Articles Posted in Russia Sanctions

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Pillsbury and Goltsblat BLP are pleased to announce that Evgeny Shumilov, Economic Attaché, Embassy of the Russian Federation, will be participating in the October 21 luncheon and roundtable discussion on doing business in Russia.  Mr. Shumilov will open the event by discussing the state of U.S.-Russia trade and opportunities for U.S. companies in the Russian market.

Please join us for Mr. Shumilov’s remarks and for presentations from top legal minds from Pillsbury and Goltsblat BLP regarding the key developments under Russian, U.S. and EU laws and regulations for U.S. companies doing business in Russia today.

Topics include:

  • Russian Legal Developments: Major recent Russian legislative developments and initiatives, including changes to employment, real estate, commercial, anti-trust, corporate and tax laws.
  • U.S. and EU Sanctions Update: Current compliance considerations for U.S. companies and their subsidiaries and affiliates doing or seeking to do business in Russia.
  • News from Capitol Hill: Outlook for U.S.-Russia relations through the November 2016 elections.

Speakers

Evgeny Shumilov, Economic Attaché, Embassy of the Russian Federation

Andrey Goltsblat, Managing Partner, Goltsblat BLP

Nancy Fischer, Partner, Pillsbury

The Honorable Gregory H. Laughlin, Senior Counsel, Pillsbury

Elina Teplinsky, Partner, Pillsbury

 

For questions or to register, please contact Julie Merkin at julie.merkin@pillsburylaw.com.

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On 19 June, the European Council extended EU sanctions against Russia pursuant to Council Decision (CFSP 2015/959).  This follows a series of increasingly coordinated actions by the US and EU, such as the joint statement produced at the G7 meeting two weeks ago, to show a united front against continued Russian activity related to Ukraine.  With this extension, EU sanctions will remain in place until January 31, 2016 unless there is a complete implementation of the Minsk Agreements before then.

However, looking forward, US and EU policymakers recently leaked to the media that they are pre-planning a series of coordinated sanctions against Russia should the situation deteriorate. These new measures could include new travel bans on Russian government officials and business leaders, but could escalate significantly to more broad-based sanctions against the Russian energy and financial sectors. In particular, these sanctions could target the sale of petroleum products from Russia and Russia-related financial transactions. Some western leaders are also supportive of utilizing these new sanctions should the status quo remain unchanged for much longer. Continue reading →

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The leaders of the G7 met for two days of discussions in Elmau, Southern Germany on 7 and 8 June 2015.

High on the agenda was the issue of Russian targeted EU and US sanctions over Moscow’s role in support of Ukrainian rebels.

Russia has already been excluded from what was formerly known as G8 following its annexation of Crimea in 2014.

Following talks between President Obama and German Chancellor Merkel in Elmau, reportedly over a traditional Bavarian meal of sausages and beer, the White House issued a statement confirming: “The duration of sanctions should be clearly linked to Russia’s full implementation of the Minsk agreements and respect for Ukraine’s sovereignty”. Continue reading →

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U.S., EU and other sanctions and export control regimes continue to target the Russian defense and energy sectors, restricting access to both military and dual use items. This creates demand pressure on the Russia side and as a result potential added compliance risk for exporters. Companies often ask “what are we expected to do try and prevent our exports from going inadvertently to prohibited end users and end uses?”

On May 18, 2015, the U.S. Commerce Department’s Bureau of Industry and Security (“BIS”) released guidance on due diligence practices for exporters to prevent unauthorized exports to Russia, amidst express concerns of front companies and intermediaries making transshipments to Russia in violation of the Export Administration Regulations (“EAR”).  In particular, the guidance focuses on exports of (a) National Security or “NS”-controlled items and (b) military end-use or end-user controlled items–which both require a license for Russia–to countries with less restrictive licensing requirements.

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The 17th EU-Ukraine summit took place in Kyiv, Ukraine on 27 April 2015, being the first summit taking place under the framework of the Association Agreement, the treaty between the EU and Ukraine that establishes a political and economic association between the parties.

