On March 2, 2021, the US Government imposed a series of new measures against Russian Government officials and entities in response to the alleged poisoning and subsequent imprisonment of Russian opposition politician Aleksey Navalny.  Specifically, the US State Department (State) imposed a number of financial sanctions and export restrictions on Russia; the Office of Foreign Assets Control (OFAC) within the US Treasury Department designated seven Russian officials to the List of Specially Designated Nationals and Blocked Persons (the “SDN List”); the Bureau of Industry and Security (BIS) within the US Commerce Department added 14 entities to the Entity List. 

Background

According to the Treasury Department’s press release, Navalny was found poisoned on August 24, 2020 with a substance that was later identified as a Novichok nerve agent.  It is believed that Russia is the only known country to have used Novichok and the nerve agent is only available to Russian state authorities.  Therefore, while Russia has denied any involvement, the US, EU, and UK governments attributed the poisoning attack to the Russian Federal Security Service (FSB), Russia’s internal intelligence service.  In February 2021, Navalny was convicted and sentenced to more than two years in prison.  In response to the poisoning and subsequent imprisonment of Navalny, the US Government has implemented the following sanctions.   

State Department’s Sanctions

1. Expansion of Existing Sanctions Imposed in 2018

On March 1, 2021, State determined pursuant to the US Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (“CBW Act”) that the Russian Government had used a chemical weapon against its own nationals in violation of international law.  As a result, State announced the expansion of existing sanctions targeting Russia under the CBW Act.  The CBW Act sanctions were first imposed in August 2018 in response to the Russian Government’s alleged poisoning of Sergei Skripal, a former Russian military intelligence officer who acted as a double agent for the UK’s intelligence services.  In August 2019, State imposed a second round of CBW Act sanctions following the determination that the Russian Government had failed to provide reliable assurances that it would not engage in future chemical weapons attacks.  Please see here and here for our prior blog posts regarding the Skripal-related rounds of CBW Act sanctions.  The expanded sanctions include the following:  

  • Termination of Foreign Assistance: State announced the termination of foreign assistance to Russia (except for urgent humanitarian assistance and food or other agricultural commodities).
  • Termination of Arms Sales: State announced the termination of (a) sales to Russia of any defense articles or defense services and (b) authorizations for the export of items (goods, software, technology) on the US Munitions List to Russia. (See subsection 4 below).  
  • Termination of Arms Sales Financing: All foreign military financing for Russia is terminated.
  • Denial of US Government Credit or Other Financial Assistance: Any credit, credit guarantees, or other financial assistance by the US Government is denied.
  • Prohibition on Exports of National Security-Sensitive Goods and Technology: All exports and reexports to Russia of goods and technology subject to National Security (“NS”) controls on the Commerce Control List (CCL) in the Export Administration Regulations (EAR) are prohibited. 

The CBW Act provides the President with limited authority to waive certain restrictions when determined to be in the national security interest of the United States.  The President has used this waiver authority to allow continued authorization for the following transactions:

  • Foreign assistance to Russia;
  • Exports to Russia under the following EAR license exceptions: Temporary Imports, Exports, and Reexports (TMP); Governments, International Organizations, and International Inspections under the Chemical Weapons Convention (GOV); Baggage (BAG); Aircraft and Vessels (AVS); and Encryption Commodities and Software (ENC);
  • Exports needed to ensure the safe operation of commercial passenger aviation;
  • Exports to wholly owned subsidiaries of US and other foreign companies in Russia;
  • Deemed export licenses for Russian nationals working in the United States; and
  • Exports in support of government space cooperation.

License applications for transactions covered by these waivers will continue to be reviewed on a case-by-case basis.  Several existing export-related waivers, however, will be removed. Specifically,

  • The waivers for EAR license exceptions Service and Replacement of Parts and Equipment (RPL), Technology and Software Unrestricted (TSU), and Additional Permissive Reexports (APR) will be removed.  Exporters can no longer export or reexport NS-controlled items subject to the EAR to Russia under these license exceptions.
  • The waiver for exports and reexports of NS-controlled items subject to the EAR to commercial end-users in Russia for civil end-uses will be removed. Where an EAR license exception is not applicable, license applications for such exports will now be reviewed under a “presumption of denial” policy.   
  • The waivers for exports of US Munitions List items and NS-controlled items in support of commercial
    space flight activities in Russia will be removed following a six-month wind-down period.  After that, license applications for such exports will be subject to “a presumption of denial” policy.

The unwaived sanctions will take effect following a 15-day Congressional notification period and will remain in place for at least 12 months and until the Executive Branch determines and certifies to Congress that the Russian Government has met various conditions related to its obligations under the Chemical Weapons Convention.  If the Russian Government fails to meet these conditions, the CBW Act requires the imposition of a second round of sanctions, which was the case with the Skripal incident.

2. EO 13382 Designations

State also sanctioned the following seven entities and individuals under Executive Order (“EO”) 13382 for contributing to the proliferation of weapons of mass destruction or their means of delivery.  Below please find a chart summarizing these designations.

