U.S., UK, and EU Impose Additional Sanctions and Export Controls Against Russia

Over the past several weeks, as Russia’s war against Ukraine has continued, the United States, EU, and UK have continued to implement additional sanctions, export controls, and other restrictions targeting Russia. Most notably, the United States, EU, and UK have all significantly escalated sanctions in the last week in response to mounting evidence of atrocities committed by Russian forces in parts of Ukraine.

In particular, the Biden Administration announced significant new property-blocking sanctions on April 6 and 7 targeting major Russian financial institutions Sberbank and Alfa-Bank, family members of Russian President Vladimir Putin and Foreign Minister Sergey Lavrov, members of Russia’s Security Council, and certain Russian state-owned enterprises, including Public Joint Stock Company Alrosa (“Alrosa”), which is the world’s largest diamond mining company, and Joint Stock Company United Shipbuilding Corporation (“USC”). President Biden also signed a new executive order prohibiting new investment in Russia by U.S. persons, and the export of services to Russia from the United States or by U.S. persons, wherever located, as determined by the Secretary of the Treasury. Further, the Department of Commerce expanded license requirements under the Export Administration Regulations (“EAR”) on items destined for Russia and Belarus, temporarily revoked the export privileges of three major Russian airlines, and added numerous parties to the Commerce Department’s Entity List.

Also in recent weeks, the Biden Administration has issued several general licenses authorizing certain activities otherwise prohibited by sanctions; announced that Russia will be prohibited from making debt payments with funds subject to U.S. jurisdiction; designated the aerospace, electronics, and marine sectors of the Russian economy for sanctions; and made clear that sanctions targeting Russia apply to gold-related transactions. The U.S. Congress has also stepped up pressure on Russia, passing bills last week to suspend Russia and Belarus’s Permanent Normal Trade Relations (“PNTR”) status, and also to prohibit imports into the United States of Russian oil, natural gas, and coal (essentially writing into law President Biden’s Executive Order of March 8 prohibiting such imports). Both bills were signed into law by President Biden on April 7, 2022.

Separately, on April 8, 2022, the European Union adopted additional measures which include additional asset-freezing designations (covering, among other parties, several of Russia’s largest banks, as well as various government officials, oligarchs, and family members thereof) and new financial services restrictions, as well as a wide range of new export and import restrictions, including a new import ban on coal originating from Russia, together with new transportation-related sanctions. The EU has also adopted new Belarus sanctions measures, including new financial services and transportation sector restrictions.

The UK has also continued to add individuals and entities to its sanctions list, including, on April 6, Russia’s largest bank, Sberbank, as well expanding existing UK trade controls restrictions to non-government-controlled regions of Ukraine, and announcing further import and export restrictions.

U.S. Sanctions Developments

New Sanctions Designations

Over the past few weeks, the Treasury Department’s Office of Foreign Assets Control (“OFAC”) has added numerous entities, individuals, and vessels to the List of Specially Designated Nationals and Blocked Persons (“SDN List”) pursuant to Executive Order 14024 (“E.O. 14024”):

• On March 24, 2022, OFAC announced the addition to the SDN List of 48 Russian defense companies, 328 members of the Russian State Duma, the State Duma itself, and the CEO of Public Joint Stock Company Sberbank (“Sberbank”), Herman Gref.
• On April 6, 2022, OFAC announced the addition of the following entities and individuals to the SDN List:
  • Sberbank and 42 of its subsidiaries;
  • Joint Stock Company Alfa-Bank (“Alfa-Bank”), six Alfa-Bank subsidiaries, and five vessels owned by a subsidiary of Alfa-Bank;
  • 21 members of the Security Council of the Russian Federation who had not previously been added to the SDN List, including former President and Prime Minister of Russia Dmitry Medvedev;
  • Two of Russian President Vladimir Putin’s daughters; and
  • The wife and daughter of Russian Foreign Minister Sergey Lavrov.
• On April 7, 2022, OFAC announced the addition to the SDN List of the following Russian state-owned enterprises:
  • Alrosa, the world’s largest diamond mining company, accounting for 28% of global diamond mining and 90% of Russia’s diamond mining capacity; and
  • USC, along with 28 of its subsidiaries and eight board members. USC is responsible for developing and building the Russian Navy’s warships.