The summit was an opportunity for the EU and Ukraine to discuss: (i) the implementation of the Association Agreement and the political and economic reforms in Ukraine including EU financial and other assistance; (ii) the crisis in Eastern Ukraine and the application of the Minsk agreements; and (iii) regional issues and the preparations for the upcoming Eastern Partnership summit in Riga.

During the summit, EU and Ukrainian leaders are reported to have agreed that the full implementation of the Minsk agreements, the ceasefire deal struck between Ukraine and pro-Russian rebels, remains the best chance to move towards a political solution, taking note of the European Council Conclusions of 19 March 2015 which called both for the swift and full implementation of the Minsk agreements, and for the duration of the restrictive measures against Russia to be linked to such implementation.

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It has been reported that Russia has proposed the sale of S-300 surface-to-air missile defense systems to Iran. According to the Russian News Agency TASS, Russian Foreign Minister Sergey Lavrov said that Russia’s previous voluntary embargo of sales of military equipment to Iran is no longer needed due to the progress in the negotiations regarding Iran’s nuclear program.

On May 1, 2015, Ed Royce (R-Calif.), the Chairman of the House Foreign Affairs Committee, and ranking member Eliot Engel (D-N.Y.) sent a letter to President Obama stating that the White House should consider using sanctions to deter the delivery of the missile defense system to Iran. The letter calls on the President to determine whether the proposed sale would advance Iran’s efforts to acquire or develop destabilizing numbers and types of advanced conventional weapons.

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On January 29, 2015, the Bureau of Industry and Security (BIS) issued a rule amending the Export Administration Regulations (EAR), consistent with the prohibitions contained in Executive Order 13685 that broadly prohibited new investments in, imports from and exports to the Crimea region. Specifically, the Executive Order prohibited “the exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of any goods, services, or technology to the Crimea region of Ukraine.”

A license is now required for exports and reexports to, and transfers within, the Crimea region of Ukraine for all items subject to the EAR, other than food and medicine designated as EAR99. There will be a presumption of denial for all such license applications, with the exception of certain agricultural commodities, medicine, medical supplies, and replacement parts authorized under the Department of the Treasury’s Office of Foreign Assets Control General License No. 4. For those items, BIS will review the license applications on a case-by-case basis.

Shipments of items that did not previously require a license that were on the dock for loading, or loaded on January 29, 2015, were allowed to proceed without a license, provided that they were exported/reexported by February 1, 2015.

Certain license exceptions are available for exports and reexports to, and transfers within, the Crimea region of Ukraine. These include the following, subject to the specific requirements in each exception:

  • TMP for items for use by the news media
  • GOV for items for personal or official use by personnel and agencies of the U.S. Government, the International Atomic Energy Agency (IAEA), or the European Atomic Energy Community (Euratom)
  • GFT for gift parcels and humanitarian donations
  • TSU for certain operation technology and software for lawfully exported commodities, and certain sales technology
  • BAG for exports of items by individuals leaving the United States as personal baggage
  • AVS for civil aircraft and vessels

For guidance on legal issues involving Ukraine-Russia sanctions, contact any of the above authors, or any of the professionals in Pillsbury’s International Trade Group.

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By Christopher R. Wall, Stephan E. Becker, Nancy Fischer, Aaron R. Hutman and Stephanie J. Rohrer

The Office of Foreign Assets Control issued three general licenses today authorizing certain activities that would otherwise be prohibited by Executive Order 13685. This Executive Order became effective on December 19, 2014, and broadly prohibited new investments in, imports to, and exports from the Crimea region of Ukraine. Companies were permitted a wind-down period under certain circumstances through the start of February 1, 2015, pursuant to earlier General License 5. Today’s general licenses authorize specific transactions in the following three areas:

