The Administration’s expansion of sanctions since May 8, 2022 has targeted several different networks and entities, along with expanding prohibited conduct to include certain professional services (i.e., accounting, trust and corporate formation, and management consulting services). The expansion of these sanctions coincides with several expiring Treasury Department general licenses that could further complicate the sanctions landscape.
On May 8, 2022, the Biden Administration imposed a range of new sanctions, export restrictions, and designations with respect to Russia. The most impactful is likely the prohibition on the provision of certain professional services to any person located in Russia (a wind down of general activities through July 7th and certain credit rating and auditing services through August 20th). Specifically, the Treasury Department banned the provision of any accounting (according to FAQ 1034 “includes services related to the measurement, processing, and evaluation of financial data about economic entities”), trust and corporate formation, and management consulting services to any person located in Russia. This was the first time that any administration explicitly rendered the use of such companies prohibited rather than simply used for facilitating sanctions evasion or money laundering schemes. Doing so casts a wide net on different professions and actors to effectively include any US person participating in the creation, administration, or management of corporate vehicles for any Russian person.
The sanctions measures also targeted three important groups: three large Russian state-owned or controlled television stations, Gazprombank bank executives, and Russian shipping assets. Advertisers are now likely subject to restrictions in dealing with the Russian state-owned or controlled television stations. With respect to Gazprombank, while many executives were designated, the bank itself was not, although the professional services restrictions now apply to the bank. Nonetheless, it sends the critical message that the bank itself could ultimately be subject to a primary sanctions designation (for engaging in sanctionable conduct or for operating in a particular sector of the Russian economy), or a derivative designation (being owned or controlled by one or more specially designated nationals (SDNs)). Congressional pressure may also begin to build for a full Gazprombank sanction given the recent focus on Bank Rossiya at a Senate hearing featuring Janet Yellen. The listing of dozens of ships may also indicate a deeper dive into Russia’s maritime sector in terms of sanctions as those measures start to bite. Finally, the Department of Commerce imposed a licensing requirement on exports, re-exports, and transfers of a range of industrial goods “from wood products to construction machinery.” This is an area to watch as export restrictions against Russia generally stray further into the EAR 99 list, a catch-all designation for export-controlled goods and technology that is not specifically identified on export control lists.
Almost as impactful as the expansion of sanctions designations are the pending deadlines for the winddown of current sanctionable activities, known as general licenses (GLs). Some licenses have multiple expiration dates attached to them for multiple measures while most have single expiration dates attached. While the Administration has revised and amended some, they have also allowed some fairly significant GLs, such as Alfa Bank (Russia’s 7th largest bank) and Alrosa PJSC (Russia’s largest diamond mining company), to expire. For most of the GLs, the Administration has three options: (1) extend them for a set period of time equal to or greater than the underlying license, (2) allow the GL to expire, and (3) modify the GL with respect to the permissible conduct, shorter timeline for expiration, or a combination of the two. FS Vector has compiled the following table of existing and recently expired GLs. As shown below, May 25 will be a big date to watch as many GLs will expire on this date.
