Sanctions Weekly Update – Ukraine/Russia Conflict – April 3, 2023 - Export Controls & Trade & Investment Sanctions

Russia/Ukraine Sanctions Update – Week of April 3, 2023

I. US SANCTIONS

OFAC Updates FAQ on Payment of Russian "Exit Tax": On March 30, the Office of Foreign Assets Control (OFAC) issued an amended FAQ 1118 on the payment of "exit tax" to the Russian Central Bank and the Ministry of Finance, as may be required by the Russian government before divesting any assets located in Russia. OFAC reiterated that a specific license must be obtained from the OFAC before such payments can be made; however, given the Commission established by Russia to review such divestments may include U.S.-sanctioned individuals, U.S. persons do not need to seek separate OFAC authorization for their Russian buyers to submit an application to the Commission regarding a divestment transaction. Read more>>
BIS Renews Temporary Denial Orders on Entities Violating Russia Sanctions: On April 3 and 4, the Commerce Department's Bureau of Industry and Security (BIS) granted the requests of the Office of Export Enforcement (OEE) to renew the temporary denial orders previously issued on October 3, 2022 against PJSC Aeroflot, UTair Aviation JSC, and Azur Air respectively. BIS found that renewals of the orders were necessary in the public interest to prevent an imminent violation of the Export Administration Regulations (EAR); specifically, evidence showed that these entities violated Russia sanctions by continuing to fly designated aircrafts into Russia without BIS authorization. Read more>>, Read more>> and Read more>>
Microsoft Fined $3.3 Million for Violations of Russia Sanctions; Violations Predate Ukraine Invasion: On April 6, the Department of the Treasury's Office of Foreign Assets Control (OFAC) and the Department of Commerce's Bureau of Industry and Security (BIS) announced that they had issued a combined $3.3 million in civil penalties on Microsoft for violations of sanctions and export control laws on Russia; the violations occurred before the invasion of Ukraine. Microsoft voluntarily disclosed the violations and cooperated with both agencies over the course of the investigation. Read more>> and Read more>>
Treasury Sanctions Illicit Darknet Marketplace Purportedly Located in Russia: On April 5, pursuant to Executive Order (E.O.) 13694, the Treasury Department imposed sanctions on Genesis Market, one of the world's largest illicit marketplaces which is believed to be located in Russia. According to its published statement, Genesis Market is one of the most prominent brokers of stolen credentials and other sensitive information, gaining unauthorized access to victim devices and selling stolen data to cybercriminals for further exploitation. Read more>> and Read more>>
Connecticut Company Ordered to Forfeit $826,000 for Violation of Export Controls on Russia: On April 5, a U.S. District Court judge ordered a Connecticut-based manufacturer to forfeit $826,000 that had been sent by a Latvian company working as part of a conspiracy to transport a jig grinder, made by the Connecticut manufacturer, to Russia without a license in violation of U.S. export control laws. The investigation into the matter was coordinated by Task Force KleptoCapture. Read more>>
Assistant Secretary of the Treasury Discusses Russia Sanctions Program: On April 6, Assistant Secretary of the Treasury Elizabeth Rosenberg spoke at the Center for Strategic and International Studies. She discussed the current landscape of the sanctions program, highlighting new designations of Russian persons and entities and the oil price cap. She next discussed what the Department has learned from the experience, praising the value of coordination with both allies and the private sector on implementing sanctions, noting that loopholes remain in sanctions infrastructure, and expressing the need for the U.S. to help developing countries build capacity in their sanctions programs. Read more>>
