Sanctions Watch

Roundup: February 1 - February 22, 2023

February 22, 2023

Russia and China-related sanctions were the focus of the last two weeks both with respect to the Biden Administration and Congress. We will likely see new initiatives from the Administration coming out of last week’s Munich Security Conference (February 17-19), and once Congress returns at the end of February now that the relevant national security committees have organized. 


U.S.-China relations deteriorated significantly during the reporting period. In the aftermath of the overflight of the U.S. by a reported Chinese surveillance balloon, the U.S. Department of Commerce added six Chinese entities engaging in related research and production to the entity list, which consists of entities engaging in activities contrary to the United States’ national security or foreign policy interests. The Chinese government retaliated by placing Lockheed Martin and Raytheon on the “unreliable list,” blocking China-related imports and exports for those companies. Questions remain with respect to whether the consideration of additional measures, such as outbound investment screening, will be accelerated by the Administration under pressure from Congress.  

During this timeframe, the Administration also engaged in a coordinated action with the United Kingdom, Australia, Canada, and the EU on imposing additional sanctions on government officials in Myanmar on the anniversary of the coup with a particular emphasis on the energy sector. Chevron also completed its exit from Myanmar during this reporting period.  


In a speech this week, Deputy Secretary of the Treasury Wally Adeyemo outlined the Administration’s 2023 sanctions posture towards Russia, with an emphasis on targeting sanctions evasion networks. The Munich Security Conference G-7 meetings reviewed Russia sanctions with the possibility of additional actions stemming from it. The EU’s 10th round of sanctions is likely to focus on financial sector designations, such as Russia’s largest private bank Alfa-Bank, and additional trade bans on Russian rubber and asphalt imports and other components that could be used to make weapons. Notably absent from consideration by the EU are any sanctions on Rosatom or Russia’s nuclear sector.

During this reporting period, EU member states agreed on the level of price caps to be imposed on shipments of Russian refined oil products, limiting the price of premium products such as diesel at $100 per barrel and that of low-end products including fuel oil at $45 a barrel.  Now that the price caps have been initially set, attention will turn to enforcement by G-7 members, particularly as Russia announced production cuts in response. The EU continues to examine ways to seize billions of dollars in Russian sovereign assets to pay for Ukraine reconstruction and launched an ad hoc group investigating how to do so. This effort included a call for EU countries to report on the status of such reserves. 

During the reporting period, Treasury targeted sanctions evasion networks supporting Russia’s defense industrial base, leveraging information from the REPO Task Force. There were also a number of Russia-related corruption designations under the Global Magnitsky sanctions regime, and Russian activities related to cyberattacks. The Administration has also been reviewing Russia’s gold sector for possible sanctions either as a sector or targeting individual networks. The Treasury Department removed from sanctions a commercial bank that was a subsidiary of Russia’s Sberbank, which is now wholly owned by a company in Kazakhstan. This is particularly significant as the Administration will view this as a victory in compelling foreign subsidiaries of Russian companies to break their ties with parent Russian companies.


The Administration continued to focus on targeting Iran’s defense and energy sectors. The former focused on Iran’s UAV production for use by Russia in Ukraine, to include “eight senior executives of Paravar Pars Company, an organization previously designated in the United States and European Union’s (EU) sanction list for manufacturing unmanned aerial vehicles (UAVs) for Iran’s Islamic Revolutionary Guard Corps Aerospace Force.” The Department of Commerce concurrently added seven Iranian drone producers to the entity list. The Administration also continues to target Iranian petrochemical and petroleum buyers, primarily in Asia. Finally, Iraq’s foreign minister was in Washington, DC discussing the status of U.S. restrictions on dollar transactions with Iraq. Those restrictions were imposed due to Iran’s use of Iraq’s financial sector for sanctions evasion. 


It was reported that Venezuela will contract with an Iranian shipyard to build two oil tankers under an existing construction agreement.  While Venezuela’s state-run energy firm PDVSA has been trying to expand its efforts to buy and lease oil tankers to rebuild its fleet given the increase in the demand for Venezuelan oil after sanctions were relaxed, the decision to contract with Iran likely violates U.S. sanctions.


Multiple Committees in the House and Senate, particularly the Senate Foreign Relations Committee, the House Financial Services Committee, and the House Armed Services Committee, held their first oversight hearings of the new Congress on U.S. policy towards China. Of particular interest was supply chain security and outbound national security investment screening. With respect to the former, the tech sector and national security-related supply chains were discussed, particularly onshoring or allied-shoring these critical technologies and components. While there was a consensus of the utility of the latter, there was a very wide array of views with respect to how such a mechanism would work. 

In the near term, the disposition of TikTok will likely take center stage with respect to sanctions.  Senator Marco Rubio (R-FL), Ranking Member of the Senate Intelligence Committee, and Congressman Mike Gallagher (R-WI), Chairman of the Select Committee on China, reintroduced legislation imposing sanctions on TikTok. House Foreign Affairs Committee Chairman Mike McCaul (R-TX) previously stated his intent to move TikTok-related legislation at the end of February.


Bipartisan legislation was introduced to compel the Administration to designate the Russian private military company Wagner Group as a foreign terrorist organization. Legislation imposing statutory sanctions in line with the Russia oil cap has yet to be reintroduced but will likely be considered once congress reconvenes.

The Administration will be submitting its budget to Congress on March 9. Resourcing for sanctions enforcement, additional authorities, and the congressional response will all be critical to understanding how sanctions, AML/CTF, export controls, and associated policies will proceed in 2023.