Sanctions Watch

Roundup: June 6 - July 7, 2023

July 12, 2023

Sanctions against Russia are likely to accelerate in the wake of the Wagner Group’s drive on Moscow given the internal “cracks” within the Russian system that the Administration alleges. China remains a focus of both the Administration and Congress, while Iran remains a point of contention.  


Russia sanctions during the reporting period temporarily increased in their intensity likely due to instability in Russia and attempts to exploit that instability to undermine Russia’s operations in Ukraine. The Administration reacted to the events surrounding the Wagner Group by imposing sanctions on four gold-dealing companies in the Central African Republic, the United Arab Emirates, and Russia for financing Wagner Group mining operations in Africa. The Administration also released extensive guidance for the African gold sector miners, traders, refiners, exporters, users, consumers, financial institutions, and those otherwise engaged in the sector to ensure they conduct enhanced due diligence to address risks, to include Russia. 

This also fits a pattern of the United States (U.S.) increasingly targeting networks outside of Russia. The U.S., United Kingdom (U.K.), Ukraine, and France requested that the United Nations (UN) Security Council (UNSC) investigate Russia’s use of Iran-furnished drones against Ukraine as a violation of UN sanctions. This call came in the aftermath of the Khakova Dam breach, which both the Ukrainians and Russians blamed on each other. A similar situation now exists with the Zaporizhzhia Nuclear Power Station and reports that it may be targeted as well. An increase in sanctions could be part of a reaction to any targeting of the plant. In the aftermath of the dam’s destruction, the European Union (EU) agreed on an 11th sanctions package banning EU members from selling dual-use technologies to countries that might sell the products to Russia, extending the suspension of EU broadcasting licenses of five Russia-controlled media outlets, and banning access to EU ports for ships suspected of delivering cargo from Russia. 

U.S. coordination with allies and partners extended to the joint guidance on humanitarian aid exemptions for Russia sanctions, which included agricultural and medical equipment exports to Russia if they support basic human needs, as well as exceptions for telecommunications, financial services, and other services for citizens in conflict zones. Finally, the Financial Action Task Force (FATF) stated that Russia’s suspension from the group will remain in place, citing the impact of the country’s ongoing military aggression against Ukraine on the global financial system and urged vigilance surrounding current and emerging risks from sanctions circumvention by Russia.


China insisted that the U.S. remove sanctions on Chinese Defense Minister Li Shangfu in exchange for resuming high-level military communications and cooperation. Beyond that issue, two sanctions/export controls-related issues centered on technology export/import restrictions and fentanyl-related issues. With respect to restrictions on the import and export of key technology, it was reported that the Department of Commerce is considering new Chinese export controls on artificial intelligence chips or related cloud services—particularly those made by Nvidia—preventing them from being exported to China without obtaining a license. China has also been placing export and import restrictions on U.S. companies as well. With respect to the fentanyl issue, the Administration created an international coalition to combat synthetic drugs, as the Justice Department also filed its first criminal charges against Chinese chemical manufacturing companies for illegally trafficking fentanyl precursors. This period also experienced an increase in the application of sanctions against both Chinese and Mexican individuals and entities for narcotics production and trafficking. The Administration will likely shift its focus on China to targeting fentanyl-related actors.


During the reporting period the U.K. made explicit, and the EU signaled, its intent to maintain sanctions against Iran’s ballistic missile infrastructure after the sanctions on many of those entities are supposed to expire in October in line with the Iran nuclear agreement. This comes amid speculation during the reporting period that the U.S. and Iran were moving toward an interim agreement or understanding on the status of Iran’s nuclear program. 

During the reporting period, the Biden Administration continued to impose sanctions against Iran for its ballistic missile program to include entities operating in China and Hong Kong. Most significantly, the Administration issued guidance to counter “Iran’s UAV programs, including through preventing abuse of the U.S financial system and disrupting the procurement of foreign-sourced components.” With this guidance issued, there may be an increase in the number and significance of designations in this area. 

North Korea

During the reporting period, the UNSC added 16 persons from the Democratic People’s Republic of Korea (DPRK or North Korea) to the sanctions list for facilitating the DPRK’s ongoing nuclear program. Prior to that listing, the Biden Administration designated two China-based North Korean nationals involved in procuring equipment and materials for North Korea’s ballistic missile program. The nuclear envoys of South Korea and the United States also agreed on a strengthened partnership to prevent North Korea’s methods aimed at funding its illegal weapons development programs.