Secretary Yellen Welcomes IMF Approval of Ukraine Economic Program: On March 31, Secretary of the Treasury Janet Yellen released a statement welcoming the International Monetary Fund (IMF) Executive Board's decision in approving a $15.6 billion economic program for Ukraine. Secretary Yellen commended Ukraine's efforts to pursue broad-based structural reforms under the program despite Russia's aggression and strongly supports the program's measures in securing economic and financial stability. Read more>> and Read more>>
Defense Department Offers Ongoing Military Training for Ukrainians: On March 30, Department of Defense representatives said that apart from providing more than $32.5 billion of security assistance in the form of military hardware and ammunition to Ukraine, it is also providing substantial training to Ukrainians to make good use of the equipment that has been supplied. According to Pentagon Press Secretary Pat Ryder, the U.S. has trained more than 7,000 members of the Ukrainian armed forces ever since Russia's invasion of Ukraine in 2022, and will continue to do so to ensure the Ukrainian people have the security assistance they need to defend their country against Russian aggression. Read more>>
USAID Provides Winter-Related Assistance to Ukraine: On March 30, the U.S. Agency of International Development (USAID) reported that during the past winter, it had provided Ukraine with $400 million worth of winter-related assistance, including energy repair equipment, power generators, support for heating points, and humanitarian supplies, with more assistance on the way. The assistance helped provide the people of Ukraine with access to heat, hot water, electricity, healthcare, and basic supplies during the height of winter, as they continue to defend themselves against Russia's aggression. Read more>>
U.S. and EU Continue Work on Energy Security and Reducing Reliance on Russian Energy: On April 3, the joint U.S.-EU Task Force on Energy Security, launched by President Biden and President von der Leyen of the European Union (EU) one year ago, released its progress report and outlook for the year 2022-2023, stressing that it has made major progress during the year in meeting its goals to reduce the EU's reliance on Russian energy. The 10th U.S.-EU Energy Council also met in Brussels on April 4, where leaders discussed strategic energy issues and how the U.S. and EU should respond to Russia's threat to global energy security. Read more>> and Read more>>
Additional U.S. Security Assistance to Ukraine: On April 4, the Biden administration authorized its 35th drawdown of U.S. arms and equipment for Ukraine valued at $500 million, including more ammunition for U.S.-provided HIMARS, air defense interceptors, artillery rounds, anti-armor systems, small arms, heavy equipment transport vehicles, and maintenance support. In addition, the Department of Defense is also providing a significant package under its Ukraine Security Assistance Initiative, which includes air defense capabilities, artillery and tank ammunition, mortar systems, rockets, and anti-armor systems. Read more>> and Read more>>
World Leaders Discuss Coordination of Economic Support for Ukraine: On April 5, Deputy National Security Advisor for International Economics Mike Pyle, Finance Minister of Ukraine Sergii Marchenko, and European Commission Director-General for Neighborhood and Enlargement Negotiations Gert Jan Koopman co-chaired the second meeting of the Steering Committee of the Multi-agency Donor Coordination Platform for Ukraine. During the meeting, the leaders as well as representatives from international financial institutions discussed the coordination of economic support for Ukraine's financing needs and future economic recovery and reconstruction efforts. Ukraine highlighted its early recovery priorities for 2023 in the areas of energy infrastructure, civilian demining, critical and social infrastructure, housing, and support to the private sector. The Steering Committee agreed that the Platform was critical as a catalyst for mobilizing international commitments required to respond to Ukraine's needs in 2023. Read more>>

