023 on the third anniversary of the Belarusian authorities’ falsification of the August 2020 presidential election and crackdown on the Belarusian protest movement, the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) designated additional individuals, entities, and aircraft. The sanctioned individuals and entities include three state-owned enterprises (“SOEs”), the director and a subsidiary of one of the SOEs, one Belarusian government agency and four of its employees, and three individuals facilitating sanctions evasion in support of Lukashenka’s regime. The Department of State also imposed visa restrictions on 101 regime officials and their affiliates. This action was taken in conjunction with similar recent actions U.S. partners and allies.
  
  In connection with the new sanctions, OFAC also issued two new Belarus General Licenses: (1) Belarus General License 8 "Authorizing the Wind Down of Transactions Involving Joint Stock Company Byelorussian Steel Works Management Company of Holding Byelorussian Metallurgical Company", which authorizes relevant transactions through 12:01 a.m. EDT, October 9, 2023; and (2) Belarus General License 9 "Authorizing Transactions Related to Civil Aviation Safety or the Wind Down of Transactions Involving Open Joint Stock Company Belavia Belarusian Airlines", which authorizes relevant transactions through 12:01 a.m. EDT, September 8, 2023. 
  Read more >> and Read more >>
• OFAC Issues Russia-Related General License 13F: On August 10, 2023, OFAC issued Russia-related General License 13F, "Authorizing Certain Administrative Transactions Prohibited by Directive 4 under Executive Order 14024".  This new Russia-related General License supersedes General License No. 13E in its entirety, and authorizes certain administrative transactions involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation, through 12:01 a.m. EST, November 8, 2023. Read more >> 
• Senate Foreign Relations Committee Calls on Kyrgyzstan to Uphold Sanctions Against Russia: On August 8, 2023 US Senator Bob Menendez (D-N.J.), Chairman of the Senate Foreign Relations Committee, sent a letter to the President of the Kyrgyz Republic regarding allegations that Kyrgyzstan has assisted Russia, or its proxies, in evading international sanctions imposed in response to Russia’s unlawful invasion of Ukraine.  Specifically, he urged the Kyrgyzstan government to “immediately investigate” these allegations, and to “establish more reliable, robust processes to prevent the illicit flow of goods through [its] territory.”  Read more >>
• Negotiations Launch for US-Ukrainian Bilateral Security Commitments: On August 3, 2023 representatives from the Departments of State and Defense and the National Security Council met with Ukrainian counterparts to begin negotiations on long-term security commitments between the two countries.  These discussions fall under the framework of the G7 Joint Declaration of Support to Ukraine, which seeks to formalize enduring U.S. support to Ukraine as it defends its sovereignty and territorial integrity, rebuilds its economy, protects its citizens, and pursues integration into the Euro-Atlantic community.  Read more >>
• Secretary of State Blinken’s Call with Ukrainian Foreign Minister Kuleba: On August 7, 2023, Secretary of State Antony J. Blinken spoke with Ukrainian Foreign Minister Dmytro Kuleba via phone.  The two discussed developments in Ukraine’s counteroffensive efforts, recent conversations about a just and durable peace in Ukraine held in Jeddah, Saudi Arabia, and long-term security arrangements between the two countries.  Secretary Blinken reiterated the United States’ staunch and ongoing support of Ukraine’s defense against Russia’s aggression and reaffirmed continued support of a strong Ukrainian military and accountable defense institutions.  Read more >>
• Attorney General Garland Touts DOJ’s Efforts to Pursue Russian War Crimes: On August 7, US Attorney General Merrick B. Garland touted the Department of Justice (“DOJ”)'s efforts to hold Russia accountable for war crimes in Ukraine, telling delegates at the American Bar Association (ABA)'s annual meeting that the U.S. is "not waiting for hostilities to end" in order to hold perpetrators accountable, according to a report by Law360.  Specifically, recent changes to the War Crimes Act will allow the DOJ to prosecute foreign individuals present in the U.S. for alleged war crimes, Garland said in his address to members of the ABA’s House of Delegates.  
  Read more >>
• Treasury Secretary Yellen Addresses Ukraine Supplemental Budget Request: On August 10, 2023, Secretary of the Treasury Janet L. Yellen issued a statement on the Ukraine Supplemental Budget Request.  Specifically, she requested ”vital support” through international financial institutions (IFIs) to developing countries that are impacted by Russia’s war, including contribution for a new portfolio guarantee platform at the World Bank to support reform efforts under the MDB evolution initiative launched by the United States, which would unlock roughly $25 billion in new lending; grants to bring down costs of the new lending; and $1 billion for the International Development Association’s Crisis Response Window.  The US government is also seeking authorization to make loans to two IMF trust funds, which will enable the IMF to continue supporting vulnerable countries in the face of Russia’s actions, with an aim to mobilize $200 billion of new financing for developing countries, according to the Secretary. Read more >>
• Ex-FBI Agent to Plead Guilty for Helping Sanctioned Russian Avoid Sanctions: On August 7, 2023 reports emerged that former FBI agent Charles McGonigal, who was accused of helping Russian billionaire Oleg Deripaska avoid U.S. sanctions, will “enter a change of plea,” according to the Manhattan federal court.  McGonigal was charged with money laundering and violating the International Emergency Economic Powers Act after prosecutors say he and Sergey Shestakov, a former Russian diplomat who became a U.S. citizen, conspired to help Deripaska, who was sanctioned by the U.S. government in 2018, get off U.S. sanctions list and investigate rival Russian oligarchs, as well as other restricted activities.  Read more >>
• Kyocera Wins Halt to New Jersey State Sanction on Russia: On August 7 2023, a New Jersey federal judge had agreed to temporarily free Kyocera Document Solutions America Inc. (Kyocera), a printer equipment company, from the state’s ban on doing business with Russian businesses, according to reports.  In a suit filed against New Jersey on July 28, 2023, Kyocera argued that the state’s prohibitions against “remote and tenuous connection” with companies based in Russia were “unconstitutionally overbroad,” to which the judge found to be strong.  Read more >>

