Sanctions Watch

Roundup: June 7 - June 15, 2022

June 17, 2022

Russian sanctions expansion continued to slow, with most activity around the issuance of guidance and general licenses. There is a building confrontation between some in Congress and the Biden Administration over both Cuba and Venezuela sanctions policy. While we expect an uptick in sanctions designations against Russia, the economic impact of these measures on Russia may be less severe and may be limited to the targeting of additional Russian proxies. The main venue for possible legislative action will shift to the appropriations and defense reauthorization processes.

Russia

In a sign that fissures have emerged within the Administration over Russia sanctions policy, a report surfaced noting concerns that US sanctions against Russia have had severe, unintended economic blowback. This report comes as fissures within the Administration over sanctions policy have slowed the next significant round of designations. As a result, the Administration may increase their targeting of Russian surrogates or affiliated entities, such as the Russian Imperial Movement, which was designated on June 15.

On June 7, Treasury issued a FAQ that banned US individuals and entities from purchasing Russian debt on secondary markets. While they can invest in US funds that contain such debt, and they can also hold and/or sell Russian assets, they cannot purchase any such debt. The last week also saw the Administration clarify the application of sanctions for the private sector. This includes the following:

On June 14, Treasury extended a general license that allows for US financial institutions to process Russian energy transactions denominated in dollars until December 5. Treasury also issued a number of FAQs providing details on allowable activities, including its intent to wind down oil transactions by December, noting that the Russian energy sector is not subject to comprehensive sanctions, and other information on the scope of permissible and non-permissible transactions.
On June 9, Treasury issued additional FAQs further clarifying the prohibitions on certain accounting, trust and corporate services. Specifically adding “management consulting services to include services related to strategic business advice; organizational and systems planning, evaluation, and selection; development or evaluation of marketing programs or implementation; mergers, acquisitions.

Venezuela and Cuba

Venezuela and Iran announced 20-year mutual aid plan on June 11 with an emphasis on energy and petrochemical cooperation, which is likely to curtail any sanctions relief for Venezuela in the energy sector. Treasury also amended Cuba sanctions regulations to weaken restrictions on travel and remittances. Against the backdrop of a contentious Summit of the Americas, both Venezuela and Cuba sanctions programs may start to receive additional scrutiny from the Administration and Congress.

No significant actions. The NDAA process was initiated in the House and the Senate, with House Armed Services Committee subcommittee markups, and the Senate Armed Services Committee Full Committee markup. The House Armed Services is taking place on June 22, and both bills should be on the Floor in July.

Look for Cuba and Venezuela to emerge as contentious issues. Expect multiple attempts to add sanctions legislation to the NDAA and appropriations legislation over the next few months. Finally, the administration’s split may begin to replicate itself in Congress on the issue of Russia sanctions