U.S. persons are broadly prohibited, except as authorized by OFAC, from transacting or dealing with SDNs and entities that SDNs own 50% or more, directly or indirectly, individually or in the aggregate with other SDNs. In addition, the property of SDNs and entities that they own 50% or more must be blocked, or frozen, when it comes into the United States or the possession or control of a U.S. person. “U.S. persons” are U.S. entities and their non-U.S. branches; individual U.S. citizens and lawful permanent residents (“green-card” holders), no matter where located or employed; and persons present in the United States.

The designations of Sberbank and Alfa-Bank for property blocking sanctions are particularly significant. Sberbank is Russia’s largest bank and, although both Sberbank and Alfa-Bank were previously subject to debt and equity restrictions pursuant to Directive 3 under E.O. 14024—and Sberbank was also subject to correspondent and payable-through account (“CAPTA”) sanctions pursuant to Directive 2 under E.O. 14024 and debt and equity restrictions pursuant to Directive 1 under Executive Order 13662—the designations of Sberbank and Alfa-Bank to the SDN List represent a marked escalation of sanctions against these entities and the Russian financial sector.

Issuance of New Executive Order Targeting New Investment in and Certain Services Exported to the Russian Federation

On April 6, 2022, President Biden issued Executive Order 14071, “Prohibiting New Investment in and Certain Services to the Russian Federation in Response to Continued Russian Federation Aggression” (“E.O. 14071”). E.O. 14071 prohibits:

• all new investment in the Russian Federation by U.S. persons, wherever located;
• the export, reexport, sale, or supply, directly or indirectly, from the United States, or by a U.S. person, wherever located, of any category of services as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State, to any person located in the Russian Federation; and
• any approval, financing, facilitation, or guarantee by a U.S. person, wherever located, of a transaction by a foreign person where the transaction by that foreign person would be prohibited by E.O. 14071 if performed by a U.S. person or within the United States.

The prohibition against new investment by U.S. persons in the Russian Federation is potentially quite significant, and builds on the prohibition adopted last month in Executive Order 14066 (“E.O. 14066”) against new investment by U.S. persons in the energy sector of the Russian Federation, as described in our March 10 client alert. E.O. 14071 does not define “new investment,” and OFAC has not yet issued guidance defining the term for purposes of this executive order. However, for purposes of the energy sector new investment restriction in E.O. 14066, OFAC has issued guidance in the form of a response to Frequently Asked Question (“FAQ”) 1019, defining “new investment” to mean “a transaction that constitutes a commitment or contribution of funds or other assets” or a “loan or other extension of credit” to “new energy sector activities (not including maintenance or repair) located in or occurring in Russia beginning on or after March 8, 2022” (the date of E.O. 14066). This definition is consistent with how OFAC has traditionally defined “new investment” in the context of other sanctions programs, and suggests that is likely how OFAC will define “new investment” for purposes of E.O. 14071 as well.

The prohibition against the export, reexport, sale, or supply to Russia of any category of services determined by the Secretary of the Treasury does not have an immediate impact because it requires further action by the Secretary of the Treasury to apply the prohibition to (i.e., to designate) particular categories of services. However, it gives the Secretary of the Treasury significant authority to quickly constrain U.S.-person involvement in the provision of services to Russia in the future.

