The ever-evolving sanctions targeting Russia in response to the crisis in Ukraine just became more complicated, as the Commerce Department issued a new set of export restrictions aimed at further limiting U.S. trade with Russia’s defense and energy sectors.
Defense Sector Sanctions
Commerce added the following Russian defense companies to its Entity List and imposed a license requirement for exports, reexports, or in-country transfers of all items subject to the Export Administration Regulations (EAR) to these companies:
- Almaz-Antey Air Defense Concern Main System Design Bureau, JSC
- Dolgoprudny Research Production Enterprise, OAO
- Kalinin Machine Plant, JSC
- Mytishchinski Mashinostroitelny Zavod, OAO
- Tikhomirov Scientific Research Institute of Instrument Design, JSC
Note that the Treasury Department’s Office of Foreign Assets Control (OFAC) also has designated the five companies as Specially Designated Nationals (SDNs). The Commerce and OFAC sanctions effectively prohibit U.S. companies from doing any business with these five Russian entities.
In addition to these specific designations, Commerce imposed a broad restriction on exports of many U.S. items (including several items that otherwise are subject to low level controls) destined for any military end-user or military end-use in Russia. Exports of certain military items controlled by the EAR to any end-user in Russia are prohibited as well. These far-reaching new military sector controls can be found in section 744.21 of the EAR and necessitate thorough due diligence on potential Russian customers and end-uses.
Energy Sector Sanctions
Commerce also added the following five Russian energy companies to its Entity List:
- Gazprom, OAO
- Gazprom Neft
- Lukoil, OAO
A license is now required to export, reexport, or transfer in-country any item subject to the EAR to the five companies listed above when the item will be used directly or indirectly in exploration for, or production of, oil or gas in Russian deepwater locations (greater than 500 feet), Arctic offshore locations, or Russian shale formations or when the exporter is unable to determine whether the item will be used in such projects. This new measure significantly expands Commerce’s general Russian energy sanctions by covering all types of products and technology and not just a specific list of oil and gas products (see prior post). Commerce has yet to issue any formal guidance on how broadly it will interpret the “directly or indirectly” language, creating uncertainty for U.S. exporters. Again, OFAC has issued similar sanctions against these five companies that prohibit transactions, including services (except for financial services), in support of certain Russian oil projects.
There has been no indication that U.S. restrictions against Russia will slow any time soon, so it is critical that companies stay plugged-in and adjust their compliance programs accordingly.