United States and EU Expand Russian Sanctions and Export Controls
In its continuing ratcheting of sanctions against Russia, the United States and the European Union have announced new sanctions and export controls to target additional industries and government officials. In a new front, the US and EU included a ban on accounting and business consulting services. The new US restrictions extend to broad export controls and sanctions focused on Russian banking executives, a weapons manufacturer and state-owned media.
The US expansion on export controls covers a broad range of commercial and industrial operations, including wood products and construction machinery. The new export controls are built around strict licensing controls bound for Russia and include approximately 200 new product categories to the list of items requiring a license for export to Russia. Many of these new export controls match existing measures already adopted by the EU. These controls extend and range from air conditioning equipment to elevator parts, to ironing machines and to machine tools for finishing metal.
The US and EU restrictions have had a direct impact on Russia’s tank manufacturing — two Russian plants, the Uralvagonzavod Corporation and the Chelyabinsk Tractor Plant, to suspend operations. Other Russian manufacturing companies have slowed operations because of the shortage of components. The US and EU controls originally were focused on microchips and electronics and is now expanding to industrial products. Russia has had difficulties in sourcing this equipment from other sources.
The US also adopted new sanctions restrictions including designations against Russia state-controlled media entities and banks. OFAC designated individuals and entities critical to Russia’s ability to wage war against Ukraine, including board members of important banks, Sberbank and Gazprombank, the Moscow Industrial Bank and 10 of its subsidiaries. OFAC designated eight executives at Sberbank and 27 officials at Gazprombank and executives at Moscow Industrial Bank.
OFAC did not ban or freeze all assets of Gazprombank. Two Russian banks, Sberbank and VTB, are subject to total bans.
OFAC issued two new directives banning the provision of certain management consulting and accounting services to Russia. The prohibition did not extend to legal services but noted that such a prohibition could occur in the future.
OFAC issued three new General Licenses and updated General License 33, authorizing certain transactions with Channel One Russia, NTV Broadcasting Company and Television Station Russia-1 through June 7, 2022.
General License 34 authorizes the wind-down of accounting, trust and corporate formation, or management consulting services to Russia until July 7, 2022.
General License 35 authorizes credit rating and auditing services to Russia until August 20, 2022.
Finally, the US and EU recommitted to phase out and eventually ban Russian oil imports “in a timely and orderly fashion.”