General Licenses

OFAC issued a number of new or updated general licenses in connection with the new property-blocking sanctions described above, as well as existing sanctions against the Crimea region of Ukraine and the so-called Donetsk People’s Republic (“DNR”) and Luhansk People’s Republic (“LNR”) regions of Ukraine. The licenses are subject to various terms and conditions, and do not authorize activities that are otherwise prohibited by U.S. sanctions laws and regulations. Notable recent general licenses are as follows:

• General License 8B replaces General License 8A and expands the scope of the general license to cover Alfa-Bank. Specifically, General License 8B authorizes, through 12:01 a.m. EDT on June 24, 2022, transactions related to energy involving VEB, Bank Otkritie, Sovcombank, Sberbank, VTB, Alfa-Bank, any entity in which one or more of the stated entities own, directly or indirectly, a 50% or greater interest, or the Central Bank of the Russian Federation.

• General License 9C replaces General License 9B, and expands the scope of the general license to cover Alfa-Bank and Alrosa.

     
  Specifically, General License 9C authorizes, through specified time periods, all transactions prohibited by the Russian Harmful Foreign Activities Sanctions Regulations, 31 C.F.R. Part 587 (“RuHSR”) that are ordinarily incident and necessary to dealings in certain debt or equity of one or more of the following entities, provided that any divestment or transfer of, or facilitation of divestment or transfer of, covered debt or equity must be to a non-U.S. person that is not the target of sanctions: VEB, Bank Otkritie, Sovcombank, Sberbank, VTB, or any entity in which one or more of these entities own, directly or indirectly, a 50% or greater interest; Alfa-Bank, or any entity in which Alfa-Bank owns, directly or indirectly, a 50% or greater interest; or Alrosa, or any entity in which Alrosa owns, directly or indirectly, a 50% or greater interest.

  Further, this general license authorizes, through 12:01 a.m. EDT on May 25, 2022, all transactions prohibited by Directive 4 under E.O. 14024 that are ordinarily incident and necessary to the receipt of interest, dividend, or maturity payments in connection with debt or equity of the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation issued before March 1, 2022.

• General License 10C replaces General License 10B, and expands the scope of the general license to cover Alfa-Bank and Alrosa.

     
  Specifically, General License 10C authorizes, through specified time periods, all transactions prohibited by the RuHSR that are ordinarily incident and necessary to the wind down of certain derivative contracts that (i) include one of the following entities as a counterparty or (ii) are linked to debt or equity of one of the following entities, provided that any payments to a blocked person are made into a blocked account: VEB, Bank Otkritie, Sovcombank, Sberbank, VTB, or any entity in which one or more of the preceding entities own, directly or indirectly, a 50% or greater interest; Alfa-Bank, or any entity in which Alfa-Bank owns, directly or indirectly, a 50% or greater interest; or Alrosa, or any entity in which Alrosa owns, directly or indirectly, a 50% or greater interest.

  Further, this license authorizes, through 12:01 a.m. EDT on May 25, 2022, all transactions prohibited by Directive 4 under E.O. 14024 that are ordinarily incident and necessary to the wind down of derivative contracts, repurchase agreements, or reverse repurchase agreements entered into prior to 12:01 a.m. EDT on March 1, 2022, that include the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation as a counterparty.

