Since April 1, the Administration has expanded Russia sanctions designations and congressional movement on Russia sanctions has increased. The early summer may provide a timeframe for additional Russia legislation.
The Russia sanctions regime has expanded in April, prompting Russia to impose additional retaliatory sanctions against the US by designating US lawmakers (the Biden Administration imposed similar sanctions on the Russian Duma in late March).
The Biden Administration issued a new Executive Order (EO) on April 6, prohibiting any new investment or expansion of services in Russia by a US person, as determined by the Secretary of the Treasury in consultation with the Secretary of State. The EO also prohibits any facilitation of investment in identified services by a foreign person as well, opening the door to secondary sanctions for future violations.
The Administration increased the number and significance of their sanctions designations. In addition to the children of senior Russian officials, including Vladimir Putin, they have expanded to include Alrosa, Russia’s biggest diamond mining company, and have levied full blocking sanctions on Sberbank and Alfa-Bank and their subsidiaries. There has also been an increased focus on sanctions evasion networks, including the April 5 Treasury action against the virtual currency exchange Garantex and the darknet market Hydra. The latter included a joint operation between the US Department of Justice and German authorities that shut down Hydra and seized $25 million in bitcoin.
On April 9, the Department of Commerce applied restrictions to the export and reexport of all commerce control list goods, services, and technology to Russia. The prior week, Commerce issued a final rule adding 120 entities to the Entity list, a list of foreign persons, businesses, and organizations requiring special licensing from Commerce, as a means to further restrict the ability of Russia’s military to continue its operations in Ukraine.
Negotiations to restore the Iran nuclear agreement have stalled as the Administration is reportedly hesitant to rescind or otherwise weaken terrorism sanctions—particularly the designation of Iran’s Islamic Revolutionary Guard Corp as a terrorist organization. Republican Senators and Members of the House of Representatives, including an increasing number of Democrats, have been particularly vocal.
In April 6th testimony before the House Financial Services Committee, Secretary Yellen noted that the Administration is prepared to apply sanctions to China in the event that China attempts to invade Taiwan. Additionally, China disclosed that it had imposed sanctions on US government officials in response to US sanctions on China for human rights abuses under China’s anti-foreign sanctions law. Expect blocking sanctions against China to be a point of discussion in coming months, particularly from the Hill.
Democratic People’s Republic of Korea (DPRK)/North Korea
On April 1, the Administration designated North Korea’s Ministry of Rocket Industry and an associated network of trading companies in response to the DPRK’s February 26, March 4, and March 24 intercontinental ballistic missile launches. Additionally, the Administration updated the listing of the Lazarus Group, a North Korean cybercrime group, on April 14, two days after the Department of Justice sentenced an American citizen to more than 5 years in prison for providing the DPRK technical advice and services, including how to use cryptocurrency and blockchain technology. Additional actions on the part of the Administration and Congress will likely increase and DPRK provocations become more frequent.
On April 7, the House and Senate passed two bills imposing restrictive measures on Russia and Belarus due to Russia’s invasion of Ukraine. The first, HR 6968 (passed 413-9 in the House and 100-0 in the Senate), bans the importation of energy products from Russia, including oil and natural gas. The second, HR 7108 (passed 420-3 in the House and 100-0 in the Senate), suspends normal trade relations with Russia and Belarus and increases tariffs against the two countries. It also permanently authorized the Global Magnitsky sanctions regime. The President signed both into law on April 8.
On April 5, the House Foreign Affairs Committee favorably reported the following measures: HR 7276, Ukraine Invasion War Crimes Deterrence and Accountability Act (McCaul/requires US government reporting on Russian war crimes in Ukraine); HR 7312, to prohibit participation of the Russian Federation in the G7 (Keating/prohibits the Administration from using Federal funds to support or facilitate Russia’s participation in the G-7); HR 923, Georgia Support Act (Connolly/provides security assistance to Georgia and imposes sanctions on human rights abusers in Abkhazia and South Ossetia); HR 7311, Countering Malign Russian Activities in Africa Act (Meeks/requires reporting on and a strategy to counter Russian activities in Africa); HR 7340, to provide for congressional oversight of certain sanctions imposed with respect to the Russian Federation (Meuser/provides the Congress the ability to formally nominate individuals and entities for sanctions designations under EO 14024); HR 7338, Russia Cryptocurrency Transparency Act (Meeks/requires congressional notification of rewards paid using cryptocurrency by the administration, authorized the Secretary of State to appoint a Director of Digital Currency Security, and contains other reporting requirements); HR 7372, Protecting Semiconductor Supply Chains from Putin Act (Titus); HR 7314, AXIS Act (Barr/established an interagency Working Group on Semiconductor Supply Disruptions); HR 3344, Transatlantic Telecommunications Security Act (Kaptur/establishes within the State Department tan International Telecommunication Union Security Campaign Director); HR 6930, Asset Seizure for Ukraine Reconstruction Act (Malinowski/permits the administration to confiscate all property blocked by Treasury of designated entities associated with Russia).
It is unclear what the pathways for passage are for any of these with respect to the House or Senate, or if they could be absorbed into broader legislation later.
The Administration has signaled that it may begin to utilize secondary sanctions against individuals and entities that provide support for or transact with sanctioned Russian persons. Also, expect the continued rapid expansion of both sanctionable conduct and designated individuals and entities. As with Sberbank, there will likely be additional migration of entities subjected to non-property blocking, less stringent sanctions, to full property blocking sanctions. Along with all of these activities comes increased risk.
Russia may be on the verge of defaulting on its upcoming bond payments in May and may already be in default given its bond payments this month were made in Rubles after the US refused to allow Russia to pay in dollars, reportedly in violation of their contracts. If Russia defaults, bondholder groups would likely attempt to target Russian government property abroad and could result in increased litigation and a potential standoff between Russia and its creditors.
With the administration’s latest drawdown in security assistance, the authorization and appropriations for such assistance may be running low. By early summer, resources could become an issue again, likely prompting an administration request, to which congress could attach additional sanctions legislation.