2. EU Sanctions

European Commission Updates its Russia Sanctions FAQs on Export-Related Restrictions for Dual-Use Goods and Advanced Technologies: On 31 March 2023, the EU updated its FAQ with regards to Export-Related Restrictions for Dual-Use Goods and Advanced Technologies by adding a question on the transit of goods through Russia and by updating the correlation table. Read more>>
EU Adopts Restrictive Measures to Suspend the Broadcasting Activities of RT Arabic and Sputnik Arabic: On 31 March 2023, the Council of the EU has concluded that restrictive measures suspending the broadcasting activities in the Union of RT Arabic and Sputnik Arabic shall apply from 10 April 2023. Read more>>
Bulgaria Closes Ports for all Russian Ships in Line With EU Sanctions: Ships under Russian flags already cannot enter Bulgarian ports catering to the traffic from the Black Sea. The country's Maritime Administration set the ban on April 17, making an exception only for deliveries of critical products from Russia. Read more>>
Lithuania Launches Investigation Into International Sanction Circumvention: The Lithuanian authorities have transferred to the financial crime investigation service data on a Cessna 172, which sought to fly from Lithuania to Russia in violation of international sanctions. Read more>>
EU Proposes Measures to Block Import of Russian Arctic LNG: After sanctioning the import of most pipeline gas from Russia, the EU is now beginning to target the flow of Russian LNG into the bloc. EU member states increased consumption of Arctic LNG by 50 percent since the beginning of sanctions. A new proposal would allow EU member states to block the import of LNG. Read more>>
Commission Approves €2 Billion Austrian Support to Wien Energie in The Context of Russia's War Against Ukraine: The European Commission has approved a €2 billion Austrian measure to support the energy supplier Wien Energie GmbH in the context of Russia's war against Ukraine. Read more>>
Commission Approves €3.5 Billion French Scheme to Support Small Companies in the Context of Russia's War Against Ukraine: The European Commission has approved a €3.5 billion French scheme to support small and medium-sized enterprises ('SMEs') and microenterprises in the context of Russia's war against Ukraine. The scheme was approved under the State aid Temporary Crisis and Transition Framework. Read more>>
Commission Approves €70 Million Dutch Scheme to Support the Greenhouse Horticulture Sector in the Context of Russia's War Against Ukraine: The European Commission has approved a €70 million Dutch scheme to support small and medium-sized enterprises (SMEs) active in the greenhouse horticulture sector in the context of Russia's war against Ukraine. The scheme was approved under the State aid Temporary Crisis and Transition Framework. Read more>>
Commission Approves €30 Million Italian Scheme to Support Commercial Bus Transport Operators in the Context of Russia's War Against Ukraine: The European Commission has approved a €30 million Italian scheme to support commercial bus transport operators in the context of Russia's war against Ukraine. The scheme was approved under the State aid Temporary Crisis and Transition Framework. Read more>>
Commission Approves €25 Million Greek Scheme to Support Apple and Chestnuts Producers in the Context of Russia's War Against Ukraine: The European Commission has approved an approximately €25 million Greek scheme to support apple and chestnuts producers in the context of Russia's war against Ukraine. The scheme was approved under the State aid Temporary Crisis and Transition Framework. Read more>>
EU Plan to Buy Ukraine Shells Hits Legal Snag Over Who Gets the Money: Countries have already agreed to jointly buy Kyiv piles of ammunition, but ambassadors can't agree on whether the contracts will stay within the bloc. Read more>>
Five EU Countries Urge Brussels to Buy Ukrainian Grain: The leaders of the five European Union member states, which help transit Ukrainian agricultural products to third countries, called on the EU to take measures in connection with the a backup of grain stored in their countries, which arose because the goods do not reach their destinations. The prime ministers of Poland, Slovakia, Hungary, Romania and Bulgaria asked Brussels to consider the possibility of urgent purchase of surplus products by the EU, and to allocate funds for the fastest development of transport and warehouse infrastructure. Read more>>

3. UK Sanctions

UK to Stop Licensing Use of Frozen Funds for Legal Fees in Defamation Case: On March 30, 2023, the UK Treasury Lords Minister Baroness Penn, published a Ministerial Statement on HM Treasury's internal review of applications for legal fees licences under sanctions regulations. Baroness Penn said,"It is the Government's view that in most cases, the use of frozen funds for payment of legal professional fees for defamation cases is not an appropriate use of funds, and in many cases will be against the public interest";and "Whilst still reviewing each individual application on a case-by-case basis, OFSI will take a presumption that legal fees relating to defamation and similar cases will be rejected."Read more>>
UK Government Publishes New Economic Crime Plan: On March 30, 2023, the UK government published its Economic Crime Plan for 2023-2026. As part of the Plan, the government has committed to combatting kleptocracy and sanctions evasion. Amongst other things by expanding the capacity of the NCA's Combatting Kleptocracy Cell to target "corrupt elites" through assets hidden in the UK and to support cross-government work on criminal breaches of sanctions and reviewing and expanding on OFSI's enforcement guidance and licencing framework by Q4 2023. Read more>> and Read more>>
UK Drops Part of Probe into Sanctioned Russian Billionaire: On April 4, 2023, it was reported that the UK's National Crime Agency (NCA) has dropped part of its investigation into sanctioned Russian billionaire Mikhail Fridman after raiding his London home in 2022. The NCA is no longer probing Fridman on suspicion of conspiracy to defraud the UK Home Office and conspiracy to commit perjury, people familiar with the decision said. A money laundering investigation is still ongoing and the legal basis for the raid's search warrant is also being contested. Read more>>
UK Russia Sanctions List Update: On April 6, 2023, the Foreign, Commonwealth and Development Office updated the UK Sanctions List. Under the Cyber Financial Sanctions regime, the list was amended for individual Vitaliy Nikolayevich Kovalev, to update a known alias. Under the Russia Financial Sanctions regime, the list was updated to: (i) amend the entry for Vitaliy Nikolayevich Kovalev; (ii) amend the address for Volodymir Vasilyovich Saldo; and (iii) correct the date of birth for Vladimir Konstantinovich Markov. Read more>>andRead more>>
Brick Court Chambers Sanctions Soirée: On May 11, 2023, Brick Court Chambers will be hosting a sanctions evening discussing aspects of UK sanctions law and practice with the FCDO and OFSI. The event will be chaired by Maya Lester KC, Lord Sumption, and Paul Wright. If you are interested in attending, contact marketing@brickcourt.co.uk Read more>>

