As the U.S. and the European Union both prepare their own set of Russian sanctions and export controls, a senior U.S. official said the measures may not be identical but will align very closely to avoid hurting the competitiveness of U.S. firms. Peter Harrell, a National Security Council official, also said the trade restrictions won’t amount to an embargo against “everyday” Russian consumers, and will likely include exemptions and a wind-down period.
The European Council condemned recent aggressive action from Russia that has heightened tensions with Ukraine. In Jan. 24 conclusions on the European security situation, the council promised "massive consequences and severe costs" for any greater Russian military aggression against Ukraine, which includes "a wide array of sectoral and individual restrictive measures" that would be taken up by the European Union and its partners.
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The Biden administration this week previewed its plan to impose a “massive” set of export controls and sanctions on the Russian economy if the country further invades Ukraine, including measures to cut off Russian companies from both U.S. and foreign-produced technology inputs. The export restrictions could include an expansion of the Commerce Department’s foreign direct product rule, officials said, and would specifically target several of Russia’s “key” technology sectors, including its defense, aerospace, quantum computing and artificial intelligence industries.
Rep. Gregory Meeks, D-N.Y., introduced a version of a bill that would impose a host of sweeping new sanctions against Russia in the event it invades Ukraine, including new restrictions on Russian debt and broad sanctions against the country’s extractive industries. The bill, introduced in the House last week, also would authorize certain sanctions against the Nord Stream 2 gas pipeline, designate Russian financial institutions and expedite military assistance for Ukraine, similar to its companion bill in the Senate (see 2201120036).
The Treasury Department's Financial Crimes Enforcement Network is seeking public comments on a potential pilot program that would give financial institutions more freedom to share suspicious activity reports, according to a Jan. 24 notice. The program would allow institutions to share SARs with their foreign branches, subsidiaries and affiliates to better combat illicit finance and transactions that may violate U.S. sanctions or anti-money laundering regulations. Institutions are currently only allowed to share with their head offices or controlling companies. Comments on the proposed program are due March 28.
The U.S. this week imposed new sanctions against Russia for its “destabilizing” activities in Ukraine and privately previewed a harsher set of potential trade restrictions, including major new export controls on chip equipment. Although it remains unclear if those specific export restrictions would be coordinated with allies, the U.S., Germany and the U.K. all said Jan. 20 that they are ready to impose “massive consequences and severe economic costs” on Russia if it continues down a path to war.
The United Kingdom added two Russian individuals to its Global Human Rights sanctions regime, the Office of Financial Sanctions Implementation said Jan. 13. Both former members of the Russian military, Dmitry Vadimovich Kovtun and Andrey Konstantinovich Lugovoy were sanctioned for their role in the killing of Alexander Litvinenko through deliberate poisoning in 2006. The pair were also listed under the Anti-terrorism, Crime and Security Act 2001, but OFSI gave notice Jan. 17 that the designations of the two Russians expired under that regime but are still subject to asset freezes as the two individuals' listings have been moved to the Global Human Rights sanctions regime.
Former U.S. Trade Representative Robert Zoellick, who also led the World Bank, told an Atlantic Council audience that he doesn't think sanctions on Russia if it invades Ukraine is a particularly useful approach. "Sanctions have a mixed history," he said. "They tend to be most effective as a tool when they’re narrowly focused," such as with export controls. "To be blunt, people often apply them because they’re not sure what else they’re ready to do … but they want to signal their displeasure," he said during the Jan. 19 webinar. He suggested that if the U.S., Canada and Europe offered to invest in Ukraine with an eye to improving its economy and as a carrot to improve its governance, that could be more effective.
Export Compliance Daily is providing readers with the top stories from last week in case you missed them. You can find any article by searching the title or by clicking on the hyperlinked reference number.