The first anniversary of Russia’s invasion of Ukraine saw a dramatic quantitative and qualitative expansion in sanctions against Russia. At the same time, Congress increased its focus on China through a series of committee legislative markups in the House and introduction of bills in the Senate.
Russia
February 24 witnessed the most significant expansion of sanctions against Russia since the initial stages of the war, and the Administration announced a number of multilateral initiatives aimed at enforcing these measures. The Treasury and Commerce departments imposed sanctions on over 100 Russian persons, added dozens to the Entity List1, and imposed additional export control restrictions on multiple non-controlled items with a commercial applicability, including biologics and associated equipment. They also imposed new export control restrictions targeting the Russian-Iranian trade in unmanned aerial systems. Also announced were increases in tariffs on dozens of Russian products, including aluminum. Finally, the G7 is reportedly establishing an “Enforcement Coordination Mechanism” to improve the information sharing and coordinate enforcement efforts related to individuals and entities engaged in sanctions evasion. The EU also renewed Russia sanctions during the reporting period.
Equally as significant is the Administration’s articulated enforcement posture. On March 2, the Treasury, Commerce, and Justice departments jointly published updated guidance highlighting warning signs for sanctions and export control evasion, and encouraged the imposition of a risk-based approach to sanctions compliance. On March 9, the Russian Elites, Proxies and Oligarchs (REPO) Task force (Australia, Canada, France, Germany, Italy, Japan, the United Kingdom, the United States, and the European Commission) held a meeting in which they issued an advisory on sanctions evasion methodologies and noted the status of Russian assets owned by the Central Bank and National Wealth Fund. This was followed by the U.S. obtaining a warrant to seize an aircraft owned by Rosneft Oil Company. As noted before, the status of Russian sovereign assets is an area to watch, particularly as the U.S. criticizes the pace of enforcement with certain partners. There remain a few other areas to watch in the near-term include the following:
Nuclear Sanctions: Future Polish and Ukrainian officials also continued to call for international sanctions against Russia’s nuclear energy sector, which is an area to pay close attention to as a potential next step by the U.S. and other G7 members.
Another area to watch, as previously noted, is the selective removal of sanctions against certain entities. For example, OFAC recently delisted a former Kazakh subsidiary of Sberbank after it was sold to the Kazakh government-owned Baiterek bank. The Administration and G7 will likely try to repeat sanctions removal for foreign branches of Russian banks and companies that are sold off and are no longer tied to Russia.
China
In the aftermath of the Biden Administration warning China not to provide lethal assistance to Russia, China’s foreign minister Qin Gang warned the United States on sanctions policy as Xi Jinping tried to rally China’s private sector to help overcome “containment” by the U.S. and its allies. During this period, Commerce added 28 Chinese entities and 9 others for contributing to “Russia’s military and/or defense industrial base, supporting PRC military modernization, and facilitating or engaging in human rights abuses in Burma and in the People’s Republic of China (PRC).” Reports also indicate that Treasury and Commerce have submitted reports to Congress with a plan to prohibit U.S. investors from producing funding to foreign companies that could contribute to China’s military capabilities.
Iran
The Administration has continued to target Iranian entities although they have still not designated or re-designated strategically significant targets. The Administration has continued to target entities selling and transporting Iranian petrochemical products largely built around the Trilliance Network. The Administration has also prioritized the targeting of Iranian drone production networks targeting companies operating in China and Turkey; the Administration has yet to designate major Iranian airlines for this trade. Finally, the Administration continued to target Iranian human rights violators, including those managing Iran’s prison system. During the reporting period, the U.K. imposed sanctions against Iran’s Revolutionary Guard Corps senior officials but have yet to designate the organization as a whole as a proscribed organization.
Miscellaneous
Other developments during the reporting period include the following:
Treasury issued General License (GL) no. 23 and BIS issued guidance to facilitate the flow of earthquake relief into Syria, which provided broad exemptions for transactions normally prohibited or sanctionable related to earthquake relief. This GL was quickly followed by the E.U. and E.U.-aligned states.This effort has been criticized in anti-regime elements as being far too broad.
The Biden Administration released the new Conventional Arms Transfer memo, focused on ensuring that arms transfers to not support corruption or undermine good governance, in addition to preventing proliferation.
China
The China debate took center stage during the reporting period, with the app TikTok being the primary target. During the reporting period, Senate Intelligence Committee Chairman Mark Warner (D-VA) and Senate Minority Whip John Thune (R-SD) introduced legislation with a total of 13 bipartisan cosponsors providing the Department of Commerce with the expanded authority “to review, prevent, and mitigate ICT transactions that pose undue risk, protecting the U.S. supply chain now and into the future.” The Department of Commerce has already voiced its support for this legislative initiative, which was referred to the Senate Commerce, Science, and Transportation in the Senate, and would likely be referred to the House Committee on Energy and Commerce.
There are multiple other legislative initiatives taking aim at TikTok. Senator Marco Rubio (R-FL), the Ranking Member of the Senate Intelligence Committee, and Congressman Mike Gallagher (R-WI), Chairman of the Select Committee on China, already have reintroduced legislation in the Senate imposing sanctions on TikTok. Senator Rubio chose not to cosponsor the Warner legislation, noting that it did not mandate particular action against TikTok. During a Senate Intelligence Committee hearing (starting at 44:08) on March 8th, Senator Rubio asked FBI Director Christopher Wray whether the Chinese government could use TikTok to access data on millions of Americans, control software on their devices, or drive narratives to divide Americans, and Director Wray answered in the affirmative.
House Foreign Affairs Committee Chairman Michael McCaul (R-TX) has also introduced and moved in Committee legislation targeting TikTok, although along a party-line vote. This legislation would permit and then mandate the Administration to target apps that abuse the sensitive personal data of Americans but is specifically focused on China. Negotiations are now underway as to how to harmonize these legislative initiatives.
During this reporting period, both the House Financial Services Committee and House Foreign Affairs Committee held markups on multiple China-related measures. The Committees have also been pressuring the Administration to take a more hard line towards China. Chairman McCaul criticized Commerce for approving over $23 billion in licenses for blacklisted Chinese firms in general, and export licenses for Huawei in particular. On March 6, Chairman McCaul and Ranking Member Gregory Meeks (D-NY) wrote a letter to the Administration that triggered a legislative mandated determination under the Global Magnitsky sanctions regime whether the Hangzhou Hikvision Digital Technology has engaged in human rights-related sanctions.
TikTok legislation will likely be further considered in the House and Senate in the coming months, and China-related legislation that has already moved through committee may be considered on the House Floor over the next few months. The key consideration is whether the legislation itself will be China-specific or broadened.
The Administration will likely continue to enforce sanctions against Russia; watch for potential oil-cap enforcement actions.