II. EU SANCTIONS 

• EU Publishes Amends Sanctions Against Belarus: On August 4, 2023, the European Union published a Regulation (EU) 2023/1594 amending the sanctions against Belarus. The EU expanded the ban on exports if firearms to Belarus as well as provision of technical assistance, brokering services or other services related to such goods. The Council also expanded the ban on export to Belarus of dual-use goods and technology as well as goods and technology which might contribute to Belarus’s military and technological enhancement. The changes align the Belarus sanctions with the EU’s Russia sanctions regime. Read more >> and Read more >>
• European Companies Reported to Suffer €100bn Hit from Russia Operations: Europe’s biggest companies have suffered at least €100bn in direct losses from their operations in Russia since President Vladimir Putin’s full-scale invasion of Ukraine last year. Moscow’s decision to seize control of the Russian businesses of gas importers Fortum and Uniper in April, followed by the expropriation of Danone and Carlsberg last month, suggests more pain lies ahead, according to analysts. More than 50 per cent of the 1,871 European-owned entities in Russia before the war are still operating in the country. Read more >>
• Hungarian Foreign Ministry States that Hungary Cannot Refuse Gas from Russia: Hungarian Prime Minister Orban in July called the EU's attempt to withdraw from Russian energy resources a mistake. Russian gas supplies 85% of Hungary's annual consumption. Although it was able to partially diversify supplies, it is difficult to replace such a large volume, so the country cannot refuse gas from Russia, claimed the Hungarian government. 
  Read more >>
• Poland Calls on EU to Provide Funds for Ukraine Grain Transit: Poland called on the European Union to help boost port capacity to allow more Ukrainian grain shipments through the Baltic Sea, while insisting it will keep a sales ban on its neighbour’s crops. Ukraine grain exports through Polish ports climbed to 260,000 tons in June, according to Agriculture Minister Robert Telus. This would be more than double levels seen earlier this year and are likely to increase as Russia exited from the Black Sea grain deal. Read more >>

III. UK SANCTIONS 

• UK Sanctions Amendments Extended to Overseas Territories: On July 19, 2023, the UK government amended the Russia (Sanctions) (Overseas Territories) (Amendment) (No. 2) Order 2023 to extend the UK sanctions amendments to the British territories other than for Bermuda and Gibraltar, which implement sanctions through their own legislative arrangements. The Order includes changes: 
  
  
  •  to modify offences in relation to export of goods to non-government controlled Ukrainian territory;
  • to modify relevant offences in relation to import of relevant processed iron or steel products and revenue generating goods from Russia; and
  • to modify certain provision in relation to prohibitions on the provision of professional and business services.  Read more >> 

• OFSI Updates Guidance on Maritime Services Ban And Oil Price Cap: On August 4, 2023, OFSI updated its reporting forms for the oil price cap and maritime services ban general licences.  These changes provide additional information on:
  
  • how to complete and return the reporting forms;
  • navigating around the OPC website; and
  • using the published guidance to assist in fulfilling reporting requirements.  Read more >> and Read more >>
    

