U.S. broadens sanctions on Russia in connection with poisoning and imprisonment of Alexei Navalny

Over the course of the past few weeks, the U.S. Government has taken several actions against the Russian government in connection with the poisoning of Russian dissident Alexei Navalny. These actions included the designation of a number of entities by the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) and the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), as well as changes in licensing policy by the U.S. Department of State’s Directorate of Defense Trade Controls (DDTC) with respect to certain defense articles and services. Some of these designations may trigger additional reporting requirements for issuers that are required to file reports with the U.S. Securities and Exchange Commission (SEC).

OFAC and BIS designations

On 2 March 2021, OFAC added a number of Russian individuals and entities to its Specially Designated Nationals and Blocked Persons (SDN) List, including several individuals and entities that were already sanctioned under other authorities, such as Russia’s Federal Security Service (FSB) and its Main Intelligence Directorate (GRU).  U.S. Persons are generally prohibited from most dealings involving SDNs, and non-U.S. Persons are also generally prohibited from dealings involving goods, software, or technology subject to U.S. law, as well as U.S. Dollar-denominated transactions that clear through the U.S. financial system.

Similarly, BIS announced its addition of a number of Russian entities to the Entity List in connection with Russia’s chemical and biological weapons programs. Unlike many other Entity List designations, which impose a licensing requirement for all items subject to the Export Administration Regulations (EAR) and a review policy of a presumption of denial, in this case BIS specified that it is imposing a more tailored license review policy, expressly flagging that it is applying the license review policy set forth in §§ 744.2, 744.3, and 744.4 of the EAR, which includes restrictions on certain nuclear end-uses; rocket systems and unmanned aerial vehicles end-uses; and chemical and biological weapons end-uses. In other words, these restrictions are more targeted than BIS’s typical policy of denial for all items subject to the EAR. License applications for items that do not pose proliferation-related concerns may be able to benefit from a more favorable licensing policy of case-by-case review, rather than a presumption of denial.

The State Department also announced the continuation of existing measures under the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (CBW Act), as well as the expansion of certain export controls, which it summarized in this fact sheet. These sanctions – which include the prohibition, subject to partial waiver, on the export to Russia of National Security-controlled goods and technology subject to the EAR – are scheduled to take effect on 18 March 2021 and will remain in place for a minimum of 12 months. The U.S. Government’s use of chemical and biological weapons sanctions against Russia dates back to the 2018 poisoning of Sergei Skripal in the UK with the nerve agent Novichok. For further details on those measures, see our prior client alert here. The following changes in particular may be relevant to companies doing business with Russia:

  • The waivers authorizing continued use of license exceptions Service and Replacement of Parts and Equipment (RPL), Technology and Software Unrestricted (TSU), and Additional Permissive Reexports (APR), will be removed. Exporters will no longer be able to use these exceptions for exports and reexports of items controlled for National Security (NS) reasons to Russia.
  • Likewise, the waiver for exports and reexports of NS items to commercial end-users in Russia for civil end-uses will be removed. Applications for such exports will now be reviewed under a “presumption of denial” policy, rather than on a case-by-case basis.

In a 17 March 2021 press release, BIS also announced that it plans to expand export restrictions further pursuant to the 2 March 2021 determination by Secretary of State Anthony Blinken that the Government of Russia used chemical or biological weapons in violation of international law, or lethal chemical or biological weapons against its own nationals.

Finally, DDTC announced its intention to amend Section 126.1 of the International Traffic in Arms Regulations (ITAR) to include Russia on the list of countries that are subject to a policy of denial with respect to exports of defense articles and defense services. The State Department outlined a limited number of exceptions to this general policy of denial relating to government space cooperation and commercial space launches:

  1. An exception to allow for case-by-case review of exports to Russia that support government space cooperation.
  2. An exception, valid for six months from the date of the Secretary of State’s determination (i.e., until 1 September 2021), to allow for case-by-case review of exports to Russia when in support of commercial space launches.