• General License 21A authorizes, through 12:01 a.m. EDT on June 7, 2022, U.S. persons to engage in all transactions ordinarily incident and necessary to the wind down of Sberbank CIB USA, Inc., or Alrosa USA, Inc., or any entity in which Sberbank CIB USA, Inc. or Alrosa USA, Inc. owns, directly or indirectly, a 50% or greater interest, that are prohibited by the RuHSR, including the processing and payment of salaries, severance, and expenses; payments to vendors and landlords; and closing of accounts.
• General License 22 authorizes, through 12:01 a.m. EDT on April 13, 2022, all transactions ordinarily incident and necessary to the wind down of transactions involving Sberbank or any entity in which Sberbank owns, directly or indirectly, a 50% or greater interest that are prohibited by E.O. 14024.
• General License 23 authorizes, through 12:01 a.m. EDT on May 6, 2022, all transactions ordinarily incident and necessary to the wind down of transactions involving Alfa-Bank or any entity in which Alfa-Bank owns, directly or indirectly, a 50% or greater interest that are prohibited by E.O. 14024.
• General License 24 authorizes, through 12:01 a.m. EDT on May 7, 2022, all transactions ordinarily incident and necessary to the wind down of transactions involving Alrosa or any entity in which Alrosa owns, directly or indirectly, a 50% or greater interest that are prohibited by E.O. 14024.
• General License 25 authorizes all transactions ordinarily incident and necessary to the receipt or transmission of telecommunications involving the Russian Federation that are prohibited by the RuHSR. Subject to compliance with any applicable EAR controls, this license also authorizes the exportation or reexportation, sale, or supply, directly or indirectly, from the United States or by U.S. persons, wherever located, to the Russian Federation of services, software, hardware, or technology incident to the exchange of communications over the internet, such as instant messaging, videoconferencing, chat and email, social networking, sharing of photos, movies, and documents, web browsing, blogging, web hosting, and domain name registration services, that are prohibited by the RuHSR.
• Ukraine General License 25 authorizes certain transactions in the Crimea region, the DNR region, and the LNR region (collectively, the “Covered Regions”) that are ordinarily incident and necessary to journalistic activities in the Covered Regions by news reporting organizations that are U.S. persons, and individuals who are U.S. persons regularly employed by a news reporting organization, either as journalists (including photojournalists) or as supporting broadcast or technical personnel. For purposes of this general license, the term “news reporting organization” means an entity whose primary purpose is the gathering and dissemination of news to the general public.

Designation of Russian Aerospace, Electronics, and Marine Sectors Under Section 1(a) of E.O. 14024

On March 31, the Secretary of the Treasury designated the Russian aerospace, electronics, and marine sectors of the Russian economy under Section 1(a) of E.O. 14024, in addition to the financial services, technology, and defense and related materiel sectors that already were designated under the E.O. While persons operating in these sectors are not automatically subject to U.S. property-blocking sanctions, OFAC has the authority under Section 1(a) of the E.O. to impose property-blocking sanctions on specific persons who are determined to operate or have operated in these sectors. OFAC has used this authority to impose sanctions against numerous entities and individuals.

Prohibition on Russian Debt Payments Using Funds Subject to U.S. Jurisdiction

On April 4, 2022, OFAC reportedly blocked the Russian government from paying holders of its sovereign debt from reserves held in U.S. banks.

Since February 24, 2022, Directive 4 under E.O. 14024 has prohibited, absent licensing or other authorization from OFAC, “any transaction involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation, including any transfer of assets to such entities or any foreign exchange transaction for or on behalf of such entities.” OFAC had reportedly been permitting the Russian government to use restricted Central Bank funds held in U.S. financial institutions to make coupon payments on dollar-denominated sovereign debt on a case-by-case basis. However, according to a reported statement by a Treasury Department spokesperson, beginning on April 4, 2022, “the U.S. Treasury [would] not permit any dollar debt payments to be made from Russian government accounts at U.S. financial institutions.”

As described in a White House press release, U.S. sanctions do not preclude payments on Russian sovereign debt provided that Russia uses funds outside of U.S. jurisdiction. However, the move to preclude Russia from using its funds held with U.S. financial institutions appears to have been intended to force Russia to choose between draining its available funds to make debt payments or defaulting on its debt.

OFAC Guidance Regarding Application of Russia-related Sanctions to Gold-Related Transactions

On March 24, 2022, OFAC published a response to FAQ 1029, making clear that the prohibitions of E.O. 14024 and other Russia-related sanctions apply to gold-related transactions. OFAC cautioned that sanctioned Russian parties are known to employ a wide variety of measures in their efforts to evade U.S. and international sanctions, and warned U.S. persons wherever located—including U.S. persons that process or facilitate gold-related transactions—to be vigilant against attempts to circumvent OFAC sanctions and to take risk-based steps to ensure they do not engage in prohibited transactions.

