Sanctions Watch

Roundup: October 22 – November 4, 2022

The Biden Administration increased their targeting of Iranian networks, particularly those linked to Russia. After issuing a number of significant Russia-related designations and expanding sanctions or other restrictive measures to both Russia and China, Administration activities were relatively subdued during this reporting period. The level of congressional activity was low ahead of the November 8 midterm elections.


European Union member states will hold off on seeking a compromise on the oil price-cap mechanism until a technical seminar on the issue takes place next week. Member states are aiming to reach a deal on the Commission’s third emergency package of energy measures when they meet on Nov. 24, but it is still unclear if the Commission will propose anything on a price cap before then. There are concerns that any delay could risk that the region is left without a temporary price measure this winter. Treasury also issued guidance on the US oil cap, noting that it will temporarily exempt shipments loaded before the Dec. 5 implementation date, offering some clarity to oil shippers, traders and investors. Cargoes must be unloaded by Jan. 19 to qualify for exemption.  

The European Union is studying the feasibility of using billions of euros worth of Russian central bank assets already frozen by member states to help with Ukraine’s reconstruction efforts, according to people familiar with the matter. The options would focus on how to eventually seize some of the about $300 billion of the Central Bank of Russia’s reserves that were frozen by the EU, the US and other allies following Russia’s invasion of Ukraine. While US law limits the ability of the Administration to take sovereign property, expect this to emerge as an issue both within the EU and in US circles.  

Both the US and EU may expand their export control restrictions and sanctions on Russia given reports that Russia has been stripping washing machines and other non-controlled low-technology consumer goods for possible military components. Finally, the IRS noted that it had opened 20 criminal investigations into Russia sanctions evasion.   

North Korea

North Korea’s continued provocations, including the testing and deployment of ballistic missiles, will likely result in a significant response by the US to include sanctions.  

The United States and its allies clashed with China and Russia over North Korea’s escalating ballistic missile launches and American-led military exercises in South Korea, again preventing any action by the deeply divided U.N. Security Council.  The State Department recently offered a reward of up to $5 million for information leading to the arrest of Kwek Kee Seng, a Singaporean national and director of the Singapore-based shipping agency and terminal operations company Swanseas Port Services that allegedly provided fuel shipments to North Korea. Expect additional sanctions designations in the near-term. 


The Biden Administration has designated a number of Iranian officials and a network associated with Iran’s Islamic Revolutionary Guards Corps’ (IRGC) oil smuggling networks. One such network was an oil trading network consisting of several individuals, companies and vessels supporting Hezbollah and the Islamic Revolutionary Guard Corps-Quds Force through its illicit oil trade.  The Administration also continued to impose human rights sanctions on Iranian officials responsible for the continuing crackdown against protestors there. Over the past two weeks, the Administration has designated senior Iranian individuals for human rights abuses. The Administration also ventured into additional designations of Iranian entities by designating the 15 Khordad Foundation, a purported charitable organization subordinate to Iranian Supreme Leader Ali Khamenei, who offered a bounty for the assassination of Salman Rushdie.  Expect the Administration to continue to impose sanctions against individual Iranians, and expand the list of entities, both Iranian and foreign, that have engaged in or facilitated human rights abuses.   


During the reporting period, the Commerce Department clarified that the recently-imposed export control restrictions on US persons assisting China’s chip industry applies to those conducting or authorizing the delivery of items used to develop or produce advanced chips at a plant in China (including maintaining, repairing and refurbishing those items), but not those who perform related clerical or administrative duties. Concurrently, the Administration is reportedly considering extending export control quantum technology, artificial intelligence, or advanced algorithms.  Against this backdrop, two suspected Chinese intelligence officers were charged with attempting to obstruct a US criminal investigation of Huawei.


The Administration expanded sanctions against Nicaragua to include targeting that country’s gold sector and allowing the Administration to target other sectors of its economy. This includes the designation of Nicaragua’s state-controlled General Directorate of Mines (DGM), which manages gold operations in the country and generates funds. 


Russia sanctions on Capitol Hill remained muted over the reporting period given the midterm elections. Of note was a bipartisan House letter sent to the Treasury, State and Commerce Departments on the issue of Iranian drones with Western components being sent to Russia for use in Ukraine. The letter noted a possible expansion of EAR-99 export control restrictions (low-tech consumer goods) in both the Russia and Iran context.


Minority Leader Kevin McCarthy (R-CA) noted that if Republicans take control of the House, that they would establish a select committee on COVID-19 with a focus on China.  Broader congressional efforts will likely expand beyond COVID-19, to include focusing on Taiwan’s defense; export control reform with China as the primary motivating factor; strengthening inbound (CFIUS) and creating outbound investment screening for US companies; reshoring and allied-shoring supply chains; Chinese language and cultural programming in the US; intellectual property theft; and sanctions policy, including those associated with China’s human rights record.  In the Senate, the Chinese government directly rebuked Sen. Josh Hawely (R-MO) after he introduced legislation sanctioning Chinese premier Xi Jinping for human rights abuses. 


Senators Marc Rubio (R-FL) and Ted Cruz (R-TX) sent a letter to the Administration asking President Biden not to provide additional concessions to the Maduro government.  As noted in the last Sanctions Watch, any legislative response will likely come after the midterm elections when the House and Senate reconvene and may even wait until January.  

The Administration will likely issue additional guidance on the oil-cap policy as the US and EU attempt to reconcile their positions on the issue. Congress may end up combining the National Defense Authorization Act and the Omnibus Appropriations Act into a single vehicle rendering additional significant sanctions (other than those already contained) in either bill unlikely.