Marking the one-year anniversary of Russia’s invasion of Ukraine, the US and the G7 announced significant new restrictions on Russia intended to further weaken Russia’s ability to obtain resources needed to continue the war in Ukraine. This new round of actions included a new authority targeting the metals and mining sector of Russia’s economy for sanctions; new blocking restrictions targeting various Russian individuals and entities; expanded export controls applicable to, inter alia, a host of new EAR99 items; and increased tariffs on various Russian-origin goods, including aluminum and other metals. 

Below, we highlight key takeaways from these measures.

A New Sanctions Authority and Several New Designations

Determination targeting the metals and mining sector of Russia’s economy

First in the line of actions announced by US authorities was a new determination by the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) pursuant to Executive Order 14024, identifying Russia’s metal and mining sector as subject to sanctions. As a result of the determination, persons operating in this sector can now be sanctioned upon a determination by US authorities. Newly-issued FAQ 1115 defines the metals and mining sector of Russia’s economy as “any act, process, or industry of extracting, at the surface or underground, ores, coal, precious stones, or any other minerals or geological materials in the Russian Federation, or any act of procuring, processing, manufacturing, or refining such geological materials, or transporting them to, from, or within the Russian Federation.” In conjunction with the determination, OFAC also designated four entities for operating in the sector.

Publication of New FAQs

OFAC also issued five new FAQs intended to clarify the impact and scope of, among other issues, the new determination. These new FAQs include:

• FAQ 1114, summarizing the actions announced as to the metals and mining sector and FAQ 1115 defining that sector.
• FAQ 1116, explaining that “[a] sector determination pursuant to E.O. 14024 exposes persons that operate or have operated in an identified sector to sanctions risk; however, a sector determination does not automatically impose sanctions on all persons who operate or have operated in the sector.”
• FAQ 1117, addressing whether the provision of goods or services to entities operating in the metals and mining sector of Russia’s economy risk sanctions themselves for operating in that sector and providing that non-US persons “may . . . be exposed to sanctions for activities with persons” in such sectors. The FAQ further provides that non-US persons would not be exposed to sanctions if the provision of goods or services is solely for certain safety, health and environmental reasons, or if they are engaged in transactions that would not require a specific license if engaged in by a US person.
• FAQ 1118, explaining that Russia-related General License (GL) 13D does not authorize transactions that involve the payment of an “exit tax” levied by the Russian government from companies divesting assets from Russia and that involve Russia’s Central Bank or Ministry of Finance.

New Designations by State and OFAC

In addition to the issuance of the new determination and FAQs, OFAC and the US Department of State issued nearly 200 new designations. Specifically, OFAC designated 22 individuals and 83 entities for, inter alia, operating in Russia’s financial services, management consulting, technology, electronics, aerospace, and defense and related materiel sectors. OFAC also designated numerous persons for acting for or on behalf of the Russian Federation government and under Belarus-related Executive Order 14038 for having acted or purported to act for or on behalf of, already-sanctioned entities. Among those targeted by OFAC were numerous large Russian financial institutions, adding to the growing list of entities blocked in Russia’s financial services sector; Russian officials and “proxy authorities”; and other persons determined to be “responsible for backfilling Russian stocks of sanctioned items or enabling Russian sanctions evasion.”¹

The US Department of State simultaneously announced the designation of more than 60 individuals and entities determined to be “complicit in the administration of Russia’s government-wide operations and policies of aggression toward Ukraine and in the illegitimate administration of occupied Ukrainian territories for the benefit of the Russian Federation.”²  Persons targeted by the State Department included government ministers, governors and high-level officials in Russia; individuals and entities deemed to be “operating in parts of Ukraine occupied by Russia, facilitating grain theft, and governing on behalf of Russia”; individuals involved in expanding Russia’s future energy production and export capacity; persons operating in Russia’s “advanced technology sector,” including manufacturers and developers of hardware and software supporting Russia’s intelligence collection capabilities; and various entities supporting Russia’s nuclear weapons and civil nuclear activities.

New and Updated General Licenses

Narrowing the scope of these designations, OFAC issued two new general licenses, GLs 60 and 61, and amended existing GL 8F. These GLs authorize otherwise prohibited activity without need for further application to OFAC as follows:

• GL 60 authorizes, subject to certain conditions, the wind down and rejection of transactions involving a subset of the Russian financial institutions designated in this latest announcement until May 25, 2023.
• GL 61 authorizes, subject to certain conditions, the wind down of certain securities and derivatives transactions involving a subset of the newly-designated financial institutions until May 25, 2023.
• GL 8F was updated to include within the scope of its authorization the processing of energy-related transactions involving certain of the newly-designated financial institutions.

