Sixth Round of EU Sanctions

As previewed in last week’s weekly highlights, the EU published a new round of sanctions on June 3, 2022, which includes a wide range of new restrictions.  Key provisions are summarized below.

The EU now prohibits the purchase, import, or transfer of Russian-origin crude oil and certain petroleum products.  Although the sanctions took effect immediately, for seaborne crude oil, the regulations permit spot market transactions and the execution of existing contracts for six months, while for petroleum products spot market transactions and the execution of existing contracts will be permitted for eight months.  Furthermore, the EU exempted from these prohibitions altogether certain Member States that have an oil pipeline dependency on Russia, an apparent concession for Hungary.  The prohibitions will “temporarily not apply” to those countries “until the Council decides otherwise.”  However, those exempted Member States are nevertheless prohibited from reselling Russian-origin crude oil and petroleum products to other Member States or third countries.  Separately, the EU exempted Bulgaria from these prohibitions until the end of 2024.  The EU also permitted Croatia to import Russian vacuum gas oil until the end of 2023.

The EU announced that Sberbank, Credit Bank of Moscow, Russian Agricultural Bank, and Belinvestbank (Belarusian Bank for Development and Reconstruction) will be removed from SWIFT, effective June 14, 2022.  The EU will also suspend broadcasting activities from three Russian state-owned outlets: Rossiya RTR/RTR Planeta, Rossiya 24 / Russia 24, and TV Centre International.

The EU also has imposed additional export restrictions that expand (i) the list of entities associated with the military-industrial complex in Russia and Belarus and which therefore are subject to export restrictions, (ii) the list of goods and technology subject to the restrictions.  Exports of dual-use goods and technologies, as well as goods and technology that could enhance or develop the security sector, to the identified entities must be authorized.  The new expansion captures 80 new chemicals that could be used in manufacturing chemical weapons. 

EU Persons are now prohibited from providing, directly or indirectly, to the Government of Russia or legal persons, entities, or bodies established in Russia, (i) accounting, auditing, including statutory audit, bookkeeping or tax consulting services, or (ii) business and management consulting or public relations services.  The prohibitions do not apply to services that are “strictly necessary” for the termination, by July 5, 2022, of contracts that were concluded prior to June 4, 2022 (or of associated ancillary contracts necessary for the execution of such contracts).

Finally, the EU sanctioned additional individuals and entities, including highly-ranked members of Russia’s military, Russians who are heads of businesses, family members of listed oligarchs and Kremlin officials, and Russian companies in the defense and financial sectors.

U.S. Clarification of Prohibitions Contained in Certain Executive Orders (“EOs”)

OFAC released several new “Frequently Asked Questions” (“FAQs”) clarifying the “new investment” prohibitions in EOs 14066 (related to new investment in energy), 14068 (related to new investment in any sector of the Russian Federation economy)14071 (related to new investment generally).  Among other clarifications, OFAC said in FAQ 1051 that EOs 14066, 14068 and 14071 do not prohibit the export of goods, services, or technology, or related sales to Russia, provided that the transaction is made pursuant to ordinary commercial sales terms.  The guidance provides that these EOs do not prohibit entering into new contracts or agreements for such transactions.

In separate guidance, OFAC explained that EOs 14066, 14068 and 14071 prohibit U.S. persons from purchasing both new and existing debt and equity securities issued by an entity in the Russian Federation, apparently prohibiting secondary market transactions, except for divestment to non-U.S. persons. 

Other FAQs released this week addressed OFAC prohibitions on the export of accounting, trust and corporate formation, and management consulting services to persons located in the Russian Federation, prohibited by OFAC pursuant to EO 14071, including the scope of the restriction and types of services captured by the restrictions, and geographic scope of restrictions.  A brief summary is below, with many subject to additional provisions.

  • Prohibited: (i) Tax preparation and filing, (ii) serving as a voting trustee, (iii) executive search and vetting service.
  • Not prohibited: (i) Providing software, (ii) providing services associated with the export of such software (e.g. software design and engineering), (iii) educational services, such as online university courses, on the subjects of accounting, management consulting, or trust and corporate formation.
  • Geographic scope:  OFAC “interprets ‘person located in the Russian Federation’ to include persons in the Russian Federation, individuals ordinarily resident in the Russian Federation, and entities incorporated or organized under the laws of the Russian Federation or any jurisdiction within the Russian Federation.”

UK Sanctions Enforcement

As reported by the Wall Street Journal, “[s]tarting June 15, the UK’s Office of Financial Sanctions Implementation won’t have to prove that companies or individuals who violate the country’s sanctions measures knew or should have known they were violating the rules.”  The bill was passed in March and will allow the UK to enforce sanctions.

