U.S. Expands Ukraine-Related Sanctions and Further Restricts Exports to Russia

International Trade & Customs Update

Date: May 02, 2014

On April 28, 2014, in response to Russia’s actions concerning the situation in Ukraine, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) designated seven Russian government officials and 17 entities for economic sanctions.  In an equally important development for many U.S. businesses, the U.S. Commerce and State Departments announced their intention to deny pending license applications for exports of certain high-technology items to Russia or occupied Crimea.  In addition, both departments have begun a review to revoke existing export licenses involving high technology that could contribute to Russia’s defense industry.

Additional OFAC Sanctions

Under the authority granted by Executive Order 13661 (issued March 16, 2014), OFAC designated seven Russian government officials, including two key members of the Russian leadership’s inner circle, and 17 entities as Specially Designated Nationals (SDNs). All transactions with an SDN, or any entities owned or controlled by an SDN, are prohibited for U.S. companies and individuals. The seven individuals are:

  • BELAVENCEV, Oleg Evgenyevich
  • CHEMEZOV, Sergei
  • KOZAK, Dmitry
  • MUROV, Evgeniy
  • PUSHKOV, Aleksei Konstantinovich
  • SECHIN, Igor
  • VOLODIN, Vyacheslav

These individuals have been key players in Russia’s effort to annex Crimea, and two (Vyacheslav Volodin and Dmitry Kozak) are part of the growing list of President Vladimir Putin’s inner circle who have been specifically targeted for sanctions by the United States and other countries. 

In addition, OFAC has designated as SDNs 17 Russian companies with links to Putin’s inner circle:

  • AQUANIKA
  • AVIA GROUP LLC
  • AVIA GROUP NORD LLC
  • CJSC ZEST
  • INVESTCAPITALBANK
  • JSB SOBINBANK
  • SAKHATRANS LLC
  • SMP BANK
  • STROYGAZMONTAZH
  • STROYTRANSGAZ GROUP
  • STROYTRANSGAZ HOLDING
  • STROYTRANSGAZ LLC
  • STROYTRANSGAZ OJSC
  • STROYTRANSGAZ-M LLC
  • THE LIMITED LIABILITY COMPANY INVESTMENT COMPANY ABROS
  • TRANSOIL
  • VOLGA GROUP

Each of these entities is being designated for being owned or controlled by a person who previously has been designated an SDN by OFAC. While the formal names of these entities are listed above, each is also known to operate under one or more “also known as” (a.k.a.) business names. Therefore, U.S. businesses are encouraged to refer to OFAC’s SDN list.

Additional Restrictions on Export Licenses

In coordination with OFAC, the Commerce Department’s Bureau of Industry & Security (BIS) announced that it has expanded export license restrictions for 13 of the above 17 OFAC entities. The companies, located in Russia unless otherwise specified, are:

  • Stroytransgaz Holding (Cyprus)
  • Volga Group (Luxembourg and Russia)
  • Aquanika
  • Avia Group LLC
  • Avia Group Nord LLC
  • CJSC Zest
  • Sakhatrans LLC
  • Stroygazmontazh
  • Stroytransgaz Group
  • Stroytransgaz LLC
  • Stroytransgaz-M LLC
  • Stroytransgaz OJSC
  • Transoil

Each of these companies has been placed on the BIS’s Entity List – a list of foreign individuals and businesses that are subject to more stringent export license requirements. Moreover, BIS will apply a “presumption of denial” to license applications for exports to these entities.

BIS also announced that it will deny pending export/re-export license applications for any high-technology item subject to the Export Administration Regulations (EAR) to Russia or occupied Crimea, if such item could contribute to Russia’s military capabilities. In addition, BIS stated that it is taking actions to revoke any existing export licenses that meet these conditions. All other pending applications and existing licenses will receive a case-by-case evaluation to determine their contribution to Russia’s military capabilities.

The State Department’s Directorate of Defense Trade Controls (DDTC) followed suit by announcing that it would restrict and deny export license applications for any high-technology defense articles or services that are subject to the U.S. Munitions List (USML) that could contribute to Russia’s defense industry. DDTC will also revoke any existing licenses that meet these conditions.

At this time, neither BIS nor DDTC has clarified what items or services will be defined as “high technology” or as contributing to Russia’s military capability. A senior administration official has stated only that the agencies are in the process of assessing pending license applications to determine which ones involve technology needed by the Russian defense industrial complex.

FOR MORE INFORMATION

Thompson Hine will continue to monitor the situation and report on any further regulations issued by OFAC and any other activity on sanctions involving Russia. For more information, please contact:

James A. Losey
Partner, International Trade & Customs
202.263.4135
James.Losey@ThompsonHine.com

Brent Connor
Senior Counsel, International Trade & Customs
202.263.4188
Brent.Connor@ThompsonHine.com

Samir D. Varma
Associate, International Trade & Customs
202.263.4136
Samir.Varma@ThompsonHine.com

Scott E. Diamond
International Trade Specialist
International Trade & Customs
202.263.4197
Scott.Diamond@ThompsonHine.com

This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgment of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel.

This document may be considered attorney advertising in some jurisdictions.

© 2014 THOMPSON HINE LLP. ALL RIGHTS RESERVED.