Yermak-McFaul Working Group on Russian Sanctions. Progress Update #8, July 27 compared to Apr 19
Action Plan on Strengthening Sanctions against the Russian Federation, April 19, 2022
Prepared by KSE Institute
Compared to July 6, the number of both good and bad decisions were taken on the sanction field.
Among good ones, the introduction by Latvia of a ban on natural gas supplies from RF from Jan 1, 2023 and the ban on import of RF oil and oil products from 31 Dec with the ban on import of RF coal from Aug by the UK should be highlighted (#Oil).
Also on July 20, EU ambassadors approved the 7th package of sanctions against RF. Among the most important decisions — the ban on the export of gold and jewellery made from it from Russia and the blocking of Sberbank’s European assets (#Financial). 7th package also includes new export control measures and restrictions against more than 50 legal entities and individuals, including the mayor of Moscow (#SOE #Individual).
While in #Transport several negative exemptions and amendments have been adopted. In particular, both the EU and the UK allowed technical assistance for RF aircraft. In addition, the EU released guidance for transportation from RF to Kaliningrad, according to which road transit is not allowed, while railway — allowed, but within pre-invasion volumes. Transportation of sanctioned military and dual-use goods and related technologies are entirely prohibited, regardless of the mode of transport. Also, the UK excluded 2 top-managers of Rosneft from the sanction list (#Individuals).
Unfortunatelly, in the EU’s 7th package, the “sanctions policy” of the last 2 weeks is also visible — on the one hand, the EU has strengthened export control of dual-use goods, but, on the other hand — removed ban on the export of luxury goods, allowing personal use by individuals travelling from the EU, and extended the exception to transactions in agricultural products and the transport of oil to third countries (#Trade).
In addition, four Russian banks authorised to serve the Russian defence-industrial complex remain unauthorised — still stay not de-SWIFTed: JSC Gazprombank, PJSC Bank “St. Petersburg”, JSC “All-Russian Bank for the Development of Regions’’ and JSC “Far Eastern Bank”. In addition, seven members of the Military-Industrial Commission of RF did not fall under the sanctions of the EU, of which five are also not under the sanctions of the USA and UK.
Other important updates:
#Financial UK (from Jul 21), EU (from Jul 22) and Canada (from Aug 6) ban on RF gold. While the UK prohibited investment activities in respect of land located in RF, persons connected with RF, relevant entities, joint ventures, opening a representative office or establishing a branch or subsidiary located in RF.
#Trade UK ban on export of goods and items of significant importance to the Russian (such as chemicals, materials, machinery goods) and ban on export of accounting, business and management consulting, public relations services.
#Transparency USA established an outbound investment review mechanism to protect U.S. technologies (e.g. semiconductors, batteries, AI etc.) against adversaries like China and RF — notification to the federal government 45 days prior to deal closing is required if the investment involves specified sectors).
#Terorism USA called RF a “human trafficking” state, while a draft Resolution on recognizing Russia’s actions in Ukraine as a genocide was registered in the US Senate. Active discussion on designating Russia a terrorist state stays continues.
Small progress:
#SOE Canada sanctioned 12 SOEs + 3 private entities involved in disinformation activities, while EU sanctioned 7 SOEs including Sberbank and Russian terrorist funds.
#Coordination EU is working on the launch of the “Sanction Berau”.
Again no progress in #Secondary sanctions in the official sanction fields, despite companies themselves continuing severing ties with RF in the fear of secondary sanctions. As FT reports, China stopped investing in the RF under the One Belt, One Road project in fear of secondary sanctions by the US.
SANCTION ENFORCEMENT
UK. The National Economic Crime Centre (NECC), a multi-agency unit in the National Crime Agency (NCA), and HM Treasury’s Office of Financial Sanctions Implementation (OFSI), working in conjunction with law enforcement and financial sector partners as part of the Joint Money Laundering Intelligence Taskforce (JMLIT) issued a ‘Red Alert’ on financial sanctions evasion typologies by Russian elites and enablers. The purpose of the alert is to provide information from law enforcement and the legal and financial services sectors on some of the common techniques designated persons and their UK enablers are suspected to be using to evade financial sanctions.