4. Russian/Ukraine Sanctions

Ukraine Expands its Sanctions Lists: On 1 April 2023 Ukraine added 273 individuals and 380 legal entities to its sanctions list. The amendments were implemented by two Orders of the President of Ukraine, which entered into force on 4 April. Read more>> and Read more>>
Russia Receives $32 Billion in Revenue in March 2023: On April 2, 2023, it was reported that the Russian budget received more than $32billion in revenue in March 2023. Russian finance minister Anton Siluanov said in an address to the Kremlin, "Only the day before, the treasury received additional 2.5 trillion rubles. Yes, we see that there is a slight decrease in oil and gas revenues, because the price parameters for energy resources are somewhat different from what is included in the budget. But I am sure that we will fulfil all obligations."Read more>>
Russia Extends Pledged Oil Output Cuts Through 2023: On April 2, 2023, it was reported that the Russian Deputy Prime Minister Alexander Novak announced that Russia has decided to keep its oil production at a reduced level through 2023 amid high volatility in the global market. Russia had previously pledged to cut its crude-only output by 500,000 barrels per day in March in response to Western sanctions, including price caps on its oil and petroleum production, and to keep those curbs in place through June. Read more
Insurers warn Russian Sanctions Heighten Threat of Oil Spill Disaster: On April 2, 2023, it was reported that Rolf Thore Roppestad, chief executive at marine insurer Gard, warns of the growing risks of a disastrous oil spill after the knock on effects of western sanctions on Russia leaves thousands of ships without third-party liability cover from well tested insurers. Read more>>
Toyota Plant in St. Petersburg Claimed by Russian Government: The Toyota Motor plant near St. Petersburg was bought out by a Russian governmental agency, subordinate to the Ministry of Industry and Trade. The enterprise passed into ownership with equipment and land. The ministry is working on the possibility of resuming production at the plant as soon as possible, the press service of the Ministry of Industry and Trade reported. Read more>>
Russia Confiscates Passports of Senior Officials to Stop Defections: On April 2, 2023, it was reported that Russian security officers have tightened travel requirements within the state sector over fears of leaks and defections. Demanding the surrender of travel documents from senior officials and state company executives to prevent overseas travel. Read more>>
Russia Looks to Fleeing Foreign Firms to Boost Wartime Budget: On April 4, 2023, it was reported that the Kremlin is providing foreign companies with a way out of Russia at a price to help bolster the state budget. Foreign investors looking to sell their Russian assets are required to make a mandatory contribution to the state budget. It is reported that according to a note published on the Russian Finance Ministry's website, businesses will be under "an obligation to make a voluntary cash contribution to the federal budget of at least 10% of half of the market value of the relevant assets, as indicated in the asset valuation report."Read more>>
Russia Continues Information Crackdown with New Wikimedia Fine: On April 5, 2023, the Wikimedia Foundation, owner of the online encyclopaedia Wikipedia, was fined 800,000 roubles ($9,900) by a Russian court for failing to delete content considered extremist as Moscow pursues a drive to crack down on independent sources of information. Read more>>
Alfa Bank Follows in VTB Footsteps with Record 2022 Loss: On April 6, 2023, it was reported that a company report Russia's Alpha Bank made a record loss of 117.1 billion roubles ($1.44 billion) last year as sanctions on the financial system hit Russia's big banks. It was reported that Russia's central bank said two of 13 official "systemically important credit institutions" made losses in 2022. Read more>>