New Export Control Restrictions from the Department of Commerce

In conjunction with OFAC and the State Department, the Department of Commerce also issued new measures targeting Russia. Key new measures include:

• The addition of new entities to the Entity List and the modification of certain existing entries;
• The imposition of controls on certain EAR99 items identified in a new supplement to the Export Administration Regulations (“EAR”) that are destined for Iran intended to target Iran’s supply of unmanned aerial vehicles (“UAVs”) to Russia; and
• The expansion of Russian and Belarusian Industry Sector Sanctions and the “Luxury Goods” Sanctions.

Entity list additions and updates

The Department of Commerce issued two new rules adding the names of new entities to the Entity List. In the first rule, the Department of Commerce announced the addition of 76 entities to the Entity List under the destination of Russia and updated four existing entries under that destination. The majority of the entities added were identified as military end users for purposes of the Russia/Belarus-Military End User Foreign Direct Product (FDP) rule in 15 CFR § 734.9(g). 

In the second rule, Commerce added 10 entities under 13 entries to the Entity List under the destinations of Canada (2), China (5), France (1), Luxembourg (1), Netherlands (1), and Russia (3) upon a finding that these entities had assisted the Russian military. These entities are also identified as military end users for purposes of the Russia/Belarus-Military End User FDP rule. 

Restrictions on the export of certain UAV-Related EAR99 items to Iran

Commerce also issued additional restrictions with respect to the export, re-export, and transfer to or in Iran of certain EAR99 items identified in a new supplement (Supplement No. 7) to part 746 of the EAR.  Commerce explained that Iran has been supplying Iranian UAVs to Russia to enhance Russia’s defense industrial base in the country’s ongoing military assault in Ukraine and that the imposition of these additional controls were intended to “restrict Iran’s ability to obtain ‘items’ required to manufacture UAVs.” Among items included in the supplement are various types of aircraft engines, processing units, certain switching and routing apparatus, radio navigational aid apparatus, capacitors, processors and controllers, memories, amplifiers and other electronic integrated circuits. 

The rule also expands the scope of foreign-produced items that are subject to the EAR by adding a new FDP rule specific to Iran with respect to items falling in Categories 3, 4, 5 or 7 of the Commerce Control List (“CCL”) and the EAR99 items identified in new Supplement No. 7. The new rule also revises the EAR’s existing Russia/Belarus FDP rule to include the newly-added EAR99 items within its scope.

Finally, the new rule exempts countries identified in Supplement No. 3 to part 746 (Countries Excluded from Certain License Requirements, pursuant to § 746.8), from certain of the new controls on foreign-produced items described in new Supplement No. 7 to part 746, as described in 15 CFR § 746.7(a)(1)(iv) and (v).

The expansion of Russian and Belarusian Industry Sector Sanctions and the “Luxury Goods” Sanctions

Commerce also published a new rule expanding the Russian Industry Sector Sanctions and the “Luxury Goods” Sanctions by adding new items subject to each respective restrictions. Specifically, the Commerce Department added 322 new industrial items to Supplement No. 4, including various electronics, industrial machinery and equipment. The scope of items listed in Supplement No. 6 was also expanded via various clarifying edits and additions to the scope of materials identified in the supplement. Finally, Supplement No. 5, identifying various luxury goods controlled for export, re-export or transfer to or within Russia and Belarus, was expanded via the addition of 276 items, including various electrical machinery, sound recorders and reproducers, television image and sound recorders and reproducers, and items relating to nuclear reactors, boilers, machinery and mechanical appliances to the supplement.

The rule also made numerous clarifying changes to these sections of the EAR. 

Heightened Tariffs

In addition to the export and sanctions restrictions outlined above, the US also raised tariffs on certain Russian products, including metals, minerals and chemical products, imported to the United States. According to the White House, the new measures will result in “increased tariffs on more than 100 Russian metals, minerals, and chemical products worth approximately $2.8 billion to Russia. It will also significantly increase costs for aluminum that was smelted or cast in Russia to enter the U.S. market.” Such increased costs come as a result of a newly-announced 200% tariff on aluminum and aluminum derivates produced in Russia starting on March 10, 2023³. Additional information on the tariff measures announced is available here.

1. https://www.whitehouse.gov/briefing-room/statements-releases/2023/02/24/fact-sheet-on-one-year-anniversary-of-russias-invasion-of-ukraine-biden-administration-announces-actions-to-support-ukraine-and-hold-russia-accountable/.↩
2. https://www.state.gov/the-united-states-imposes-additional-sweeping-costs-on-russia/.↩
3. https://www.whitehouse.gov/briefing-room/presidential-actions/2023/02/24/a-proclamation-on-adjusting-imports-of-aluminum-into-the-united-states-4/↩