US Expands Russia Export Controls, Sanctions

The U.S. expanded export controls on Russia to cover a broader range of “commercial and industrial operations,” including wood products and construction machinery, the Commerce Department said. The new controls add “stringent” licensing restrictions for more items subject to the Export Administration Regulations destined for Russia, the Bureau of Industry and Security said in a final rule, which includes the specific Schedule B numbers or Harmonized Tariff Schedule codes of the newly restricted items.

The new restrictions, many of which apply to items that previously didn’t require a license for “most exports” to Russia, “further demonstrates the shared resolve of the U.S. and our allies and partners to deny the Russian military the resources and revenue it needs,” Commerce Secretary Gina Raimondo said. The controls add 205 6-digit HTS codes and their corresponding 478 Schedule B numbers to the list of items that require licenses to export to Russia, which better aligns U.S. restrictions with those already in place by the EU.

The controls, which took effect May 9, capture a range of industrial equipment, from air conditioning machines to elevator parts to ironing machines to machine tools for finishing metal. All exports, reexports and transfers that now require a license as a result of the increased export restrictions that were aboard a carrier to a port as of May 9 may proceed to their destinations under the previous eligibility, BIS said.

A senior administration official said the restrictions will help build on existing U.S. export controls that have already forced two “major” Russian tank plants -- the Uralvagonzavod Corporation and the Chelyabinsk Tractor Plant -- to suspend operations. The official, speaking to reporters May 8, also said Russian companies that operate heavy machinery made by Caterpillar or John Deere have also been forced to halt production or have faced “significant disruptions” due to shortages of components.

The official said the U.S. initially focused its export controls on “foundational technology inputs,” such as microchips, but is now “broadening into industrial products that have a similar effect, we think, on [Russian President Vladimir] Putin’s ability to prosecute his war ambitions.”

Russia hasn’t had “any success” in sourcing these inputs elsewhere, the official said. “We mapped this out pretty carefully beforehand, in terms of our export controls and especially on technologies,” the official said, adding that the U.S. and partners picked goods and technologies for which they are the world’s main suppliers. “We don’t think Russia has many options other than to try to produce these goods or services domestically, which I think would be a very tall task.”

The controls came one day after the White House announced a series of additional Russia sanctions, including new designations targeting Russian state-controlled media entities and banks. The Office of Foreign Assets Control designated "individuals and entities critical to Russia’s ability to wage war against Ukraine," including the board members of two of Russia’s most important banks, a Russian state-owned bank and 10 of its subsidiaries, a state-supported weapons manufacturer and three of Russia’s state-controlled television stations. OFAC also updated its Specially Designated Nationals List with Sberbank executives, Gazprombank board members, the Moscow Industrial Bank and 10 of its subsidiaries.

The administration official stressed that its designation of Gazprombank is “not a full block” and doesn’t freeze the bank’s assets or prohibit transactions. “We are not sanctioning Gazprombank in the same way that we did with Sberbank or VTB or any of the other largest banks,” the official said. “What we’re signaling is that Gazprombank is not a safe haven, and so we’re sanctioning some of their top business executives -- they’re the people who sit at the top of the organization -- to create a chilling effect."

OFAC issued three new Russia-related General Licenses and updated one. General License 33 authorizes certain transactions with Channel One Russia, NTV Broadcasting Company and Television Station Russia-1 through 12:01 a.m. EDT, June 7. General License 34 authorizes the wind-down of accounting, trust and corporate formation, or management consulting services, to Russians through 12:01 a.m. EDT, July 7. General License 35 authorizes certain transactions involving credit rating or auditing services to people in Russia through 12:01 a.m. EDT, Aug. 20. Updated General License 25A authorizes telecommunications-related transactions involving Russia. The agency also posted new frequently asked questions to provide more information on the licenses and sanctions.

Treasury also issued two new directives banning the provision of certain management consulting and accounting services. These services are “key to Russian companies and elites building wealth, thereby generating revenue for Putin’s war machine, and to trying to hide that wealth and evade sanctions," the White House said.

The administration purposefully didn’t target legal services under its new sanctions but could change that in the future, the official said. “We made a judgment, at least for now, that if there was a desire to seek due process through a U.S. lawyer, we would allow that to continue,” the official said. “But we’re reevaluating the breadth of these services, sanctions every day.” The official specifically said the U.S. is “talking very actively” with the U.K. about whether it “ought to broaden” the sanctions to also cover lawyers. “We’ll just watch what happens in the aftermath of this ban,” the official said.

Along with the U.S. sanctions, the G-7 issued a joint statement committing to phasing out or banning Russian oil imports. Member countries said they plan to stop buying the oil “in a timely and orderly fashion, and in ways that provide time for the world to secure alternative supplies.” “This will hit hard at the main artery of Putin’s economy and deny him the revenue he needs to fund his war,” the White House said.