General Licenses with Multiple Expirations:
Licenses | Description | Expiration Date(s) |
Russia-related General License 17A | Authorizing Transactions Related to Certain Imports Prohibited by Executive Order 14068 Issued: March 24, 2022. It authorizes the winddown of the importation into the US of Russian alcoholic beverages and non-industrial diamonds. | March 25, 2022 |
Also authorized the winddown of the importation into the US of fish, seafood, and associated items. | June 23, 2022 | |
Russia-related General License 10C | Authorizing Certain Transactions Related to Derivative Contracts (April 7, 2022). It authorizes transactions that are ordinarily incident and necessary to the wind down of derivative contracts entered into prior to 4:00 p.m. eastern standard time, February 24, 2022, for State Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank; Public Joint Stock Company Bank Financial Corporation Otkritie; Sovcombank Open Joint Stock Company; Public Joint Stock Company Sberbank of Russia; VTB Bank Public Joint Stock Company. | May 25, 2022 |
It authorizes transactions that are ordinarily incidental and necessary to the wind down of derivative contracts entered into prior to 4:00 p.m. eastern daylight time, April 6, 2022, of Joint Stock Company Alfa-Bank, provided that any payments to a blocked person are made into a blocked account. (3) Except as provided in paragraph (c) of this general license, all transactions prohibited by the RuHSR that are ordinarily incident and necessary to the wind down of derivative contracts entered into prior to 4:00 p.m. eastern daylight time, April 7, 2022, that (i) include Public Joint Stock Company Alrosa (“Alrosa”), or any entity in which Alrosa owns, directly or indirectly, a 50 percent or greater interest (collectively, “Alrosa entities”) as a counterparty or (ii) are linked to debt or equity of an Alrosa entity are authorized through 12:01 a.m. eastern daylight time, July 1, 2022, provided that any payments to a blocked person are made into a blocked account. (4) Debits to accounts on the books of a U.S. financial institution of the blocked entities described in paragraph (a) of this general license are authorized to the extent ordinarily incident and necessary to effect the transactions authorized in paragraph (a) of this general license. (b) Except as provided in paragraph (c) of this general license, all transactions prohibited by Directive 4 under Executive Order (E.O.) 14024, Prohibitions Related to Transactions Involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation, that are ordinarily incident and necessary to the wind down of derivative contracts, repurchase agreements, or reverse repurchase agreements entered into prior to 12:01 a.m. eastern standard time, March 1, 2022, that include the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation (collectively, “Directive 4 entities”) as a counterparty are authorized through 12:01 a.m. eastern daylight time, May 25, 2022. (c) | June 30, 2022 (Alfa-Bank) July 1, 2022 (Alrosa) | |
Russia-related General License 9C | Authorizing Transactions Related to Dealings in Certain Debt or Equity (April 7, 2022 ) It authorizes transactions that are ordinarily incident and necessary to dealings in debt or equity of State Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank; Public Joint Stock Company Bank Financial Corporation Otkritie; Sovcombank Open Joint Stock Company; Public Joint Stock Company Sberbank of Russia; VTB Bank Public Joint Stock Company. | May 25, 2022 |
It authorizes transactions that are ordinarily incident and necessary to dealings in debt or equity of Joint Stock Company Alfa-Bank. | June 30, 2022 | |
It authorizes transactions that are ordinarily incident and necessary to dealings in debt or equity of Public Joint Stock Company Alrosa. | July 1, 2022 | |
It authorizes transactions that are ordinarily incident and necessary to facilitating, clearing, and settling trades are authorized for Russian financial institution debt or equity. | May 25, 2022* *provided such trades were placed prior to 4:00 p.m. EST, February 24, 2022. | |
It authorizes transactions that are ordinarily incident and necessary to facilitating, clearing, and settling trades are authorized for Alfa-Bank debt or equity. | June 30, 2022* *provided such trades were placed prior to 4:00 p.m. EST | |
It authorizes transactions that are ordinarily incident and necessary to facilitating, clearing, and settling trades are authorized for Alrosa debt or equity. | July 1, 2022* *provided such trades were placed prior to 4:00 p.m. EST, April 7, 2022. | |
It authorizes debits to accounts on the books of a U.S. financial institution that are ordinarily incident and necessary to the receipt of interest, dividend, or maturity payments in connection with debt or equity of the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation issued before March 1, 2022. | May 25, 2022 |