• Oligarchs Fret About Their Assets as UK Fights to Keep Tabs On Their Spending: On August 5, 2023, it was reported that the UK authority responsible for enforcing sanctions is swamped with paperwork related to the restrictions on Russian oligarchs. The UK has frozen GBP18.4 billion British pounds, or USD23.4 billion, worth of assets under the Russian sanctions regime as of October 2022 — up 400 times from the GBP44.5 million in 2021. Owners of these assets are unable to access them but can apply for licenses to make payments such as for living expenses like food, rent, and utilities. The individuals can then submit licenses to their banks to release the funds for the intended purposes. Read more >> 
• OFSI Adds to Russia and Belarus Lists: On August 8, 2023, the Foreign, Commonwealth and Development Office published press releases and updated the UK Sanctions List. Under the Russia and Belarus sanctions regimes, 10 individuals and 15 entities were added to the consolidated list for contributing to Russia’s defence sector and financial sector. The designations include:
  
  
  • Paravar Pars Co, an Iran-based firm which manufactures unmanned aerial vehicles (UAVs), which have allegedly been provided to Russia, and 7 members of the board of directors;
  • Ashot Mkrtychev, a Slovakian national, who, according to OFAC, worked with North Korea to obtain weapons for Russia;
  • Anselm Oskar Schmucki, a Swiss national, who is Chief of the Moscow Office of DuLac Capital, an Swiss-based asset management company;
  • Aeromotus Unmanned Aerial Vehicles Trading LLC, a Dubai-based entity which allegedly provides UAVs to Russia;
  • Azu International Ltd and Turkik Union Dijital Teknoloji Donusum Ofisi, Turkish entities which have allegedly supplied Russia with computer components to Russia’s defence sector;
  • 2 IRGC entities and Ali Reza Balali, Senior Adviser to the Chief of the IRGC Aerospace Force, which conduct missile research and allegedly supply Russia with military goods;
  • LLC Staut and LLC Testkomplekt, and SMT-Ilogic, Russian entities which import electrical components;
  • Belomo Holding and Gomel Radio plant, entities in the Belarusian mechanical engineering sector; and
  • Radioelectronic Armament Repair Plant, JSC Peleng, Kidma Tech, and Orsha Aircraft Repair Plant, entities in the Belarusian defence sector.  Read more >> and Read more >>  