The House of Representatives, this week, is considering the National Defense Authorization Act for FY2024, which contains a range of sanctions and related provisions.  The House Rules Committee approved an initial list of 289 amendments, which will be considered on the House Floor starting Wednesday with any recorded votes rolled until Thursday. The individual amendments have been divided into five en bloc amendments which are listed with links to legislative text HERE. Debate and Floor consideration of other “controversial” amendments is still up in the air with a decision by House Republican Leadership dependent on working out deals with their members. Leadership has targeted Friday for final passage but there is a possibility that discussions could push final consideration into next week. For its part, the Senate Armed Services Committee filed its version of the NDAA on Tuesday. Senate Republican Leader McConnell (R-KY) has called for his counterpart, Senate Majority Leader Chuck Schumer (D-NY), to take “the necessary step to bring the NDAA to the Senate Floor next week.” With only eight days left on the current Senate calendar for this work period, Schumer could file set up votes for NDAA next week as soon as Thursday, as the floor amendment filing deadline has already passed.  


The China-Mexico nexus with respect to the production and trafficking of fentanyl into the U.S. has been the focus of multiple legislative efforts. Following the markup of multiple fentanyl sanctions bills in the House Foreign Affairs Committee in May, the Senate Committee on Banking, Housing and Urban Development also marked up the bipartisan FEND-Off Fentanyl legislation, led by Ranking Member Tim Scott (R-SC) that currently has 62 cosponsors in the Senate. Hearings during this timeframe also included a focus on the fentanyl trade and the China-centered money laundering networks behind it. 

Additional China-related initiatives were introduced during the reporting period (particularly in the NDAA) to include those directly relevant to China, and those that would have a significant impact on business operations with China. For example, the during the reporting period Senator Marco Rubio (R-FL) and Senator Jeff Merkley (D-OR) introduced the Uyghur Genocide Accountability and Sanctions Act, which extends sanctions to Chinese officials involved in human rights violations against the Uyghur population in Xinjiang.

In addition, there have been additional bipartisan initiatives to strengthen export controls with respect to China, such as calls for the stricter implementation of export control rules to prevent China from acquiring advanced semiconductors and related manufacturing equipment. During the reporting period, the lead Republicans on the Senate Intelligence and Armed Services committees, respectively, Senator Marco Rubio (R-FL) and Senator Roger Wicker (R-MS) introduced the Depriving Enemy Nations of Integral Authorizations and Licenses (DENIAL) Act of 2023. This legislation was introduced after considerable congressional criticism of Commerce’s use of licenses and would require “BIS to adopt a presumption of denial for any end user from China or Russia, and to notify Congress before approving a license to either country,” thereby providing Congress the ability to block the issuance of a license. This is not the only congressional effort. Sen. Michael Bennett (D-CO) noted in his press release accompanying Committee passage of the FY 2024 Intelligence Authorization Act efforts to strengthen export controls by requiring the intelligence community to collect and analyze data on export controls, entity listings, end-user monitoring, and other information the U.S. Department of Commerce can use for Entity list designation. Expect Congress to focus on these two areas in the near-term.


During the reporting period, a bipartisan coalition in the House and Senate, including House Foreign Affairs Committee Chairman Michael McCaul (R-TX) and Senate Foreign Relations Committee Ranking Member Jim Risch (R-ID) introduced the Rebuilding Economic Prosperity and Opportunity (REPO) for Ukrainians Act, which would use assets confiscated from the Central Bank of the Russian Federation and other sovereign assets of the Russian Federation for use in providing assistance to Ukraine. This is the most significant effort with respect targeting Russian sovereign assets, which is likely to accelerate over the next six months.


Congress sharply increased its bipartisan focus on Iran sanctions during the reporting period. The House Foreign Affairs Committee unanimously passed the Solidify Iran Sanction Act of 2023, led by Rep. Michelle Steel (R-CA) in the House and Sen. Tim Scott in the Senate. This legislation would strike the sunset clause in the Iran Sanctions Act and other critical legislative provisions, only allowing for their cessation if Iran ceases its nuclear weapon program, ballistic missile development, and support for terrorism. A bipartisan group led by Congressmen Mike Lawler (R-NY) and Jared Moskowitz (D-FL) in the House and Rep. U.S. Senators Marco Rubio (R-FL), Maggie Hassan (D-NH), and Jacky Rosen (D-NV) in the Senate introduced the Stop Harboring Iranian Petroleum (SHIP) Act that specifically targets entities conducting ship-to-ship transfers of oil and owning refineries that process Iranian oil. The legislation currently has eight cosponsors in the Senate and 63 cosponsors in the House.

 Two areas of emerging concern for Congress include consternation that any understanding regarding sanctions relief for an unwritten set of agreements or understandings could circumvent congressional review of such an agreement and concern regarding the investigation into the State Department Special Representative for Iran, Robert Malley. With respect to the former, elements of Congress will likely insist that Congress review any informal understanding or agreement under the Iran Nuclear Agreement Review Act. With respect to the latter, there is likely a congressional investigation now launched into the matter. 

As the NDAA and appropriations processes in the House and Senate proceed over the next two weeks, expect several sanctions-related provisions in each: for the NDAA on the floor and for appropriations measures in Committee. However, with respect to the latter, the number of amendments made in order may be considerably less in the House than in prior years.