General Licenses with Single Date Expirations
License | Description | Date of Issuance | Date of Expiration |
Russia-related General License 23 | Authorizing the Wind Down of Transactions Involving Joint Stock Company Alfa-Bank. It authorized the winddown of all transactions involving Alfa Bank. | April 6, 2022 | May 6, 2022 |
Russia-related General License 24 | Authorizing the Wind Down of Transactions Involving Public Joint Stock Company Alrosa. Issued. It authorized the winddown of all transactions involving Alrosa PJSC. | April 7, 2022 | May 7, 2022 |
Russia-related General License 29 | Authorizing the Wind Down of Transactions Involving Public Joint Stock Company Transkapitalbank. It authorizes the winddown of all transactions involving TKB, but not prohibited transactions related to financial sanctions, sanctions against the Russian Central Bank and related ministries, and those conducted with SDNs | April 20, 2022 | May 20, 2022 |
Russia-related General License 21A | Authorizing the Wind Down of Sberbank CIB USA, Inc. and Alrosa USA, Inc.It authorized the winddown of Sberbank and Alrosa operations in the US, or any entity owned or controlled by those banks | April 7, 2022 | June 7, 2022 |
Russia-related General License 33 | Authorizing the Wind Down of Operations or Existing Contracts Involving Certain Blocked Entities. It authorizes the winddown of all transactions involving Russian media stations Channel One Russia, NTV Broadcasting Company, Television Station Russia-1, but not prohibited transactions related to financial sanctions, sanctions against the Russian Central Bank and related ministries, and those conducted with SDNs. | May 8, 2022 | June 7, 2022 |
Russia-related General License 13 | Authorizing Certain Administrative Transactions Prohibited by Directive 4 under Executive Order 14024. It authorized U.S. persons to pay taxes, fees, or import duties, and purchase or receive permits, licenses, registrations, or certifications, through the Russian Central Bank. | March 2, 2022 | June 24, 2022 |
Russia-related General License 8B | Authorizing Transactions Related to Energy. It authorizes the State Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank; Public Joint Stock Company Bank Financial Corporation Otkritie; Sovcombank Open Joint Stock Company; Public Joint Stock Company Sberbank of Russia; VTB Bank Public Joint Stock Company; Joint Stock Company Alfa-Bank; or the Central Bank of the Russian Federation to engaged in transactions related to energy. | April 6, 2022 | June 24, 2022 |
Russia-related General License 34 | Authorizing the Wind Down of Accounting, Trust and Corporate Formation, and Management Consulting Services. This allows transactions relevant to the winddown of all accounting, trust and corporate formation, or management consulting services to any person in the Russian Federation by a US person. | May 8, 2022 | July 7, 2022 |
Russia-related General License 26A | Authorizing the Wind Down of Transactions Involving Joint Stock Company SB Sberbank Kazakhstan, Sberbank Europe AG, or Sberbank (Switzerland) AG. It authorizes the winddown of all transactions involving these Sberbank-related entities but not prohibited transactions related to financial sanctions, sanctions against the Russian Central Bank and related ministries, and those conducted with SDNs. | May 5, 2022 | July 12, 2022 |
Russia-related General License 35 | Authorizing Transactions Involving Credit Rating and Auditing Services. It authorizes all transactions relevant to the winddown of credit rating or auditing services to any person in the Russian Federation by a US person. | May 8, 2022 | August 20, 2022 |
Russia-related General License 30 | Authorizing Transactions Involving Gazprom Germania GmbH Prohibited by Directive 3 under Executive Order 14024 (May 2, 2022). It authorizes all transactions Gazprom Germania GmbH prohibited under directive 3 (new debt and equity restrictions). | May 2, 2022 | September 30, 2022 |
Russia-related General License 28 | Authorizing Certain Transactions Involving Public Joint Stock Company Transkapitalbank and Afghanistan. It authorizes the winddown of all transactions involving TKB, but not prohibited transactions related to financial sanctions, sanctions against the Russian Central Bank and related ministries, and those conducted with SDNs specifically with respect to Afghanistan. | April 20, 2022 | October 20, 2022 |
May 25, 2022 will be an important date for determining what general licenses will remain in place, allowed to expire or will be modified. Any extension of significant GLs will likely be combined with the expansion of sanctionable conduct and export control restrictions, additional sanctions designations, or both. Congress may or may not try to exert its influence through hearings or legislation depending on the Biden Administration’s actions.