U.S. Export Control Developments

Expansion of License Requirements for Items Destined for Russia or Belarus

On April 8, 2022, the Department of Commerce’s Bureau of Industry and Security (“BIS”) issued a Final Rule (the “April 8 Rule”) expanding license requirements on exports, reexports, and transfers (in-country) of items subject to the EAR when destined for Russia or Belarus.

As described in our February 25 and March 6 client alerts, BIS previously implemented new license requirements under EAR § 746.8(a)(1) for Russia and Belarus for items subject to the EAR and classified under Export Control Classification Numbers (“ECCNs”) in Categories 3 through 9 of the Commerce Control List (“CCL”). The April 8 Rule expands this license requirement to include items classified under any ECCN in Categories 0, 1, and 2 of the CCL—i.e., the license requirement at EAR § 746.8(a)(1) now applies to all items on the CCL. The April 8 Rule also expands the Russia/Belarus foreign-produced direct product rule (the “Russia/Belarus FDPR”) to apply to all items on the CCL. The Russia/Belarus FDPR now applies to foreign-produced items not designated EAR99 that are (i) direct products of U.S.-origin technology or software subject to the EAR and specified in any ECCN in product groups D (software) or E (technology) of the CCL; or (ii) produced by any plant or major component of a plant that is located outside the United States, when the plant or major component of a plant is itself a direct product of U.S.-origin technology or software specified in any ECCN in product groups D or E of the CCL.

Further, the April 8 Rule limits the availability of License Exception Aircraft, Vessels, and Spacecraft (“AVS”) for certain Belarus-related aircraft. Thus, paragraphs (a) and (b) of License Exception AVS are not available for aircraft registered in, owned, or controlled by, or under charter or lease by, Belarus or Russia, or by a Belarusian or Russian national.

Also on April 8, 2022, BIS issued a Final Rule adding Iceland, Liechtenstein, Norway, and Switzerland to the list of partner countries that have adopted export controls with respect to Russia and Belarus that are similar to those imposed by the United States. As a result, these countries have been granted full exclusions from license requirements imposed by the Russia/Belarus FDPR and the Russia/Belarus military end user foreign-produced direct product rule (which is described in our March 6 client alert), and certain U.S.-origin content in non-U.S. products to be exported or reexported from these countries to Russia or Belarus is not counted as controlled for purposes of the EAR’s de minimis rule. This brings the total number of countries excluded from application of these export control rules to 37.

Developments Targeting the Russian Aerospace Sector

On April 7, 2022, BIS issued Temporary Denial Orders (“TDOs”) denying the export privileges of three Russian Airlines—PJSC Aeroflot, Azur Air, and UTair Aviation JSC—due to alleged ongoing violations of U.S. export controls targeting Russia. These TDOs terminate the rights of these airlines to participate in transactions subject to the EAR, including exports from the United States. The TDOs are issued for a 180-day period and may be renewed.

According to the press release issued by BIS, Aeroflot, UTair, and Azur Air recently engaged in and continue to engage in conduct prohibited by the EAR by operating EAR-controlled aircraft without the required BIS authorization. Pursuant to Section 746.8 of the EAR, all international flights conducted by these airlines into Russia (or Belarus) involving EAR-controlled aircraft would have required export or reexport licenses from BIS. (This includes any aircraft manufactured in the United States, or manufactured outside the United States but containing more than 25% U.S.-origin controlled content.) Additionally, any domestic Russian flights by the same airlines on EAR-controlled aircraft reexported to Russia after February 24, 2022 (and Belarus after March 2, 2022) without the required BIS license would be in violation of General Prohibition Ten (“GP10”) of the EAR. GP10 provides that it is prohibited for any person (U.S. or non-U.S.) to “sell, transfer, export, reexport, finance, order, buy, remove, conceal, store, use, loan, dispose of, transport, forward, or otherwise service, in whole or in part, any item subject to the EAR” with knowledge that a violation of the EAR “has occurred, is about to occur, or is intended to occur in connection with the item.”

