Sanctions have been significantly expanded over the past two weeks in terms of designations for both Iran and Russia. Sanctionable or prohibited conduct in the case of Russia has also been expanded. Reported interagency disputes over Russia sanctions appear resolved in the near term, but Congress’ approach remains in question.
Against the backdrop of the G-7 meeting, the Administration took its most significant action in June. On June 28, the Administration joined with the rest of the G-7 in imposing a prohibition on the importation of Russian-origin gold and by imposing sanctions on a range of companies within Russia’s defense sector. The latter included nearly 100 individuals and entities centered around ROSTEC, a mainstay of Russia’s defense industry. The Administration also discussed with its G-7 counterparts the concept of an oil price cap for Russia that would, in theory, bar Western service providers such as shippers and insurers from dealing with oil priced above a fixed level.
On the same date, Treasury’s Financial Crimes Enforcement Network (FinCEN) and the Department of Commerce Bureau of Industry and Security (BIS) issued joint guidance on how Russian and Belarusian companies may attempt to evade recently imposed export controls. Of particular note is the listing of the jurisdictions that they are concerned about, including: Armenia, Brazil, China, Georgia, India, Israel, Kazakhstan, Kyrgyzstan, Mexico, Nicaragua, Serbia, Singapore, South Africa, Taiwan, Tajikistan, Turkey, United Arab Emirates, and Uzbekistan. BIS also took a number of enforcement actions, including temporary denial orders against Nordwind Airlines, Podeba Airlines, and S7 Airlines on June 24, and against Belavia Belarusian Airlines on June 16.
The Administration will continue to block and confiscate the assets of Russian oligarchs. On June 29, the Department of Justice (DOJ) issued a press release noting that the DOJ has blocked or frozen over $30 billion of such assets and immobilized over $300 billion of Russian Central Bank Assets. On June 30, the Treasury announced that it has blocked over $1 billion in the assets of Russian oligarch Suleiman Karimov. While the Administration had transmitted a legislative request for additional forfeiture-related authorities, there has been no discernable movement by the Hill on that request. See April l5-May 1 Sanctions Watch discussing legislation for more information.
On June 15, the Administration designated two supporters of the Russian Imperial Movement under terrorism sanctions. While the designations themselves were not significant, the fact that the Administration is now using terrorism sanctions to target Russian supporters is significant, as anyone doing business with these individuals now risks the application of secondary sanctions. Expect the Administration to designate additional Russian individuals and entities under terrorism sanctions.
On June 16, the Administration designated a network of petrochemical producers for violating Iran sanctions, including entities in China and India. These sanctions follow another sanctions enforcement action from May targeting another oil smuggling operation involving both Iran and Russia for violation of U.S. terrorism sanctions, as the network was run by Iran’s Revolutionary Guard Corps, a designated foreign terrorist organization. The Administration’s most recent sanctions enforcement action was done pursuant to the Trump-era Executive Order 13846, which reimposed sanctions waived or lifted by the Iran nuclear agreement. One of the targets was a network of front companies supporting a large Iranian conglomerate called Triliance Petrochemical Co. Ltd, that was designated under the Trump Administration. The Administration’s use of Trump-era sanctions authorities to target a significant sanctions evasion network likely signals more robust enforcement of Iran sanctions given the deadlock in negotiations on resuscitating the Iran nuclear deal.
On June 17, it was reported that the Financial Action Task Force (FATF) has decided to severely limit Russia’s role and influence within the organization. Russia cannot hold leadership or advisory positions, or take process in standard-setting, membership or governance issues. It may also no longer provide experts for the FATF peer review processes. This may indicate that the Administration may soon push for the FATF to place Russia on its list of high risk jurisdictions, which could have a detrimental effect on Russia’s banking sector.
In a speech on June 22, Deputy Attorney General Lisa Monaco announced that the DOJ is working to “incentivize companies to come forward and voluntarily disclose discovered misconduct.” The DOJ has increasingly become a lead agency for pursuing sanctions violations and has received significant supplemental funding to do so.
The Administration may come back to Congress with another supplemental appropriations request as soon as August/September. There was a significant fracture amongst House and Senate Republicans in particular, over the May 2022 supplemental package, in which 11 Senate Republicans and more than 50 House Republicans voted against the $40 billion package that included military aid to Ukraine, non-military and humanitarian assistance, and funding for sanctions enforcement. If there is another request during August/September, Russia sanctions, economic restrictive measures, or enhanced forfeiture authorities may be attached to that legislative effort.
ENABLERS Act—The ENABLERS Act was attached to the National Defense Authorization Act (NDAA) (section 5401) during the markup of the House Armed Services Committee bill. The ENABLERS Act extends anti-money laundering (AML) due diligence requirements to include various trust and company services providers, public relations firms, art dealers and a range of other actors. The NDAA will likely pass the House during the week of July 11. The Senate will likely take up their own version of the NDAA later in July.
The Administration may attempt to implement the oil price cap using its executive authority. Congress may also try to develop a statutory framework for secondary oil sanctions. The NDAA and appropriations legislation may also contain additional measures against Russia, Iran, China, and other such measures.