The State Department also plans to amend ITAR § 126.1(a) in order to allow exporters to use the exemptions provided in ITAR §§ 126.4(a)(2) and (b)(2) (certain transfers by or for the U.S. Government) for exports to Russia when in furtherance of government space cooperation. This amendment to ITAR § 126.1 is scheduled to take effect on 18 March 2021.

These changes have important implications for companies that provide or arrange insurance services involving ITAR defense articles in Russia. The ITAR definition of “brokering activities” includes insuring defense articles. However, there is an exemption to the ITAR requirement to register as a broker unless the insurance activities involve any country, area, or person referred to in ITAR § 126.1. With Russia being added to the list of ITAR § 126.1 countries, insurers with activities involving ITAR defense articles in Russia will no longer be able to rely on this exemption unless the activities involve the U.S. Government or other international government cooperation, including FMS or when the recipient is a U.S. Government department or agency.

FSB and new SEC reporting requirements

One of OFAC’s designations may also have had unintended consequences for issuers that are required to file reports with the U.S. Securities and Exchange Commission (SEC). Specifically, the FSB, which has been included on the SDN List since 29 December 2016, and was added to the Entity List by BIS on 4 January 2017, plays a role in the local regulatory process regarding importation of information technology and other encryption products into Russia under Russian law. As such, many companies are required to interact with the FSB in some capacity if they deal in items that are subject to these requirements. For example, companies dealing in consumer technology – such as laptops and smartphones, connected cars, medical devices, software, or any other items that make use of ordinary commercial encryption – may have to notify or seek approval from the FSB if they import or use such items in Russia. 

OFAC and BIS recognized the challenge the FSB’s role could pose for companies doing business in Russia, and OFAC issued Cyber General License 1 on 2 February 2017, authorizing certain activities connected to the FSB’s regulatory role. BIS made corresponding changes to the Entity List designation on 18 April 2017.

While OFAC’s revised Cyber General License 1B (Cyber GL 1B) continues to authorize companies to engage in such activities, the additional designation of the FSB as an [NPWMD] SDN (pursuant to 31 C.F.R. part 544, the “Weapons of Mass Destruction Proliferators Sanctions Regulations”) has implications under the disclosure requirements of the SEC. Under Section 219 of the Iran Threat Reduction Act (ITRA), an issuer that is required to file annual and, if applicable, quarterly reports with the SEC must disclose if it or any of its affiliates have knowingly engaged in any activities, transactions, or dealings with, among other things, certain SDNs, including [NPWMD] SDNs during the period covered by the report.

This disclosure requirement applies even when such activities, transactions, or dealings are exempted or authorized by OFAC, whether by a general or specific license. Thus, even though continued activities, transactions, or dealings with the FSB that fit within the scope of Cyber GL 1B are authorized by U.S. law and are conducted outside of the U.S. by non-U.S. affiliates in compliance with local law, they must be disclosed in an issuer’s SEC filings (e.g., 10-K, 10-Q, or 20-F). 

Next steps

While certain actions may not directly impact many companies conducting business with Russia, companies should nonetheless review these new designations to confirm that the entities and individuals are not business partners, or that any ongoing activities are not prohibited as a result of these changes.

Additionally, to the extent that a company is engaging in regulatory activities involving the FSB related to imports of encryption items into Russia pursuant to Cyber GL 1B, and the company is an issuer under the rules of the SEC, it is required to submit a Section 219 report to the SEC.

Hogan Lovells lawyers will continue to monitor new developments and can assist you with assessing the potential impact of these restrictions on your company. Please contact any of the Hogan Lovells lawyers listed below for further information or assistance.



Authored by Adam Berry and Tyra Walker

Anthony Capobianco
Washington, D.C.
Aleksandar Dukic
Washington, D.C.
Ajay Kuntamukkala
Washington, D.C.
Warren Maruyama
Washington, D.C.
Beth Peters
Washington, D.C.
Stephen Propst
Washington, D.C.
Kelly Ann Shaw
Washington, D.C.


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