In a move related to these TDOs, on March 18, 2022 and March 30, 2022, BIS published a list and a revised list, respectively, of commercial and private aircraft—all of which are owned or controlled by, or under charter or lease to, Russia or Russian nationals—that BIS identified as having flown from third countries to Russia in violation of the EAR. In identifying aircraft that have flown into Russia without required licensing, BIS put the public on notice that, absent authorization from BIS, it would be a violation of GP10 for any person anywhere—including within Russia—to take any action with regard to the listed aircraft, including but not limited to refueling, maintenance, repair, or the provision of spare parts or services.

BIS also cautioned that the list of aircraft it identified is not exhaustive and that the EAR’s restrictions apply in any situation in which a person has knowledge that a violation of the EAR has occurred, is about to occur, or is intended to occur in connection with an aircraft or other item that is subject to the EAR, whether or not such aircraft or other items are on the lists of aircraft published by BIS.

Designation of 120 Russian and Belarusian Parties to the Entity List

On April 1, 2022, BIS issued a Final Rule adding 120 entities to the Entity List in order to restrict access by the Russian and Belarusian defense, aerospace, maritime, and other strategic sectors to commodities, software, and technology subject to the EAR. As a result, BIS licensing is required to export, reexport, or transfer (in-country) any items subject to the EAR to the newly listed entities, and applications for such licenses are subject to a policy of denial.

Ninety-five of the entities—24 in Belarus and 71 in Russia—were added to the Entity List as “military end users” for acquiring and attempting to acquire items subject to the EAR in support of Belarus’s and Russia’s militaries. These 95 “military end users” were also designated under Footnote 3 of the Entity List, which makes them subject to the Russia/Belarus Military End User foreign-produced direct product rule. The other 25 entities, all of which are in Russia, were added to the Entity List for acquiring and attempting to acquire items subject to the EAR in support of Russia’s military modernization efforts, but were not identified as “military end users.”

U.S. Congressional Action

On April 7, 2022, both the Senate and the House of Representatives voted to give final approval to two bills intended to further increase economic pressure on Russia. Both bills were signed into law by President Biden later that same day.

H.R. 7108, the “Suspending Normal Trade Relations with Russia and Belarus Act,” passed the Senate 100-0 and the House of Representatives 420-3. It strips Russia and Belarus of what used to be referred to as “most favored nation” trade status, thereby imposing substantially higher rates of duty on many products imported into the United States from those countries. Prior to the enactment of this legislation, the only other countries in the world without permanent normal trade relations with the United States were North Korea and Cuba. H.R. 6968, the “Ending Importation of Russian Oil Act,” passed the Senate 100-0 and the House of Representatives 413-9. It essentially writes into law the ban on imports into the United States of oil, natural gas, and coal imposed by E.O. 14066.

Congress continues to look for other ways to penalize Russia for waging war against Ukraine. Numerous legislative proposals have been put forward by various members of Congress to strengthen U.S. sanctions on Russia. It is impossible to predict which if any of these proposals ultimately will be enacted, but Congress has a long history of enacting sanctions measures, in some cases even over the objections of the Executive branch. Among the more significant sanctions measures currently under consideration in Congress are:

• H.R. 7185, the “Federal Contracting for Peace and Security Act,” which aims to prohibit contracting by the U.S. government with companies that continue to do business in Russia.
• Draft legislation being prepared by the Senate Committee on Finance to deny the U.S. foreign tax credit and other tax benefits for taxes paid by U.S. taxpayers to “countries participating in the invasion of Ukraine.”
• Several bills introduced in the House of Representatives and the Senate to prohibit imports into the United States of Russian uranium and uranium products.

New EU Russian and Belarus Sanctions

On April 8, 2022, the EU adopted additional sanctions measures, the key provisions of which are summarized below.

Additional Asset-Freezing Designations

Council Implementing Regulation (EU) 2022/581 adds 217 individuals and 18 entities to the EU asset-freezing list. The new designations include all 179 members of the so-called “governments” and “parliaments” of the Donetsk and Luhansk regions. Among the newly listed entities are four significant Russian banks—Otkritie FC Bank, Novikombank, Sovcombank, and VTB Bank—together with a number of Russian oligarchs and family members thereof.

