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Russia, Ukraine: Update as of October 3

The Bass, Berry & Sims international trade team is actively monitoring the situation in Russia and Ukraine and providing real-time advice to clients on managing the situation. This post summarizes new U.S. sanctions and export restrictions as of Monday, October 3. This post supplements our previous summaries, which are available by following the links at the end of this blog post.

Commerce Adds Iranian Aircraft to List of Aircraft Operated in Violation of the EAR

On September 19, the Commerce Department’s Bureau of Industry and Security (BIS) updated its growing list of aircraft that have flown into Russia and/or Belarus in apparent violation of the Export Administration Regulations (EAR). As discussed previously, these aircraft are essentially off limits for any person to service (or operate), given that nearly any dealing with respect to such an aircraft would violate General Prohibition 10 of the EAR.

Notably, these aircraft are Iranian-owned and -operated. BIS determined that these planes had flown into Russia carrying “electronic items” purportedly to assist with the manufacture or repair of military items. On September 26, BIS added another Iranian aircraft to the list – along with two more Russian-owned or –operated aircraft.

The current list, which is available here, is comprised of nearly 200 aircraft.

BIS Expands and Tightens U.S. Export Controls on Russia and Belarus

On September 15, BIS issued a final rule aimed at honing U.S. export controls and better aligning them with controls implemented by U.S. allies. Specific actions include the following:

  • Broadened restrictions on exports of (1) lower-level items potentially useful for Russian chemical and biological weapons production and (2) items needed in connection with advanced manufacturing across multiple industries.
  • Expanded controls on goods and technology related to quantum computing. (See below for corresponding action taken by the U.S. Departments of State and Treasury).
  • Extension of “military end user” and “military-intelligence end user” controls.
  • Addition of Belarus to the industry sector sanctions previously applicable only to Russia.
  • Revision of existing controls on exports of luxury goods to Russia and Belarus.

On September 30, BIS announced additional restrictions in response to Russia’s attempt to annex sovereign Ukrainian territory. Among other things, these actions involved adding to the Entity List 57 entities located in Russia and in Crimea. According to BIS, these entities have sought to obtain U.S.-origin items in support of Russia’s military and/or been involved in helping develop Russia’s quantum computing capabilities. Most of these entities were also made subject to the EAR’s military end user and military-intelligence end-user controls.

Commerce also emphasized, and issued a new Frequently Asked Question about, the fact that parties from outside the United States are subject to U.S. export controls whenever dealing with goods, software, and technology subject to the EAR.

State Department Sanctions Russian Defense Entities, Technology Firms, Financial Infrastructure, Intelligence Agency, and Human Rights Abusers

On September 15, the U.S. Department of State took actions against a broad swath of entities and individuals involved in Russia’s defense, intelligence, technology, and financial industries. In particular, State designated a high-level Russian official; 22 Russian-installed proxy officials, some of whom were allegedly involved in theft of Ukrainian grain; and 31 defense, technology, and electronics entities. These parties are identified on the List of Specially Designated Nationals and Blocked Persons maintained by the U.S. Treasury Department.

Among the designated entities/individuals are:

A Russian Government Official and Grain Thieves

  • Maxim Stanislavovich Oreshkin, an economic advisor to Vladimir Putin.
  • Yevhen Vitaliiovych Balytskyi, Russian-appointed head of the Zaporizhzhia military-civilian administration and alleged overseer of theft of Ukrainian grain from the Zaporizhzhia Region.
  • Andriy Leonidovich Siguta, Russian-appointed head of the Melitopol District military-civilian administration and alleged overseer of theft of Ukrainian grain from the Melitopol Region.
  • Anton Viktorovich Koltsov, Russian-appointed head of the Zaporizhzhia Region military-civilian government and alleged overseer of theft of Ukrainian grain.
  • Oleksandr Fedorovych Saulenko, Russian-appointed mayor of Berdyansk and allegedly involved in theft of Ukrainian grain.
  • Valery Mykhailovych Pakhynts, Russian-appointed head of the Starobilsk District of the so-called Luhansk People’s Republic and alleged overseer of theft of Ukrainian grain.

Defense, Intelligence, and Advanced Technology Sector

  • The Main Intelligence Directorate (GRU), a military intelligence agency of the General Staff of the Russian Armed Forces.
  • Joint Stock Company Rossiyskiye Kosmicheskiye Sistemy (Russian Space Systems JSC), a Russian space systems manufacturer.
  • Rzhanov Institute of Semiconductor Physics Siberian Branch of Russian Academy of Sciences, a Russian institute focused on semiconductors and microsensoric technologies.
  • JSC Moscow Center of SPARC Technologies, a Russian microprocessor and supercomputer developer.
  • International Center for Quantum Optics and Quantum Technologies Limited Liability Company (Russian Quantum Center), a Russian technology company focused on developing quantum technologies.

The full list of the State Department’s designations can be found here.

On September 30, the Department of State imposed visa restrictions on over 900 individuals, including members of the Russian and Belarus military. State also designated Ochur-Suge Mongush for gross violation of human rights against a Ukrainian prisoner of war. Under the designation, Mongush and his immediate family members are prohibited from entering the United States.

Treasury Targets Additional Entities Facilitating Russia’s Continued Aggression

On September 30, the Department of Treasury’s Office of Foreign Assets Control (OFAC) announced the designation of hundreds of individuals deemed to be supporting Russia’s attempt to annex a portion of Ukraine. OFAC emphasized that the designations included more than a dozen key individuals involved in Russia’s military-industrial complex, three leaders of Russian financial infrastructure, and nearly 300 members of Russia’s legislature. Two third-party suppliers, including one in China, were also designated.