IV. RUSSIA/UKRAINE SANCTIONS 

• Russia Suspends the Provisions of Tax Treaties with “Unfriendly” Countries: President Vladimir Putin has signed a decree freezing double tax treaties (DTAs) with 38 states. The specific reason for the sanctions against other jurisdictions is not mentioned in official documents. According to the text of the decree, urgent measures were required "in connection with the commission by a number of foreign states of unfriendly actions against the Russian Federation." The list of countries subject to the freeze includes almost all EU countries (except Estonia and Latvia), the USA, Great Britain, Switzerland, Singapore, Japan, South Korea, Australia and a number of others. Read more >>
• Russian President Vladimir Putin Signs Law on Blocking Funds of Foreigners Under Sanctions: The amendments allow for the blocking of funds and property of legal entities controlled by foreign organizations and foreign citizens against whom Russia applies restrictive measures. In addition, they are prohibited from conducting foreign trade operations, as well as paying salaries to employees in excess of the subsistence level. Freezing of property can be carried out only by the decision of Vladimir Putin. Only companies where foreigners own more than half of the votes are at risk. The law will come into force in six months. 
  Read more >>
• Russian President Vladimir Putin Signs Law on the Exclusion of Foreign Structures from the Chain of Ownership of "Significant" Russian Companies: According to the law, the mechanism for the return of direct control to Russian beneficiaries applies only to “significant” organizations in which foreign structures from "unfriendly" jurisdictions (foreign holding companies) or owners from such countries own at least 50%. The list of "significant" organizations should form the Government. There is no option to challenge the listing. Read more >>
• Russian Companies Move Legal Battles to Hong Kong Courts: Russian litigants have traditionally favoured London’s commercial courts for their proximity and their common law legal system. But after the US and EU slapped sanctions on Russia over the Ukraine war, many large western law firms dropped Russian clients. Lawyers in the city say Russian companies are increasingly adopting Hong Kong’s governing law in their commercial contracts for similar reasons. Read more >>
• Most Russian Fuel Exports Now Pricing above G7-imposed Price Cap: Most Russian fuel exports from the Baltic and Black Sea regions are now pricing above a price cap set in February by a G7-led coalition designed to limit Moscow's revenues in the aftermath of its invasion of Ukraine. The rise in Russian fuel prices comes as global prices for fuels from other origins soar amid strong demand and low inventory levels. The Argus data showed that prices for Russian origin diesel, gasoil, naphtha and fuel oil loading in the Black Sea and Baltic regions have exceeded those caps in recent weeks. Read more >>
• Fear of Tech 'Brain Drain' Prevents Russia from Seizing Yandex for Now: The Kremlin's fear of a serious tech brain drain is the main factor preventing Moscow from nationalising Nasdaq-listed Yandex (YNDX.O), often dubbed "Russia's Google", told four people with knowledge of the company's divestment plans. Yandex's fate has been the subject of much speculation since it announced plans to pursue a corporate restructuring last November, a move that should ultimately see its main revenue-generating businesses inside Russia spun off from its Dutch-registered parent company. As Russia's leading tech company, boasting some of the country's top developers among more than 20,000 staff, Yandex was one of the few Russian firms with genuine global ambitions before Moscow unleashed its war in Ukraine in February 2022. Read more >>
• Russia to Widen Scope of Digital Rouble Testing Beginning August 15, 2023: Russia will begin piloting its digital rouble with consumers on August 15, 2023 after a lengthy testing phase with banks, the central bank said on Wednesday, as Moscow looks to widen the scope of its cross-border payments. Russia, like many countries, has been developing a central bank digital currency (CBDC) - digital tokens issued by central banks - over the last couple of years in a bid to modernise its financial system and head off cryptocurrencies. Read more >>
• Russia says JPMorgan Stops Processing Its Grain Payments: On August 4, 2023, it was reported that U.S. bank JPMorgan had the prior week stopped processing payments for the Russian Agricultural Bank. According to the Russia Foreign Ministry JPMorgan had handled some Russian grain export payments for the past few months with reassurances from Washington, however, that cooperation has now stopped. Read more >> 
• Moscow Court Reportedly Freezes Goldman Sachs Assets in Russia: On August 7, 2023, it was reported that a Russian court frozen $36m worth of Goldman Sachs’ assets following a lawsuit against them filed by Russia’s Bank Otkritie. Otkritie accused Goldman Sachs of refusing to fulfil debt obligations. According to court documents published earlier this month, Goldman had pointed to the sanctions imposed against the Russian bank by the US and other western countries for not being able to settle the debt. The frozen assets include a 5% stake in Russia’s largest children’s goods retailer, Detsky Mir, worth $27m, and smaller shares in Sberbank, VTB, Gazprom, Lukoil, Aeroflot, and Magnit.  Read more >>  
• Ruskhimalliance Filed a Lawsuit Against Unicredit Bank For 45.7 Billion Rubles: On August 7, 2023, it was reported that Ruskhimalliance (established by Gazprom and RusGazDobycha) has filed a lawsuit against UniCredit Bank (part of the UniCredit group). It is seeking to recover 45.7 billion rubles ($ 472 million) from the bank. The statement of claim was filed with the Arbitration Court of St. Petersburg and the Leningrad Region on August 5, according to the court file.  Read more >> 
• Alfa-Bank Reportedly Buys A 25% Stake in The Ticket Sales Service Kassir: On August 8, 2023, it was reported that according to the data of the Unified State of Register of Legal Entities parent structure of Alfa Bank, AB Holding, acquired 25% of the Kassir.ru ticket sales service. AB Holding acquired a stake in Kassir.ru National Ticket Operator LLC. The shares of other shareholders of the company - the general director of the service Evgeny Finkelstein and Nadezhda Solovyova decreased from 83.66% to 62.75% and from 16.33% to 12.25%, respectively. Prior to the transaction, they owned 99.99% of the company's shares,  Read more >> 
• Ukraine Includes Alcohol Manufacturer Bacardi in the List of International Sponsors of War: The National Anti-Corruption Agency, responsible for the listing, that the company continued to supply millions of dollars worth of its products to the Russian Federation and to look for new employees by publishing job vacancies. The revenue of Bacardi Rus in 2022 increased by 8.5% to 32.6 billion roubles, and the net profit to 4.7 billion: this is 206.5% more than in 2021. Read more >>

V.  OTHER NOTABLE DEVELOPMENTS

• Russian Companies Move Legal Battles to Hong Kong Courts: On August 7, 2023, it was 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. In Hong Kong, more than half a dozen senior lawyers who have handled disputes involving Russian parties report they had seen a spike in Russian companies arbitrating in the city and switching from English governing law in their contracts to Hong Kong law, owing to its sanctions-neutral policy.  
  Read more >> 
• Russia Increased Oil Exports to India by 11 Times: On August 9, 2023, it was reported that from January to May 2023, Russia supplied almost 37 million tons of oil to India, which is almost 11 times more than in the same period last year. For the whole of 2022, India imported 33.4 million tons of Russian oil. In second place in terms of supplies of raw materials to India was Iraq, which exported 21.4 million tons of oil in five months; followed by Saudi Arabia (17.5 million tons).  Read more >>

For previous weekly updates, please visit our webpage.