Insights

In May 2023, the leaders of the United States, Canada, France, Germany, Italy, Japan, and the United Kingdom gathered in Hiroshima, Japan, for the annual G7 summit. The symbolic significance of these global leaders meeting in the city devastated by an atomic bomb on August 6, 1945, was very impactful, particularly to Japan’s Prime Minister, Kishida Fumio, a Hiroshima native. 

Fueled by the historical significance of the location and shared concerns over the increasingly difficult international security environment, the G7 emerged from the gathering with strong words of solidarity, stating in a joint communiqué issued by the White House that the G7 is “more united than ever in our determination to meet the global challenges of this moment and set the course for a better future.” 

That statement was not just empty promises. Within days after the G7 summit ended, the United States, United Kingdom, and Japan announced new sanctions and export controls against Russia’s military-industrial base that bolstered efforts to restrict resources supporting Russia’s continuing warfare against Ukraine. 

A brief round-up of the sanctions implemented by the United States:

• The Department of Commerce’s Bureau of Industry and Security (“BIS”) issued two new rules “that continue efforts to impose powerful and coordinated restrictions on Russia for its ongoing full-scale invasion of Ukraine.” 
• Supplement No. 4 to Part 746 of the Export Administration Regulations (“EAR”) – Russian and Belarusian Industry Sector Sanctions was modified to include now all Harmonized Tariff Schedule (“HTS”) codes listed in HTS Chapters 84, 85, and 90. This modification brings the total to 2,000+ commodity codes that will now require a BIS license for export to Russia or Belarus or the export, reexport, or transfer of items to be used, directly or indirectly, in offshore oil or gas exploration or production benefiting Russia or Belarus. BIS’s licensing requirement also comes with a presumption of denial of such license requests, with possible case-by-case exceptions for medical or agriculture-related items. 

• 71 entities (69 Russian entities, 1 Armenian entity, and 1 Kyrgyz entity) were added to BIS’s Entity List for supporting Russia’s military and defense sector. These entities were also designated as “footnote 3” “military end users” making them subject to the Russia/Belarus Foreign-Direct Product (FDP) Rule restrictions.
• In a second Joint Alert in as many years, BIS and the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) reinforced warnings to financial institutions about remaining vigilant in monitoring for transactions by sanctions evaders. 

• U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) implemented multiple new sanctions to reflect the “commitments made at the G7 leaders’ Summit to hold Russia accountable for its war.”
• Expansion of Sectoral Sanctions Authority – Based on Executive Order (“E.O.”) 14024 issued by President Biden on April 15, 2021, that allows blocking of property of persons identified as operating in certain Russian industry sectors, OFAC is adding the following additional sectors:  architecture, engineering, construction, manufacturing, and transportation.
• Expansion of Prohibitions on Services – Using E.O. 14071 issued by President Biden on April 6, 2022, prohibiting new investment in Russia and provision of certain services to Russia, OFAC’s new determination now prohibits the export, reexport, sale, or supply, either directly or indirectly, from the U. S. or by a U.S. person (regardless of where located), of architecture or engineering services to any person located in Russia. This action mirrors similar measures recently taken by the European Union and the United Kingdom.
• New Reporting Requirement – Further amending E.O. 14024, U.S. persons are now required to report to OFAC any property in their possession or control in which the following entities have any interest of any kind: Central Bank of the Russian Federation, National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation. 
• New SDN Designations – OFAC added 22 individuals and 104 entities to its Specially Designated Nationals and Blocked Persons List (SDN List) for “attempting to circumvent or evade sanctions and other economic measures against Russia, the channels Russia uses to acquire critical technology, its future energy extraction capabilities, and Russia’s financial services sector.” 
• Also utilizing authority under E.O. 14024, the U.S. Department of State designated sanctions on approximately 200 entities, vessels, and aircraft for being “complicit in: sanctions evasion and circumvention; maintaining Russia’s capacity to wage its war of aggression; and supporting Russia’s future energy revenue sources,” and “Russia-installed puppet occupation authorities, those involved in theft of Ukrainian grain, and in the systematic and unlawful transfer and/or deportation of Ukraine’s children.”