On March 31, 2022, the US expanded the focus of US-Russia related sanctions to include the aerospace, electronics and marine sectors of the Russian economy.
Since the onset of the Russian-Ukraine conflict, the US has designated over 700 individuals and entities (persons) as Specially Designated Nationals (SDNs). As the assets of such SDNs – and entities they owned 50% or more – that are in the US or within the possession or control of US persons are blocked, such sanctions are often referred to as “blocking sanctions”.
The vast majority of the SDN designations made in connection with the Russian-Ukraine conflict have been made under Executive Order 14024 (EO 14024). EO 14024 authorizes the Office of Foreign Assets Control (OFAC) to impose blocking and other sanctions on a number of different grounds, including, under section 1(a)(i), on grounds that a person has been determined by OFAC:
to operate or have operated in the technology sector or the defense and related materiel sector of the Russian Federation economy, or any other sector of the Russian Federation economy as may be determined by the Secretary of the Treasury.
Thus, if the Secretary of the Treasury makes a determination that section 1(a)(i) of EO 14024 shall apply to a particular sector of the Russian economy, OFAC is authorized to impose blocking or other sanctions on persons determined to operate in such sector.
On February 22, 2022, US Treasury Secretary Janet Yellen made a determination that EO 14024 section 1(a)(i) shall apply to the financial services sector of the Russian economy. That same day, OFAC designated as SDNs the Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank (VEB), Promsvyazbank Public Joint Stock Company (PSB), and 42 of their subsidiaries. Two days later, on February 24, 2022, OFAC designated as SDNs VTB Bank Public Joint Stock Company and 20 of its subsidiaries, Public Joint Stock Company Bank Financial Corporation Otkritie and 12 of its subsidiaries, Open Joint Stock Company Sovcombank and 22 of its subsidiaries, and Joint Stock Commercial Bank Novikombank. Also on February 24, 2022, the US imposed non-blocking sanctions on Public Joint Stock Company Sberbank and 25 of its subsidiaries, and on 12 other Russian banks.
On March 31, 2022, Secretary Yellen determined that EO 14024 section 1(a)(i) shall also apply to the aerospace, electronics, and marine sectors of the Russian economy. While OFAC has not yet made use of this new authority, given the flurry of sanctions imposed following Secretary’s Yellen’s previous sectoral determination it seems highly likely that new sanctions will soon be imposed on persons that operate in the Russian aerospace, electronics and marine sectors soon.