Council Regulation (EU) 2022/580 introduces a derogation mechanism allowing EU Member States to authorize the release of certain frozen funds or economic resources belonging to the newly-sanctioned banks or the making available of certain funds or economic resources to those banks where it is necessary for the termination of contracts/operations with these entities by October 9, 2022, with respect to arrangements entered into before April 8, 2022. A similar exception already existed with regards to three Russian banks designated on February 23, 2022 (VEB, Bank Rossiya, and Promsvyazbank).

In addition, the regulation allows EU Member States to grant a license for the sale and transfer by October 9, 2022, of proprietary rights in an entity established in the EU where those proprietary rights are directly or indirectly owned by an EU-designated person or entity. (The proceeds of such sale and transfer remain frozen.)

Additional Sectoral Sanctions

Council Regulation (EU) 2022/576 introduces a broad range of new amendments to Council Regulation (EU) No 833/2014, which is the principal EU measure imposing sectoral export and services sanctions in relation to Russia.

Export Controls and Associated Services Restrictions

The regulation introduces a variety of additional restrictions on the sale, supply, transfer, or export of certain restricted items to persons in Russia or for use in Russia, including the following:

• Additional Annex VII items: The regulation expands Annex VII to Regulation (EU) No 833/2014 to include certain advanced semiconductors and electronic equipment, oil and gas equipment, certain energetic materials, and various other industrial, research, and technology sector items.
• Jet fuel and fuel additives: The regulation introduces an export ban on certain listed jet fuel and fuel additives (subject to certain exemptions). Those items are listed in Annex XX to Regulation (EU) No 833/2014.
• Industrial equipment and materials: The regulation introduces further new export controls on various industrial items, set forth in Annex XXIII to Regulation (EU) No 833/2014. Annex XXIII includes, among other products, various types of flowers; clays, chalks, and other raw materials; and hydrogen, nitrogen, and other gases and chemicals.

The foregoing restrictions are all accompanied by associated prohibitions against providing services relating to the restricted items.

Import Controls

• Russian coal: The Regulation introduces an import ban for certain listed coal and other solid fossil fuels products—set forth in Annex XXII to Regulation (EU) No 833/2014—if they originate in Russia or are exported from Russia. Restrictions also apply to the provision of services relating to products identified in Annex XXII.
• Other products: Additional import bans cover a wide range of miscellaneous products, including cement, rubber products, wood, spirits (including vodka), liquor, and high-end seafood. These items are set forth in Annex XXI to Regulation 833.

Transportation Section Restrictions

• Access to EU ports: The regulation introduces a prohibition on providing access to EU ports to vessels registered under the flag of Russia.
• Russian road transport undertakings: The regulation also introduces a new prohibition against Russian road transport undertakings transporting goods by road within the EU, including in transit.

Financial Sector Sanctions

• Accepting Deposits: The pre-existing restrictions in Regulation (EU) No 833/2014 on accepting deposits from Russian nationals/entities or natural persons residing in Russia are now extended to include a prohibition to provide crypto-asset wallet, account or custody services, if the total value of crypto-assets of the natural or legal person, entity, or body per wallet, account, or custody provider exceeds 10,000 Euro.
• Trust-related services: It is also now prohibited to register, provide a registered office, business, or administrative address as well as management services to, or to serve as a trustee/nominal shareholder or in a similar capacity for, a trust or any similar legal arrangement that has as a trustor or a beneficiary Russian nationals/entities or persons residing in Russia, or entities majority-owned or controlled by the foregoing.

Public Contracting

• The regulation introduces a ban on Russian nationals/entities (or entities majority-owned by the foregoing) on participating in public procurement in EU Member States.
• It is furthermore now prohibited to provide financial and non-financial support to Russian publicly owned or controlled entities under EU, Euratom, and Member State programs.