USA. Intertech Trading Corporation, an Atkinson-based laboratory equipment distributor, has pleaded guilty in the US District Court for the District of New Hampshire to 14 counts of failure to file export information. Between 2015 and 2019, Intertech used false, innocuous descriptions for the sophisticated scientific equipment it was exporting to destinations including Russia and Ukraine. It also significantly undervalued its shipments. Sentencing is scheduled for 17 October 2022. If the court accepts the terms of the plea agreement, Intertech will pay $10,000 per count and be subject to a 2-year term of corporate probation and monitoring.
The Treasury Department took action to broadly expand the agricultural and medical authorizations in Russia-related General License (GL) 6B. This GL now covers transactions related to agricultural equipment. Its expansion further reiterates that U.S. sanctions on Russia in response to its war against Ukraine do not stand in the way of agricultural and medical trade. This GL authorizes transactions related to (1) agricultural commodities, agricultural equipment, medicine, medical devices, replacement parts and components for medical devices, or software updates for medical devices; (2) the prevention, diagnosis, or treatment of COVID19 (including research or clinical studies relating to COVID-19); or (3) ongoing clinical trials and other medical research activities.
Enabling exports of Russian food and fertilizer is a key part of attempts by the United Nations and Turkish officials to broker a package deal with Russia that would also allow for shipments of Ukrainian grain from the Black Sea port of Odessa, which have been blockaded by the war.
SANCTION LOOPHOLES
EU. On 21 July, EU extended until 31 Dec 2022 (previously — 5 Sep 2022) the wind-down period for transactions, including sales, of a joint venture or similar legal arrangement concluded before 16 March 2022, involving certain state-owned entities, listed in Annex XIX (OPK Oboronprom, United Aircraft Corporation, Uralvagonzavod, Rosneft, Transneft, Gazprom Neft, Almaz-Antey, Kamaz, Rostec (Russian Technologies State Corporation), JSC PO Sevmash, Sovcomflot, United Shipbuilding Corporation).
The EU refused to impose sanctions on the Ural corporation VSMPO-Avisma, which is the world’s largest manufacturer of titanium and titanium alloy products — WSJ. The decision was made due to fears of a ban on imports of products into the EU.
As Boomberg reports, EU is in discussions about removing sanctions it imposed on some Russian individuals over their involvement in Moscow’s war in Ukraine after the bloc’s lawyers found that the penalties may have been imposed on weak grounds, according to people familiar with the matter. Some 30 individuals have taken the EU to court, asking to be removed from the sanctions lists, and about another 10 have asked the EU directly to be removed, said the people, who asked not to be identified because the process is private.
USA. The Treasury Department took action to broadly expand the agricultural and medical authorizations in Russia-related General License (GL) 6B. This GL now covers transactions related to agricultural equipment. Its expansion further reiterates that U.S. sanctions on Russia in response to its war against Ukraine do not stand in the way of agricultural and medical trade. This GL authorizes transactions related to (1) agricultural commodities, agricultural equipment, medicine, medical devices, replacement parts and components for medical devices, or software updates for medical devices; (2) the prevention, diagnosis, or treatment of COVID19 (including research or clinical studies relating to COVID-19); or (3) ongoing clinical trials and other medical research activities. Enabling exports of Russian food and fertilizer is a key part of attempts by the United Nations and Turkish officials to broker a package deal with Russia that would also allow for shipments of Ukrainian grain from the Black Sea port of Odessa, which have been blockaded by the war.
China. China sells necessary equipment to Russia to continue the war in Ukraine — WSJ. Chinese exports of microchips, electronic components and military raw materials to Russia increased after the invasion of Ukraine. According to customs data, during the first five months of 2022, shipments of microcircuits from China to Russia increased more than 2 times — to 50 million US dollars. The volume of exports of aluminium oxide, which is used for the manufacture of weapons and the aerospace industry, exceeded the indicators of the previous year by 400 times.
Greece. Greek tanker owners, who control nearly a third of the world’s fleet, transported about half of Russian crude oil in May and June — WSJ. During two months, Greek vessels called at Russian ports in the Black and Baltic seas 151 times (compared to 2021–89). Greek tankers also go to Russian Siberia: the ship arrived in China after loading crude oil from Kozmino in Russia.
