On Friday, February 23, 2024, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) and the U.S. Department of State (“State”) announced additional sanctions designations related to Russia’s ongoing war in Ukraine (the “February 23rd Sanctions”).  The February 23rd Sanctions represent the largest number of sanctions designations imposed since Russia’s invasion of Ukraine two years ago. The February 23rd Sanctions are primarily limited to the designation of hundreds of persons (individuals and entities) on the Specially Designated Nationals and Blocked Persons List (“SDN List”) and cover a broad range of industries including the financial, military and defense, engineering, electronics, metals and mining, and transportation sectors of the Russian economy.  The sanctions include blocking measures not only against persons based in Russia, but also against persons in third countries including, among others, the People’s Republic of China (“PRC”), Serbia, the United Arab Emirates, and Cyprus. 

In parallel, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) added 93 entities to the Entity List, including 63 based in Russia, eight based in the PRC, 16 in Turkiye, four in the UAE, two in the Kyrgyz Republic, and one each in India and South Korea.¹

These sanctions designations demonstrate the U.S. government’s continued reliance on list-based sanctions and export controls as foreign policy tools, thereby highlighting the need for companies to establish rigorous periodic screening and risk-based compliance programs designed to adapt to an evolving legal landscape. Moreover, these sanctions designations further expose the heightened risks associated with doing business in Russia. In fact, the U.S. Departments of State, Treasury, Commerce, and Labor also issued a business advisory on February 23, 2024 to help businesses assess the risks of doing business in or involving Russia and in it stressed the importance of conducting heightened due diligence to mitigate those risks. 

The following summarizes the OFAC, State, and BIS measures imposed on February 23, 2024. Companies should conduct a full-scale review of the sanctions measures to determine whether and to what extent these measures affect their business activities.  

OFAC and State Department Sanctions

OFAC Sanctions Designations

The February 23rd Sanctions imposed by OFAC primarily consist of blocking sanctions against persons operating in various sectors of the Russian economy. Persons designated pursuant to the February 23rd Sanctions are included on OFAC’s SDN List and all property and interests in property of the designated persons that are in the United States or in the possession or control of a U.S. person are blocked and must be reported to OFAC. Entities owned, directly or indirectly, individually or in the aggregate, 50 percent or more by such persons are also considered blocked. As a result, U.S. persons are prohibited from engaging in virtually all dealings with the blocked persons unless otherwise authorized by OFAC. 
According to OFAC, the February 23rd Sanctions, in part, target Russia’s core financial infrastructure. Of note is OFAC’s blocking of the National Payment Card System Joint Stock Company, which is the state-owned operator of Russia’s Mir National Payment System along with nine regional financial institutions, including, among others, Avangard Joint Stock Bank, and Bank RostFinance, five investment and venture capital funds, including Limited Liability Company BSF Capital, and six financial technology companies including Joint Stock Company Quorum and Limited Liability Company Crypto Pro. 

Further to its determination pursuant to Section 11(a)(ii) of Executive Order (“EO”) 14024 issued in December of 2023, which expanded the list of items or classes of items related to Russia’s military-industrial base to include, among other things, certain machine tools and manufacturing equipment, manufacturing materials for semiconductors, and certain lubricants and lubricant additives, OFAC’s February 23rd Sanctions also target entities involved in advanced manufacturing and technology such as machine tools, including computer numerically controlled (“CNC”) machines, 3D printing, and other fields such as robotics and lasers. 

OFAC also designated persons involved in other sectors of the Russian economy including:

• lubricants, coolants, and industrial chemicals; 
• semiconductor and electronics manufacturing, components, and research; 
• industrial automation software; 
• optics; 
• navigational instruments; 
• military-industrial base information technology and other military-industrial base entities; 
• energy storage and power supply for military-industrial base equipment; 
• military-industrial base software; 
• aerospace; 
• logistics, cargo transportation, and truck parts; 
• construction of power objects (specifically, Limited Liability Company Group of Companies MKC); and 
• diamonds (specifically Joint Stock Company Foreign Economic Association Almazyuvelirexport, a Russian-state-owned exporter of diamonds and precious metals). 

