Sanctions Guide – October 2022

This month has seen the US, EU and UK all respond to Russia’s organisation of referenda in occupied Ukraine and formal annexation of the Luhansk and Donetsk regions with a raft of new designations, predominantly of military and political leaders.  OFAC has also made some moderate additions to its Russia programme, adding a new prohibition on the export to the country of cloud computing services.

 

On 7th October 2022 the EU launched an eighth package of sanctions targeting the Russian economy, providing the legal basis to enforce a commitment by the G7 to cap the purchase price of Russian origin oil and gas.

 

September also saw a renewed focus on Iranian sanctions, with OFAC making a number of new designations targeting companies active in the sale of oil produced in the country and the sale of Iranian military technology to Russia.  EU and US leaders have also called for the designation of individuals and institutions linked to Iran’s crackdown on protests, which erupted in September following the death in custody of Masha Amini.

 

Referendum Response

• Russia’s formal annexation of the Luhansk and Donetsk regions in Eastern Ukraine was met with an instant response from OFSI on 26^th September, which added 89 people and three entities to its Russia sanctions list, including Russian “officials and collaborators” involved in organising the referenda, several executives at SOEs, notably at Gazprom and Sberbank, as well as PR agency IMA Consulting and security documents company Goznak – both of which provided practical support to the referendum processes.

 

• OFAC followed four days later with its own new package of measures, which included new designations of individuals and entities involved in the procurement of arms to support the Russian oil effort, leading figures in Russia’s financial infrastructure and the remaining 278 members of the Russian Duma which had yet to be included on its SDN list.

 

• A fresh package of EU sanctions launched on 7th October, reflecting Ursula van der Leyen’s intent to “make the Kremlin pay” for the escalation of the conflict. The new measures include prohibitions on the importation of new classes of good from Russia, the export to Russia of certain goods and technologies which might support its war effort and the prohibition of EU citizens from serving as directors of Russian state-owned companies.

 

• The EU package also provides the legal basis for a new G7 agreement to cap the purchase price of Russian oil. It followed the commitment of the G7 to a comprehensive ban on services which enable maritime transportation of Russian-origin crude oil and petroleum products.

 

Other Russia Developments

• In addition to the measures imposed in response to the Luhansk and Donetsk annexations, OFAC has continued to widen the scope of its measures targeting Russia. On 16^th September OFAC designated 22 people and two entities, including the family Chechen leader Ramzan Kadyrov, six members of the judiciary in Crimea and Sevastopol and a neo-Nazi paramilitary group.

 

• A week later, OFAC added the quantum computing sector to the list of Russian industries subject to trade restrictions, prohibiting the export, sale, or supply from the US or by a US person / entity of services related to quantum computing to anyone in Russia.

 

• OFAC has publicly announced its intention to intensify its pursuit of parties considered to be supporting attempts by Russia to circumvent western sanctions. This has included the publication of a Frequently Asked Question relating to the use of Russian payments system Mir and its National Payment Card System.

 

• The EU has removed former President Viktor Yanukovych and his son, as well his former prosecutor general Viktor Pshonka and his son, from its Ukrainian misappropriation of state funds program. The move follows legal challenges by Yanukovych and Pshonka which led an EU General Court to annul their designations.

 

• Oleg Deripaska, founder of Rusal, has been charged in the US District Court of the Southern District of New York with conspiring to violate the US sanctions against him and his company. The US Department of Justice has accused Deripaska of, amongst other things, evading and violating US sanctions by owning and selling US property through corporate shells and purchasing and sending gift deliveries and flowers to contacts in the US and Canada.

 

Iran

• Over the past month OFAC has imposed a series of new designations on Iranian entities targeting the country’s cyber warfare activities and especially in response to an alleged attack on the government of Albania in July 2022. On 15^th September, the day after it included Iran’s Ministry of Intelligence and Security, as well as its head, in its cyber program as a response to the Iranian attack, OFAC added the designations of ten individuals and two entities affiliated with Iran’s Islamic Revolutionary Guard Corps.

• Further measures have targeted Iranian entities deemed to be involved in sanctions evasion. On 30^th September OFAC designated eight Iranian entities alleged to have played a critical role in concealing the origin of Iranian petrochemical shipments.  OFAC has also designated four Iran-based entities and one Iranian national said to be involved in the production and transport of drones to Russia for use in its war against Ukraine.

• OFAC has also responded to Tehran’s crackdown on dissent in the wake of the death in custody of Mahsa Amini, designating seven leaders of Iranian security organisations, the morality police, the Ministry of Intelligence and Security, the Basij Resistance Forces and other agencies. France has also led the call for new EU measures on Iran in response to its human rights abuses.

New Legislative Developments

• In her state of the union address on 14^th September, President of the EU Commission Ursula von der Leyen announced that the EU will follow the UK and US in creating specific anti-corruption measures. Unlike the UK and US, which both have dedicated sanction programmes targeting entities deemed to be involved in corruption, the new measures will be inserted as a new provision of the EU’s current human rights sanctions regime.  The commission is yet to publish the details of the proposed changes.

 

• In the UK, the Economic Crime and Corporate Transparency Bill passed its first reading in the House of Commons on 26^th September.  The bill makes it an offense for persons designated under UK or UN sanctions to act as directors of UK companies or indirectly “take part in or be concerned in the promotion, formation or management of a company”.  The bill also amends SAMLA – the Sanctions and Anti Money Laundering Act – to remove requirements for statutory instruments to be used to update the UK High-Risk third countries list and confers this power to the Treasury.