U.S. Seizure of Airplanes

On June 6, 2022, The U.S. Department of Justice (“DOJ”) announced it had obtained seizure warrants to seize two aircraft owned by Russian oligarch Roman Abramovich, alleging the aircraft were flown to Russia in violation of U.S. export controls.  DOJ claims the combined value of the two aircraft exceeds $400 million.  Also, on June 6, 2022, Commerce’s Bureau of Industry and Security (BIS), issued an Administrative Charging Letter against Abramovich, alleging violations of the Export Administration Regulations (EAR) involving flights of two U.S. origin aircraft—the same aircraft DOJ is seeking to seize—to Russia without a license from BIS.

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Photo of Caroline Brown Caroline Brown

Caroline E. Brown is a partner in Crowell & Moring’s Washington, D.C. office and a member of the firm’s White Collar & Regulatory Enforcement and International Trade groups and the steering committee of the firm’s National Security Practice. She provides strategic advice to…

Caroline E. Brown is a partner in Crowell & Moring’s Washington, D.C. office and a member of the firm’s White Collar & Regulatory Enforcement and International Trade groups and the steering committee of the firm’s National Security Practice. She provides strategic advice to clients on national security matters, including anti-money laundering (AML) and economic sanctions compliance and enforcement challenges, investigations, and cross border transactions, including review by the Committee on Foreign Investment in the United States (CFIUS) and the Committee on Foreign Investment in the U.S. Telecommunications Services Sector (Team Telecom).

Caroline brings over a decade of experience as a national security attorney at the U.S. Departments of Justice and the Treasury. At the U.S. Department of Justice’s National Security Division, she worked on counterespionage, cybersecurity, and counterterrorism matters and investigations, and gained unique insight into issues surrounding data privacy and cybersecurity. In that role, she also sat on both CFIUS and Team Telecom and made recommendations to DOJ senior leadership regarding whether to mitigate, block, or allow transactions under review by those interagency committees. She also negotiated, drafted, and reviewed mitigation agreements, monitored companies’ compliance with those agreements, and coordinated and supervised investigations of breaches of those agreements.

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Photo of Carlton Greene Carlton Greene

Carlton Greene is a partner in Crowell & Moring’s Washington, D.C. office and a member of the firm’s International Trade and White Collar & Regulatory Enforcement groups. He provides strategic advice to clients on U.S. economic sanctions, Bank Secrecy Act and anti-money laundering…

Carlton Greene is a partner in Crowell & Moring’s Washington, D.C. office and a member of the firm’s International Trade and White Collar & Regulatory Enforcement groups. He provides strategic advice to clients on U.S. economic sanctions, Bank Secrecy Act and anti-money laundering (AML) laws and regulations, export controls, and anti-corruption/anti-bribery laws and regulations. Carlton is the former chief counsel at FinCEN (the Financial Crimes Enforcement Network), the U.S. AML regulator responsible for administering the Bank Secrecy Act.

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Photo of Jeffrey L. Snyder Jeffrey L. Snyder
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Photo of Anand Sithian Anand Sithian

For high-stakes internal and government investigations and complex regulatory and compliance matters, companies and individuals look to Anand to provide strategic advice and counseling, particularly on issues relating to the Bank Secrecy Act and Anti-Money Laundering (“BSA/AML”), economic sanctions, and digital assets. Anand

…

For high-stakes internal and government investigations and complex regulatory and compliance matters, companies and individuals look to Anand to provide strategic advice and counseling, particularly on issues relating to the Bank Secrecy Act and Anti-Money Laundering (“BSA/AML”), economic sanctions, and digital assets. Anand is resident in the firm’s New York office and a member of the firm’s International Trade, White Collar and Regulatory Enforcement, and Financial Services groups.

A former federal prosecutor, Anand leverages his government experience to guide clients through complex white-collar matters, including grand jury and regulatory investigations, enforcement proceedings, and internal investigations. Anand has deep experience in parallel criminal and civil investigations and proceedings, and often represents clients in defending against civil lawsuits related to government investigations.

Representing some of the world’s largest banks and technology companies, Anand has addressed a wide range of issues, including economic sanctions, BSA/AML; economic sanctions and national security; payments and cryptocurrency; securities laws; and cybersecurity enforcement. In the regulatory space, Anand prides himself on providing commercial and actionable advice, including in the developing areas of digital assets, FinTech, and payments.

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Photo of Laurel Saito Laurel Saito
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