The foregoing new restrictions are subject to a variety of targeted exemptions, grandparenting provisions, and provisions enabling EU Member State regulators to issue licenses for otherwise-prohibited activity.

New Belarus Sanctions

Council Regulation (EU) 2022/577 amends Regulation (EC) No 765/2006 (the principal EU-Belarus sanctions regulation) by introducing:

• a prohibition for Belarussian road transport undertakings to transport goods by road within the EU, including in transit (similar to the Russian related restriction outlined above); and
• a prohibition to sell, supply, transfer, or export banknotes denominated in any official currency of a Member State to Belarus or to any natural or legal person, entity, or body in Belarus.

Further UK Russia Sanctions Developments

Amendments to the UK’s Russia Sanctions Regulations

On March 30, 2022, The Russia (Sanctions) (EU Exit) (Amendment) (No. 7) Regulations 2022 introduced a number of further changes to the UK's Russia sanctions regulations. The changes are focused mainly on aligning the regulations with the changes made to the designation rules under the Economic Crime Act (see previous alert) and extending certain finance, shipping, and trade restrictions imposed on Crimea to the non-government-held regions of Ukraine in Donetsk and Luhansk. The changes introduced include the following:

• The introduction of the power to designate persons “by description” under both the standard designation procedure and the "urgent" procedure introduced by the Economic Crime Act. This allows persons that form part of a group to be designated by description where the identities of all persons in that group are not known. The power to designate by description for purposes of UK sanctions is provided by the UK Sanctions and Anti-Money Laundering Act 2018 and explained as follows in the Explanatory Notes to that Act: "This power can only be used when the minister cannot identify by name all the persons falling within the description, and the description is sufficiently precise that a reasonable person would know whether any person falls within it."
• The extension of existing restrictions on investment, exports, and imports (and related activities), provision of services, and shipping restrictions relating to Crimea, to apply also to the Donetsk and Luhansk regions of Ukraine.
• The introduction of a specific ban on the provision of "technical assistance relating to aircraft and ships" for the benefit of a designated person.

Further UK Sanctions Designations

On April 6, 2022, in parallel with the U.S., the UK designated eight Russian businessmen as well as Russian banks, Sberbank and the Credit Bank of Moscow, which are now subject to UK asset-freezing restrictions. HM Treasury’s Office of Financial Sanctions Implementation (“OFSI”) has issued a general license with respect to the Credit Bank of Moscow, which runs to May 6, 2022, and permits activities reasonably necessary to effect the winding down of transactions with the bank. No equivalent general license has yet been issued with respect to Sberbank.

The UK separately designated a number of individuals on March 31 and April 8, 2022.

Announcement of Further Forthcoming UK Sanctions Targeting Russia

On April 6, 2022, the UK Foreign Secretary announced UK plans to introduce (in addition to the asset-freezing designations outlined above), restrictions banning:

• all new outward investment to Russia” from the UK;
• the export of “key oil refining equipment and catalysts” to Russia; and
• the import of “iron and steel products” from Russia to the UK.

These restrictions have not yet been implemented and legislation bringing such measures into effect is expected to follow in due course.

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We are closely monitoring developments concerning the U.S., UK, and EU sanctions against Russia, and will issue further updates in the event of material developments. In the meantime, we would be happy to address any questions you may have.

Covington’s International Trade Controls team—which includes lawyers in the firm’s offices in the United States, London, Brussels, and Frankfurt—regularly advises clients across business sectors, and would be well-placed to provide support in connection with the emerging Russia sanctions and export controls.

Our trade controls lawyers also work closely with Covington's Global Public Policy team which consists of over 120 former diplomats and policymakers in the United States, Europe, the Middle East, Latin America, Africa, and Asia. Many of the members of the Public Policy team have had substantial government experience in sanctions and export controls matters, and regularly advise our clients on emerging sanctions policy matters and related engagements with government stakeholders.

If you have any questions concerning the material discussed in this client alert, please contact the members of our International Trade Controls practice group.