Entity/Individual NameReason for DesignationPrior US Sanctions
Federal Security Service (aka FSB)Designated for its role in the Navalny poisoning and for possessing a Novichok chemical weaponOn the SDN List under US sanctions targeting malicious cyber-enabled activities since December 29, 2016 (the Federal Register Notice (“FR Notice”)); On the Entity List since January 4, 2017 (FR Notice)
State Scientific Research Institute of Organic Chemistry and Technology (“GosNIIOKhT”)Has a longstanding role in researching and developing chemical weapons; developed Russia’s Novichok chemical weaponsOn the Entity List since August 27, 2020 (FR Notice)
The 33rd Scientific Research and Testing Institute (“33rd TsNIII”)Subordinate to the Russian Federation Armed Forces Chemical, Biological, and Radiological Defense troops; stewards Russia’s Shikhany Chemical Proving Ground, where Russia conducts chemical weapons-related testingOn the Entity List since August 27, 2020 (FR Notice)
The 27th Scientific Center of the Russian Ministry of Defense (“27th Scientific Center”)Subordinate to the Russian Federation Armed Forces Chemical, Biological, and Radiological Defense troops; has been involved with Russian chemical weapons research and testing activitiesConcurrently added to the Entity List on March 3, 2021 (FR Notice)
The Main Intelligence Directorate ( GRU)Has engaged in activities that materially contribute to the possession, transport, and use of Novichok by RussiaOn the SDN List under US sanctions targeting malicious cyber-enabled activities since December 29, 2017 (FR Notice) On the Entity List since January 4, 2017 (FR Notice)
Alexander Yevgeniyevich MishkinGRU officer, conducted a poisoning using a Novichok nerve agent in the United Kingdom in 2018On the SDN List under US sanctions targeting Russia since December 27, 2018 (FR Notice)
Anatoliy Vladimirovich ChepigaGRU officer, conducted a poisoning using a Novichok nerve agent in the United Kingdom in 2018On the SDN List under US sanctions targeting Russia since December 27, 2018 (FR Notice)

For the parties that were not already SDNs, the result of these designations is that “US Persons” (i.e., (i) US citizens and permanent residents (i.e., Green Card holders), wherever located or employed; (ii) entities organized under the laws of the United States and their non-US branches; and (iii) any individual or entity physically located in the United States, even temporarily) are prohibited from directly or indirectly dealing with or facilitating virtually any transactions with these SDNs as well as any entities 50% or more owned by them. Any property and interests in property of such SDNs must also be blocked if they come within the jurisdiction of the United States or the possession or control of a US Person.

3. Addition to the Countering America’s Adversaries through Sanctions Act (CAATSA) Section 231 List

Furthermore, the State Department added the following six Russian research institutes to the Countering America’s Adversaries through Sanctions Act (CAATSA) Section 231 List of persons identified as part of, or operating for or on behalf of, the Russian defense or intelligence sectors. 

  • 27th Scientific Center;
  • 48 Central Scientific Research Institute Sergiev Posad (aka 48 TsNII Sergiev Posad; 48th Central Research Institute, Sergiev Posad):
  • 48 Central Scientific Research Institute Kirov (aka 48th Central Research Institute Kirov; aka 48th TsNII);
  • 48 Central Scientific Research Institute Yekaterinburg (aka 48th TsNII Yekaterinburg);
  • GoSNIIOKhT; and
  • 33rd TsNIII.

US and non-US persons who knowingly engage in a significant transaction with these parties could face secondary sanctions risks under CAATSA Section 235.

4. Amending ITAR to Implement Arms Embargo Against Russia

Finally, on March 1, 2021, State’s Directorate of Defense Trade Controls (DDTC) published a notice announcing its intent to amend Section 126.1 of the International Traffic In Arms Regulations (“ITAR”) to include Russia in the list of countries subject to a policy of denial for exports of defense articles and defense services, with certain exceptions and subject to a Congressional notification requirement.  The ITAR amendment would be a formalization of DDTC’s Russia policy announced in August 2014 that the DDTC would deny pending applications for export or re-export of any ITAR-controlled high technology defense articles or services to Russia or occupied Crimea that contribute to Russia’s military capabilities.  Furthermore, Russia’s inclusion in Section 126.1 means that ITAR violations that involve Russia or Russian nationals could trigger a mandatory reporting requirement to DDTC.

Separately, pursuant to the note to Country Group D:5 in Supplement No. 1 to Part 740 of the EAR, the addition of Russia to ITAR Section 126.1 will render Russia a Country Group D:5 country under the EAR.  Countries in Country Group D:5 are subject to additional restrictions on transactions involving 9×515 or “600 series” items.  Russia’s addition to Country Group D:5, however, would likely have a limited impact under the EAR.  This is because Russia is already subject to military end-use/user controls under Section 744.21 of the EAR which imposes additional license requirements on the export, reexport, or transfer (in-country) of, among other things, 9×515 or “600 series” items to military end-uses/users in Russia.

OFAC’s SDN Designations and Update of FSB General License

OFAC announced on March 2, 2021 the designation of seven Russian officials to the SDN List pursuant to EO 13661 for serving as officials of the Russian Government.  In addition to the EO13661 designation, the FSB Director was designated pursuant to EO 13382 for acting on behalf of the FSB.  The entries for the existing SDNs were updated to reflect the fact that they have been sanctioned under EO 13882.

To account for the additional authorities under which the FSB has now been sanctioned, OFAC updated General License (“GL”) 1B and replaced GL 1A (the reissued version of GL 1 that authorizes limited transactions with FSB).  Please see our prior blog posts here and here for more information on GL 1 and GL 1A.  The substantive scope of the authorization in GL 1A was not changed.  OFAC also made corresponding changes to the related FAQs (501502503).

BIS Entity List Additions

BIS announced that it is adding 14 entities located in Russia, Germany, and Switzerland to the Entity List based on their association with Russia’s weapons of mass destruction programs and chemical weapons activities.  As a result of the Entity List designation, a BIS export license is required for the export, reexport, or transfer (in-country) of any item subject to the EAR when a listed entity is a party (e.g., as a purchaser, intermediate consignee, ultimate consignee, or end-user) to the transaction.

Author