State Department Imposes Chemical Weapons Sanctions on Russia

On August 8, 2018, the State Department announced that it had concluded that Russia was responsible for poisoning former double agent Sergei Skripal and his daughter Yulia using the nerve agent Novichok and that it had sent a report to Congress pursuant to the Chemical and Biological Warfare Weapons Elimination Act of 1991.

The statute requires the President to report to Congress when there has been a determination that another country has used chemicals weapons. Thereafter, the statute requires the President to impose a number of sanctions relating to (i) foreign assistance, (ii) arms sales, (iii) arms sales financing, (iv) denial of U.S. credit assistance (e.g., Export-Import Bank loans) and (v) a prohibition on exports of any controlled goods.

The scope and application of the sanctions will be detailed in a Federal Register notice to be published on or around August 22, 2018. A State Department spokesperson provided a preview at an August 8 briefing.

Policy of Denial for National Security Controlled Products and Technology
The most significant of the sanctions will be the establishment of a policy of denial for license applications to export to Russia products or technology subject to National Security (NS) controls pursuant to the Export Administration Regulations administered by the Department of Commerce. These license applications are currently subject to case-by-case review.

Importantly, the denial policy will only apply to products and technology that are currently subject to NS controls. The sanctions will not impose NS controls on new items. In addition, the sanctions will not affect the availability of license exceptions.

Carve-outs
The State Department spokesperson announcing the sanctions indicated that there would be carve-outs for a number of categories of transactions, including: the (i) provision of foreign assistance to Russia and the Russian people, (ii) space flight activities, (iii) commercial passenger aviation (flight safety), and (iv) exports for purely commercial end users for civilian end uses.

The license denial policy could potentially affect a broad range of products and technology, including aero gas turbine engines, electronic devices and components, integrated circuits, and test and calibration equipment. However, the carve-out for exports to “purely commercial end users for civilian end uses” could largely vitiate its impact, making the sanction more of a symbolic gesture.

Deemed Exports
It appears that the license denial policy for NS controlled technology will not apply to deemed export licenses for Russian nationals employed by firms in the United States. This leaves open the question of whether it will apply to Russian nationals working for non-U.S. companies, although it appears that the denial policy will not apply to exports to wholly owned subsidiaries of U.S. or foreign companies in Russia.

Possibility of Further Sanctions
If Russia does not provide assurances concerning the future use of chemical weapons within three months, the CBW Act will trigger another set of mandatory sanctions against Russia. These sanctions include three of the following five: (i) opposition to multilateral development bank loans, (ii) prohibition on loans by U.S. banks to Russia (except for loans or credits to purchase food or agricultural commodities), (iii) further export restrictions (except for food and agricultural commodities), (iv) import restrictions of items from Russia; or (v) downgrading or suspending diplomatic relations.