United States Imposes Additional Sanctions and Enforces Export Controls Targeting Russia

Authored by our Global Sanctions, Export Controls and Customs Teams

United States Imposes Additional Sanctions and Enforces Export Controls Targeting Russia

In late April 2022, the US imposed additional sanctions targeting Russia's shipping industry, as well as individuals and entities determined to be facilitating the evasion of US sanctions on Russia. These measures included a new presidential Proclamation prohibiting Russian-affiliated vessels from entering US ports, and new designations of Russian individuals, financial institutions, and other entities alleged to be involved in sanctions evasion. The US also took enforcement action against the Russian cargo services provider Aviastar in response to that company's alleged violation of US export controls, and updated its list of aircraft that have flown into Russia in apparent violation of US export controls. We provide an overview of these developments below.

Proclamation Prohibiting Entry of "Russian-Affiliated Vessels" Into US Ports

On April 21, 2022, President Biden issued a Proclamation prohibiting "Russian-affiliated vessels" from entering into United States ports, effective on April 28, 2022.¹ The prohibition applies to the following types of vessels:

• vessels of Russian registry (i.e., the vessel is Russian flagged);
• vessels that are Russian owned (i.e., the legal title of ownership of the vessel that appears on the ship's registration documents is the Government of the Russian Federation or a Russian company, citizen, or permanent resident); or
• vessels that are Russian operated (i.e., a Russian company, citizen, or permanent resident is responsible for the commercial decisions concerning the employment of a ship and decides how and where that asset is employed).

The Proclamation provides an exception to the prohibition for Russian-affiliated vessels used to transport certain nuclear materials, namely "source material, special nuclear material, and nuclear byproduct material," as those terms are defined in the Atomic Energy Act of 1954. Vessels transporting such materials will be exempt from the prohibition "for such time as. . .the Secretary of Energy, in consultation with the Secretary of State and the Secretary of Commerce, determines that no viable source of supply is available that would not require transport by Russian-affiliated vessels[.]" The Proclamation also provides an exception to the prohibition for Russian-affiliated vessels requesting only to enter United States ports due to force majeure, solely to allow seafarers of any nationality to disembark or embark for purposes of conducting crew changes, emergency medical care, or for other humanitarian need. The European Union has imposed a similar prohibition on Russian vessels since April 16, 2022.²

Designations of Individuals and Entities Involved in Sanctions Evasion

On April 20, 2022, the US Department of the Treasury's Office of Foreign Assets Control (OFAC) designated individuals and entities "involved in attempts to evade sanctions imposed by the United States and its international partners on Russia."³ The newly designated parties include the following:

• The Russian commercial bank Transkapitalbank, which according to OFAC has "offered its clients the ability to conduct transactions via its proprietary Internet-based banking system, known as TKB Business, an alternative communication channel to the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network[.]";
• Entities associated with the Russia-based virtual currency mining company Bitriver, including its Switzerland-based holding company, Bitriver AG, and 10 Russia-based subsidiaries of Bitriver AG; and
• More than 40 individuals and entities that allegedly are part of a "worldwide sanctions evasion and malign influence network" led by the Russian individual Konstantin Malofeyev (Malofeyev). These include the Russia-based company Tsargrad OOO; the Autonomous Noncommercial Organization for the Study and Development of International Cooperation in the Economic Sphere International Agency of Sovereign Development (IASD); the All-Russian Public Organization Society for the Promotion of Russian Historical Development Tsargrad (Tsargrad Society); and the Joint Stock Company Marshal.Global, among others. OFAC first designated Malofeyev in 2014 for being responsible for or complicit in, or for having engaged in, actions or polices that threaten the peace, security, stability, sovereignty, or territorial integrity of Ukraine.

In conjunction with these designations, OFAC issued General License (GL) No. 29, which authorizes certain transactions ordinarily incident and necessary to the wind down of transactions involving Transkapitalbank through 12:01 a.m. eastern daylight time, May 20, 2022.⁴ OFAC also issued GL No. 28, which authorizes certain transactions involving Transkapitalbank "that are ultimately destined for or originating from Afghanistan" through 12:01 a.m. eastern daylight time, October 20, 2022.⁵

All property and interests in property of persons on the SDN List that are located in the United States or within the possession or control of a US person, wherever located, are blocked, and US persons may not engage in any dealings, directly or indirectly, with them, absent an applicable license or exemption. Any entity in which one or more blocked persons owns in the aggregate, directly or indirectly, a 50 percent or greater interest is automatically blocked.

Denial of Export Privileges for Russian Cargo Airline Aviastar

On April 21, 2022, the US Department of Commerce's Bureau of Industry and Security (BIS) issued an order temporarily denying all export privileges for the Russian cargo aircraft carrier Aviastar due to "ongoing violations" of the United States' export controls on Russia. The temporary denial order (TDO) states that Aviastar used US-origin aircraft subject to the Export Administration Regulations (EAR) on recent flights into Russia without authorization from BIS, in violation of US controls on the export of aviation-related items to Russia.⁶ The TDO prohibits Aviastar from participating in any transactions subject to the EAR, including exports from the United States and re-exports of items subject to the EAR from abroad, for 180 days. The United States has issued similar TDO's on major Russian airlines Aeroflot, Utair, and Azur Air.

Additionally, on April 21, 2022, BIS published updates to its List of Commercial and Private Aircraft in potential violation of the Export Administration Regulations.⁷ Through this list, BIS publicly identifies commercial and private aircraft that have flown into Russia in apparent violation of EAR, in order to notify the public that providing any form of service to the listed aircraft requires BIS authorization. The April 21 update removes two aircraft from the list, reflecting two additional authorizations BIS granted to allow these aircraft to leave Russia. The aircraft removed from the list are owned or operated by AirBridgeCargo (Tail Number VP-BBY) and Azur Air (Tail Number VQ-BZA). BIS granted the authorizations to "prevent the Russian government from maintaining operational control over the aircraft." 

_{1 The full text of the Proclamation is available here.
2 New Article 3ea of Regulation (EU) No 833/2014, added by Council Regulation (EU) 2022/576 of 8 April 2022.
3 See OFAC's designations.
4 See the full text of GL 29.
5 See the full text of GL 28.
6 See the full text of the TDO here.
7 See the updated list as of April 21, 2022 here.}

_{White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities.}

_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

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