OFAC Announces Hundreds Of New SDN Designations Targeting Russia’s Duma, Defense Sector And Bank Officials; Issues New General Licenses – International Law

On March 24, 2022, the U.S. Department of the Treasury’s
Office of Foreign Assets Control (“OFAC”) updated the Specially Designated Nationals and
Blocked Persons List (“SDN List”) with hundreds of new
designations pursuant to Executive Order 14024. The new SDNs
include:

• The Russian Federation (“Russia”) State Duma (lower
  house of the Russian legislature) as an entity;




• More than three hundred members of the Russian State Duma in
  their individual capacities;




• Seventeen (17) members of the board of PJSC Sovcombank
  (previously designated as a SDN);




• Numerous Russian elites, most notably Gennady Timchenko
  along with two entities he owns (OOO Volga Group and OOO Transoil)
  and his yacht;




• The CEO of PJSC Sberbank of Russia (“Sberbank”),
  Herman Oskarovich Gref (though Sberbank itself remains designated
  on the Sectoral Sanctions Identifications List which does not apply
  full blocking sanctions); and




• Forty-eight (48) entities involved in the production of
  weapons, aircraft, and other equipment used in Russia’s
  invasion of Ukraine.

In light of these designations, these individualsa’ and
entities’ property and interests in property in the U.S. or in
the possession or control of U.S. persons are now blocked and must
be reported to OFAC. All transactions within the U.S. or involving
U.S. persons relating to the blocked persons or their property or
interests in property are now prohibited. Additionally, these
blocking sanctions apply to any entities owned 50 percent or more
by one or more of the newly designated SDNs (or other SDNs),
directly or indirectly, pursuant to the OFAC 50 Percent Rule.

The forty-eight (48) defense entities sanctioned on March 24,
2022 already met the definition of “military end users”
(“MEUs”) under the Export Administration Regulations
(“EAR”), including the modified EAR MEU rules for Russia
prohibiting the export, reexport, or in-country transfer to such
MEUs of any items “subject to the EAR.” (For more on
those rules, see our previous posts here and here.) Now, with these new OFAC sanctions
designations, virtually any action taken by a U.S. person with
respect to these blocked Russian defense entities or their property
or interests in property is prohibited.

Also on March 24, 2022, OFAC updated two (2) Russia-related
General Licenses and released two (2) new General Licenses-one (1)
related to the Russian Harmful Foreign Activities Sanctions
Regulations (“RuHSR”) and one related to Ukraine-related
sanctions authorities:

• General License 6A: Supersedes General License
  6 related to transactions involving agricultural commodities,
  medicine, medical devices, replacement parts and components, or
  software updates, and the COVID-19 pandemic. Specifically, General
  License 6A now expands the license scope to include clinical trials
  and other medical research activities that were in effect prior to
  March 24, 2022 that would be prohibited under the RuHSR, reaffirms
  its inapplicability to the opening or maintaining of correspondent
  accounts at U.S. banks for entities subject to EO 14024, and
  clarifies that it does not permit any debit to an account on the
  books of a U.S. financial institution of the Central Bank of
  Russia, the National Wealth Fund of Russia, or the Ministry of
  Finance of Russia, nor does it permit any transaction prohibited by
  EOs 14066 or 14068, including the importation of certain products
  of Russian origin.




• General License 17A: Supersedes General License
  17 by extending authorization to import into the U.S.
  Russian-origin fish, seafood, and preparations thereof pursuant to
  written contracts entered into prior to March 11, 2022. This
  authorization will expire after 12:01 a.m. eastern daylight time on
  June 23, 2022. Such importation is prohibited
  under the RuHSR. Notably, this extension does not apply to
  the importation into the U.S. of Russian-origin alcoholic beverages
  or non-industrial diamonds pursuant to pre-March 11 contracts.
  Those authorizations expire after 12:01 a.m. eastern daylight time
  on March 25, 2022. To the extent contracts or
  orders were finalized but will not qualify for the General License,
  OFAC indicated in FAQ 1024 that selling or re-directing those
  shipments to non-U.S. destinations is not prohibited by EO
  14068.




• General License 20: Authorizes U.S. persons to
  engage in transactions ordinarily incident and necessary to the
  official business of third-country diplomatic or consular missions
  in Russia that are prohibited by the RuHSR.




• General License 25: Authorizes certain
  journalistic activities in the Crimea, Donetsk People’s
  Republic (“DNR”) and Luhansk People’s Republic
  (“LNR”) regions of Ukraine that would otherwise be
  prohibited under either EO 13685 of December 19, 2014 or EO 14065
  of February 21, 2022.

Timed to align with the above actions, the President met with
both North Atlantic Treaty Organization (“NATO”) and G7
leaders on March 24, 2022 to further discuss ways to support
Ukraine, bolster the NATO alliance, and promote global security. In
addition to an array of commitments across many topics, the G7
leaders resolved to “coordinate responses related
to evasive measures [i.e., attempts to evade sanctions],
including regarding gold transactions by the Central Bank of
Russia.” On this point, OFAC released a new FAQ 1029 outlining the existing gold-related
sanctions designation authorities under EO 14024 and reminding U.S.
persons and financial institutions active in the gold market of the
possibility of sanctions prohibitions applying to gold
transactions. Additionally, given food security concerns arising
from the Russian invasion of Ukraine, the G7 leaders stated they
“will avoid export bans and other trade-restrictive measures .
. .” that would curtail the global food supply chain.

Finally, on March 18 and March 15, respectively, OFAC
(i) issued Ukraine-related General License 24
authorizing the provision or receipt of civil maritime services
performed by individuals ordinarily resident in the so-called DNR
and LNR regions of Ukraine (the “Covered Regions”) when
those services are performed outside the Covered Regions and not on
behalf of an entity located in, or organized under the laws of, the
Covered Regions; and (ii) added several Russian and Belarusian
individuals to the SDN List under human rights or
anti-corruption-related authorities, including the wife of the
President of Belarus, Alyaksandr Lukashenka.

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