BIS Toughens Restrictions on Exports to Russia

"Effective immediately, BIS will deny pending applications for licenses to export or re-export any high technology item subject to the EAR to Russia or occupied Crimea that contribute to Russia’s military capabilities," it said. BIS is also "taking actions to revoke any existing export licenses which meet these conditions. All other pending applications and existing licenses will receive a case-by-case evaluation to determine their contribution to Russia’s military capabilities."

The Treasury’s Department Office of Foreign Assets Control (OFAC) also sanctioned an additional seven Russian officials and 17 companies, while the Commerce Department imposed export restrictions on 13 of those companies. U.S. companies will face license requirements that include a presumption of denial for the export, re-export or “other foreign transfer” to the companies of items that originate in the U.S. BIS said it placed the following companies on the Entity List: Stroytransgaz Holding, located in Cyprus; Volga Group, located in Luxembourg and Russia; and Aquanika, Avia Group LLC, Avia Group Nord LLC, CJSC Zest, Sakhatrans LLC, Stroygazmontazh, Stroytransgaz Group, Stroytransgaz LLC, Stroytransgaz-M LLC, Stroytransgaz OJSC, and Transoil, all located in Russia.

The individuals and entities are close to Russian President Vladimir Putin’s inner circle, said the White House. “The goal here is not to go after Mr. Putin, personally," said Obama during a press conference in Manila, Philippines. "The goal is to change his calculus with respect to how the current actions that he’s engaging in in Ukraine could have an adverse impact on the Russian economy over the long haul, and to encourage him to actually walk the walk and not just talk the talk when it comes to diplomatically resolving the crisis in Ukraine.”

The restrictions on high-technology dual-use items is far more significant to the U.S. business company, however, said J. Triplett Mackintosh, international trade lawyer and partner at Holland & Hart. “The reason the high-tech ban is such a big one, is if you read what came out of White House, there is no specification of the items and services,” said Mackintosh. “In other words, this may be effectively an arms embargo, although they haven’t come out and said that.”

The BIS export restrictions are likely causing significant consternation and uncertainty for a host of U.S. and foreign companies that deal with Russian and entities through U.S. State and Commerce licenses, said Mackintosh. “For example, if a French company is proposing to sell a helicopter carrier, you have to assume there are U.S.-origin items in the system … components of some kind. They almost always do, given the complexity of modern defense systems,” said Mackintosh. “The French company may say now there’s no way State is going to grant a license, even though we’ve built in this $100 million vessel $1 million of US components.”

Defense contractors and exporters are undoubtedly scrambling to contact their legal counsel and relevant U.S. agencies, said Mackintosh. Moreover the license denials and revocations likely will not be made public, making license requirements for specific items difficult to determine, added Mackintosh. “Unless subject to Congressional notification requirements, generally these licenses or other authorizations are not public,” said Mackintosh. “This will contribute to uncertainty among industry participants who rely on these licenses. Gauging where the line might fall under this new policy will be difficult. That usually results in companies altering behaviors and avoiding the market that is subject to the policy shift.”

OFAC also placed the following 4 entities on the Specially Designated Nationals (SDN) List (here):

• Investcapitalbank
• JSB Sobinbank
• SMP Bank
• Stroytransgaz Holding

OFAC targeted the following seven individuals:

• Belavencev, Oleg Evgenyevich
• Chemezov, Sergei
• Kozak, Dmitry
• Murov, Evgeniy Alekseyevich
• Pushkov, Aleksei Konstantinovich
• Sechin, Igor
• Volodin, Vyacheslav