State Department Sanctions Designations

The sanctions imposed by State on February 23, 2024 include blocking sanctions on persons operating in the energy, mining and metals, microelectronics, and military and defense sectors of the Russian economy, and further include sanctions against human rights abusers. The entities designated pursuant to the State Department sanctions are subject to the same SDN List blocking restrictions discussed above with respect to the February 23rd Sanctions.

With respect to entities operating in the Russian energy sector, State designated, among others: 

• two major entities involved in the financing and construction of liquified natural gas (“LNG”) tankers designed specifically for Limited Liability Company Arctic LNG 2;
  
  
• entities involved in the development of the future Yakutia Gas Project and the development and operation of Russia’s Ust-Luga LNG terminal;
  
  
• Joint Stock Company Rosgeologia (“Rosgeo”), a state-owned geological holding company that provides geological exploration services in Russia and certain other entities involved in geological exploration projects in Russia; and
  
  
• certain State Atomic Energy Corporation Rosatom subsidiaries not previously designated. 

In addition, State also sanctioned entities involved in supplying high priority items to Russia, importing microelectronics into Russia, procuring G7-origin aircraft and electronic components, as well as entities involved in Russia’s gold mining, and metals and mining sectors, including Russia’s largest pipe producer, Public Joint Stock Company Pipe Metallurgical Company and certain of its subsidiaries. State also targeted entities involved in the continued cooperation between Russia, Iran, and North Korea related to military efforts in Ukraine. 

Authorizations

OFAC issued the following general licenses (“GL”) to authorize certain activities involving certain of the entities designated pursuant to the sanctions imposed by OFAC and State: 

• GL 88A authorizing the wind down of activities involving certain entities blocked on February 23, 2024, including, among others, Limited Liability Company BSF Capital, Rosgeo, National Payment Card System Joint Stock Company, and Public Joint Stock Company Pipe Metallurgical Company, until 12:01 a.m. eastern daylight time on April 8, 2024;
  
  
• GL 89 authorizing the wind down and rejection of transactions involving certain financial institutions blocked on February 23, 2024, including Avangard Joint Stock Bank and Bank RostfFinance, until 12:01 a.m. eastern daylight time on April 8, 2024;
  
  
• GL 90 authorizing certain transactions related to debt or equity of, or derivative contracts involving, certain entities blocked on February 23, 2024, until 12:01 a.m. eastern daylight time on April 8, 2024; and
  
  
• GL91A authorizing limited safety and environmental transactions involving certain blocked persons or vessels until 12:01 a.m. eastern daylight time on May 23, 2024. 

BIS Entity List Designations

BIS added 93 entities to the Entity List. The Entity List identifies entities for which there is reasonable cause to believe that such entities have been involved, are involved, or pose a significant risk of becoming involved in activities contrary to the national security or foreign policy interests of the United States. BIS expanded the Entity List to include entities determined to: 

• contribute to Russia’s military and/or defense industrial base by facilitating the diversion of controlled microelectronics to Russia’s military and intelligence authorities;
  
  
• procure U.S.-origin machine tools, electronics test equipment, and machine tool spare parts for Russian end-users without BIS licenses;
  
  
• supply Russia with U.S.-origin items of potential importance to Russia’s war effort or divert U.S.-origin items to Russia without prior authorization from BIS;
  
  
• pose a risk of procuring and re-exporting or acquiring or attempting to acquire U.S.-origin items contrary to the national security and foreign policy interest of the United States; and
  
  
• be part of the attempted transshipment of U.S.-origin goods to Iran or Russia. 

Over half of the entities added to the Entity List on February 23, 2024 are subject to a “footnote 3” designation, which means that they are considered to be military end users and therefor subject to the most severe restrictions under the Export Administration Regulations (“EAR”). These entities were added with a license requirement for all items subject to the EAR and a license review policy of denial, apart from food and medicine designated as EAR99, which will be reviewed on a case-by-case basis.

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 ¹ According to BIS, 93 entities were listed under 95 entries (due to some entities operating in multiple countries).  

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