Russia's Ozon Reports 55% Jump in 2022 Revenue: On April 6, 2023, it was reported that Russian online retailer Ozon on Thursday said its 2022 revenue rose 55% to 277.1 billion roubles ($3.43 billion), while losses at the e-commerce site rose by 2%. Losses came in at 58.2 billion roubles, but Ozon pointed to one-off costs of 10.2 billion roubles related to a major fire at a fulfilment centre last year. Read more>>
Russia's Sovcombank to Launch Legal Challenge on Japan Sanctions: On April 3, Reuters reported that Russian private lender Sovcombank is planning a legal challenge against sanctions imposed against it over the conflict in Ukraine, and will start with Japan where the bank has shareholders, according to people familiar with the matter. The Japanese Foreign Ministry on April 4 rejected the allegations that its sanctions on the bank were illegal, stressing that they were implemented "in accordance with relevant laws" and that Russia's aggression against Ukraine "should have significant cost." The Foreign Ministry had on February 28 denied Sovcombank permission to appeal against the sanctions, leading the bank to hire local Japanese lawyers through a Russian law firm to appeal against the ministry's decision, according to the source. Read more>> and Read more>>
Ukrainian Official Express Willingness to Negotiate on Crimea: Kyiv is willing to discuss the future of Crimea with Moscow if its forces reach the border of the Russian-occupied peninsula, a top adviser to President Volodymyr Zelenskyy has told the Financial Times. He added: "It doesn't mean that we exclude the way of liberation [of Crimea] by our army." His remarks may relieve western officials who are skeptical about Ukraine's ability to reclaim the peninsula and worry that any attempt to do so militarily could lead President Vladimir Putin to escalate his war. Read more>>
Ukraine receives first $2.7 billion tranche of IMF financial package: On March 31, the IMF first announced that it had reached an agreement with Ukraine to provide a four-year financial aid package worth approximately $15.6 billion. This funding is part of a larger package worth $115 billion. The $2.7 billion was set to be disbursed "immediately" to help maintain economic and financial stability in Ukraine "during a period of exceptionally high uncertainty," the IMF wrote. Read more>>
Zelensky visits Poland: Ukrainian President Volodymyr Zelensky arrived on an official visit to Poland on April 5. During the tete-a-tete meeting, the presidents discussed not only issues of security and weapons, but also complex topics of common history and further economic cooperation and international politics. Declared the President of Poland, Andrzej Duda, "We will continue to support Ukraine, particularly in European integration issues. We will do our best to support Ukraine's accession to the European Union and NATO as soon as possible." Read more>>
Zelensky Criticizes UN for Allowing 'Terrorist State' to Chair Security Council: President Volodymyr Zelensky said in a video address that, as Russia began its term as chair the UN Security Council on April 1, "It is hard to imagine something more evident that proves the complete bankruptcy of such institutions." He added that global institutions, including the UN Security Council, should be reformed so that states committing atrocities cannot influence international institutions. Read more>>
Central Bank of Russia Extends Restrictions on Foreign Transfers: Russians and residents from friendly countries can still transfer no more than $1 million to foreign bank accounts. Restrictions on transferring funds abroad will remain in effect for another six months, until September 30. Read more>>
Raiffeisenbank's Rating in Russia Put under Surveillance due to Plans to Leave Russia: The Expert RA rating agency has placed Raiffeisenbank's credit rating under watch after its parent company, Austrian Raiffeisen Bank International (RBI), stated its intent to leave the Russian market. The decision was made in connection with the announcement "about the desire to sell JSC Raiffeisenbank" or to deconsolidate it from the parent banking group. Read more>>