Earlier in the month, on September 15, OFAC announced a raft of new actions. First, OFAC announced sanctions designating 22 individuals and two entities as well as Task Force Rusich, a Russian neo-Nazi paramilitary group.

Among the designated entities/individuals are:

  • Vladimir Valerievich Komlev, chairman of the management board and the chief executive officer of NSPK, which the Central Bank of Russia owns. (The Central Bank of Russia was designated by OFAC in February – see our February 28 blog post here.) Komlev was designated pursuant to Executive Order (EO) 14024.
  • Viktor Olegovich Zhidkov, chairman of the management and executive board of Non-Bank Credit Institution Joint Stock Company National Settlement Depository (NSD), Russia’s central securities depository. Zhidkov was designated pursuant to EO 14024.
  • Andrei Gennadyevich Melnikov, general director of Russia’s state-owned Deposit Insurance Agency. Melnikov was previously designated in 2017 pursuant to EO 13660. Now, Melnikov is being designated pursuant to EO 14024.
  • Task Force Rusich, a Russian neo-Nazi Militia fighting in Ukraine, and two of the group’s leaders.

OFAC also designated several individuals operating as Russian proxies in the Crimean region of Ukraine. These individuals, who were designated pursuant to EO 13685 issued by President Obama in 2014 in connection with Russia’s invasion of Crimea, include the following:

  • Sergei Viktorovich Bulgakov, the purported “deputy prosecutor and senior counselor of justice” for the so-called “Republic of Crimea.”
  • Andrey Nikolayevich Dolgopolov, the purported chairman of the Kyiv District Court in Simferopol in the so-called “Republic of Crimea.”
  • Mickhail Nikolayevich Belousov, a judge in the Kyiv District Court in Simferopol in the so-called “Republic of Crimea.”
  • Viktor Anatolyevich Mozhelyanskiy, a judge in the Kyiv District Court in Simferopol in the so-called “Republic of Crimea.”
  • Mariya Gennadevna Ermakova, a “judge” in the Dzhankoi District Court of the so-called “Republic of Crimea.”

The full list of designated parties, and a brief description of each, can be found in the September 15 announcement.

Cutting Off Russian Access to Quantum Computing Services

Also on September 15, OFAC issued a determination prohibiting “the exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of quantum computing services to any person located in Russia.” The determination goes into effect on October 15.

Additionally, OFAC issued another determination identifying the Russian quantum computing sector pursuant to EO 14024. The determination authorizes OFAC to impose sanctions on any individual or entities determined to be operating, or that previously operated, in Russia’s quantum computing sector. The determination took effect on September 15.

OFAC Issues New General Licenses, Frequently Asked Questions

While OFAC continues to expand restrictions related to Russia and Russian parties, the agency continues to issue or extend general licenses (GLs), and issue FAQs to help explain various restrictions and licenses. Among other actions, OFAC has recently issued the following:

  • General License 13B – this GL, issued on September 8, authorizes certain otherwise prohibited transactions with Russia’s Central Bank, National Wealth Fund, and Ministry of Finance. The GL replaces General License 13A, and expires on December 7, 2022.
  • General License 51 – this GL, issued on September 15, authorizes the wind down of transactions involving the Akvarius group of companies. (The Akvarius group of companies was designated by OFAC on September 15.) The GL expires on October 15, 2022.
  • General License 52 – this GL, which like GL 51 was issued on September 15, authorizes news reporting organizations and journalists to engage in certain otherwise prohibited transactions with Russian and other designated parties. There is no expiration date for this GL.
  • Frequently Asked Questions Nos 1033, 1034, 1059, and 1061, each issued on September 15, provide updated guidance on action taken by OFAC in May 2022 to restrict the provision to Russian parties of certain accounting, trust and corporate formation, and management consulting services.
  • Frequently Asked Questions Nos 1080, 1081, and 1082, each issued on September 15, pertain to financial transactions with certain restricted Russian parties.
  • Frequently Asked Questions Nos 1083, 1084, 1085, and 1086, each issued on September 15, which pertain to the newly imposed restrictions related to quantum computing.
  • Frequently Asked Question 1091, issued on September 30, provides further guidance on OFAC’s various restrictions on parties within and outside Russia providing support for Russia’s “sham referenda, purported annexation, and continued occupation of certain regions of Ukraine.”

Treasury Targets Iranian Drone Makers

On September 8, OFAC designated four Iranian companies and one Iranian individual for their respective roles in supplying Russia with Unmanned Aerial Vehicles (UAVs), as follows:

  • Safiran Airport Services (Safiran), a Tehran-based “air transportation service provider” that transferred Iranian UAVs to Russia.
  • Paravar Pars Company, an Iranian UAV producer involved in the development and production of the Iranian Shahed-171 UAV.
  • Design and Manufacturing of Aircraft Engines (DAMA), an Iranian UAV producer involved in the development and production of the Iranian Shahed-171 UAV program.
  • Baharestan Kish Company, an Iranian defense company involved in manufacturing UAVs.
  • Rehmatollah Heidari, managing director of Baharestan Kish Company and member on its board.

If you have any questions or need assistance related to this evolving situation or other international trade matters, please contact the authors. To read our previous coverage concerning the Russia-Ukraine situation, click the links below:

The authors would like to thank our law clerk Stephen Finan for his contributions to this article.

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