  • Non-Commercial Personal Remittances – General License 6 authorizes transactions including the sending/receipt by U.S. persons to/from the Crimea or on behalf of a person ordinarily resident in the Crimea region. It also authorizes certain financial institutions to process those transfers of funds. This does not include charitable donations to an entity or funds transfers used to support the operation of a business, even if family-owned. Additionally, U.S. persons are authorized to hand carry funds to individuals in the Crimean region, or who are ordinarily resident there, provided that it is not done on behalf of a third party. This does not authorize transactions with persons whose property and interests in property are blocked pursuant to Ukraine-related Executive Orders 13660, 13661, 13662 or 13685.
  • Operations of Bank Accounts – General License 7 authorizes U.S. financial institutions to operate a personal bank accounts for persons ordinarily resident in the Crimea region provided that the transactions are solely for personal use and do not involve transfers to/from the Crimea region, or benefit persons ordinarily resident in the Crimea region, unless qualifying as personal remittances authorized by General License 6. This does not authorize transactions with persons whose property and interests in property are blocked pursuant to the Ukraine-related Executive Orders.
  • Telecommunications and Mail – General License 8 authorizes all transactions with respect to the receipt and transmission of telecommunications involving the Crimea region, so long as no payments involve a person whose property and interests in property are blocked pursuant to the Ukraine-related Executive Orders. However, it does not authorize the provision, sale or lease of telecommunications equipment or technology, or capacity on telecommunications transmission facilities (such as satellite or terrestrial network activity). The transactions of common carriers incident to mail and package service between the United States and the Crimea region are authorized, provided that the importation/exportation is not prohibited by Executive Order 13685, or it is otherwise authorized.

For guidance on legal issues involving Ukraine-Russia sanctions, contact any of the above authors, or any of the professionals in Pillsbury’s International Trade Group.

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Ukraine Freedom Support Act

The enactment of the Ukraine Freedom Support Act of 2014 starts the timeline for the following new extraterritorial sanctions:

  • Sanctions on Rosoboronexport (effective January 17, 2015) – The President is required to impose three or more sanctions from the list of options below. Rosoboronexport is the sole state broker and exporter/importer of Russian defense products. Despite the President’s stated intent not to use the sanctions authorized under the act, it is not clear how he will be able to avoid the requirement of this mandatory provision.
  • Arms-Related Activities in Syria, Ukraine, Georgia and Moldova (effective February 1, 2015) – The President is required to impose three or more sanctions from the list of options below against Russian and Russian-owned or controlled parties who are determined to produce, transfer or broker sales of defense articles to these countries without the support of their internationally recognized governments or who provide support for these activities. Although nominally mandatory, the determination with regard to parties is discretionary, giving the President flexibility to apply this provision.
  • Investment in Crude Oil Projects (effective February 1, 2015) – The President is authorized to impose three or more sanctions from the list of options below on foreign persons that are determined to have knowingly made a significant investment in a “special Russian crude oil project,” which includes Russian deepwater, arctic offshore, and shale formation projects “intended to extract crude oil.” The U.S. Treasury and Commerce Departments have interpreted similar language to include gas projects that may produce oil.
  • Foreign Financial Institutions (effective June 16, 2015) – Sanctions may be imposed on foreign financial institutions that knowingly (a) engage in significant transactions with parties sanctioned under this statute, or (b) facilitate significant financial transactions on behalf of Russian Specially Designated Nationals (SDNs) designated under Ukraine-related sanctions. The sanctions authorized for such activities are prohibitions or restrictions on opening or maintaining correspondent and payable-through accounts in the United States.

Read more: U.S. Sanctions Legislation Targets Russia While EU and U.S. Expand Crimea Sanctions

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Stephan E. Becker, Pillsbury partner, will co-present on the topic of “U.S. Sanctions Relating to the Unrest in Ukraine: Compliance Challenges,” on Thursday, October 9 at 1:00pm.

The United States began by imposing sanctions on persons and entities associated with the unrest in the Ukraine, but the sanctions have been expanded to target broader segments of the Russian economy with the adoption of new sectoral sanctions.

During this PLI webinar, the following topics will be discussed:

  • The scope of the U.S. sanctions administered by the Treasury and Commerce Departments
  • The implementation of sectoral sanctions on the Russian financial, defense and oil& gas sectors
  • Recent expansions of the sanctions and potential future changes

For more information and to register, please visit the event page.