5. Other Notable Developments

Japan Bans Steel and Aircraft Exports to Russia in Latest Sanctions, Strips Favorable Trade Treatment for Another Year: On March 31, Japan's Trade Ministry announced that it is banning Russia-bound exports of steel, aluminum and aircraft including drones in its latest sanctions against Moscow's invasion of Ukraine. The measure also prohibits Japanese entities from exporting a wide array of industrial items to Russia, and is set to go into effect on April 7, 2023. Further, it is also keeping Russia stripped of its "most-favored-nation" trade status for another year beyond the end of March, meaning that all imports from Russia will continue to be subject to higher duties until the end of March 2024. Read more>> and Read more>>
Japan Purchases Oil Above Price Cap: On April 2, reports emerged that Japan had purchased Russian oil above the G7's price cap. The Wall Street Journal reported that Japan got the U.S. to agree to this exception, claiming that the country needed access to Russian energy products. The above-cap oil purchases have been described as "tiny." Read more>>
New Zealand Further Sanctions Russian and Belarusian Political and Military Figures: On March 31, New Zealand's Minister of Foreign Affairs Nanaia Mahuta announced further sanctions on political and military figures from Russia and Belarus. Sanctioned individuals include Russia's Children's Rights Commissioner Maria Alekseevna Lvova-Belova who was previously issued an arrest warrant by the ICC, alongside with 26 more individuals (five from Belarus and the rest from Russia), and five Russian entities with strategic relevance to Russia. Read more>> and Read more>>
Norway Implements EU's 10th Sanctions Package: On April 4, Norway's Ministry of Foreign Affairs announced that it is introducing a new set of sanctions against Russian President Vladimir Putin and the Russian regime that mirror the EU's tenth package of sanctions, which was adopted by the EU on February 25, 2023. The sanctions include restrictions on more individuals and entities, additional reporting obligations on Russian assets and securities, ban on Russian nationals holding positions on the governing bodies of critical infrastructure companies, further restrictions on imports and exports, and other measures. Read more>>
UAE Cancels License for Russia's MTS Bank Over Sanctions Risks: On March 31, the United Arab Emirates (UAE)'s central bank announced that it would cancel the license it granted to Russia's MTS Bank in Abu Dhabi last year, wind down its operations within six months and eventually close the branch. According to the central bank, the decision "comes after considering the available options regarding the new status of the MTS Bank and taking into account the sanctions risks associated with the bank." MTS Bank, a subsidiary of Russia's largest mobile operator Mobile TeleSystems, came under U.S. and UK sanctions last month as part of a broader sanctions package imposed on the first anniversary of Russia's invasion of Ukraine. Read more>> and Read more>>
China's Yuan Replaces Dollar as Most Traded Currency in Russia: China's yuan has replaced the US dollar as the most traded currency in Russia, a year after the invasion of Ukraine led to a slew of Western sanctions against Moscow. The yuan surpassed the dollar in monthly trading volume in February for the first time, and the difference became more pronounced in March, according to data compiled by Bloomberg based on daily transaction reports from the Moscow Exchange. Before the invasion, the yuan's trading volume on the Russian market was negligible. Read more>>
U.S. Says Russia is Seeking Arms-For-Food Deal with North Korea: On March 30, The Associated Press reported that Russia is once again looking to North Korea for weapons to fuel its war in Ukraine, this time in a deal that would provide Pyongyang with food and other commodities in return, according to the White House. In a press briefing, National Security Council spokesperson John Kirby said the proposed deal would allow Russia to "receive over two dozen kinds of weapons and munitions from Pyongyang." It is also understood that Russia is seeking to send a delegation to North Korea. Read more>>
IMF Board Approves $15.6 Billion Loan Amid War: On March 31, 2023, the International Monetary Fund's board signed off on a $15.66 billion aid package for Ukraine. The board approved a new 48-month extended arrangement under the Extended Fund Facility (EFF) of SDR 11.6 billion (about US$15.6 billion) as part of a US$115 billion total support package for Ukraine. Read more>>

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