Sanctions against Russia on the anniversary of the special operation. What is important to know the USA

announced a major package of sanctions against Russia on the anniversary of the outbreak of hostilities in Ukraine.New measures focus on preventing circumvention of existing restrictions and strengthening export controls

On Friday, February 24, the United States and Great Britain announced new sanctions against Russia, timed to coincide with the anniversary of the start of a military special operation in Ukraine. The European Union, after several days of intense debate, agreed on its measures by midnight on February 25, but has not yet submitted legally binding acts.

According to the joint statement of the Group of Seven (G7) dated February 24, 2023, the Western coalition is “committed to stepping up unprecedented and coordinated sanctions and other economic measures” against Russia. The statement notes that the G7 countries (of European countries, the group includes Germany, France and Italy) will continue to announce such restrictions "in the coming days and weeks."

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Sanctions Enforcement Mechanism

On February 24, first, the UK expanded the list of personal sanctions by 92 persons and organizations, emphasizing the presence among them of four banks, top managers of Rosatom, managers of Gazprom and Aeroflot. London also said it was banning the export to Russia of "every product that Ukraine says Russia uses on the battlefield," as well as the import of 140 third-country products made from recycled Russian raw materials. In the fall of 2022, the European Union already made a similar decision, extending the embargo on processed products from third countries that use Russian ferrous metal products.

The G7 leaders on the same day announced that they were creating a coordination mechanism to monitor the implementation of sanctions (Enforcement Coordination Mechanism). “We call on third countries and other international actors seeking to circumvent or discredit our measures to stop providing material support to Russian military operations or face harsh consequences,” the statement said. The United States has previously conveyed to Turkey and the United Arab Emirates (UAE) its concern that local businesses could be used by Russia to circumvent existing sanctions. EU Special Envoy for Sanctions David O'Sullivan said in an interview with the Financial Times that Russia's neighbors suddenly increased imports from the EU in 2022 (at the same time, countries such as Armenia, Kazakhstan, and Kyrgyzstan significantly increased exports to Russia).

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“Given the significant revenue that Russia receives from diamond exports, we will collectively work on further restrictions against Russian diamonds, including both rough and cut diamonds,” the G7 coalition said. About a third of all diamonds passing through the exchanges of Antwerp (Belgium is considered the world's diamond capital) are of Russian origin, and diamonds were not included in the previous nine European sanctions packages, EUObserver noted.

Sanctions against second-tier banks

The United Kingdom has included in its sanctions lists the banks St. Petersburg, Zenit, Uralsib and MTS Bank. The Office of Foreign Assets Control of the US Department of the Treasury (OFAC), in addition to these organizations, also added seven more Russian banks to the SDN list: Credit Bank of Moscow (it has been under British sanctions since spring, earlier the EU disconnected it from the SWIFT system and added it to the blocking list ), Lanta-Bank, Metallinvestbank, Levoberezhny Bank, Primorye Bank, SDM-Bank, Ural Bank for Reconstruction and Development. At least Lanta-bank, Uralsib, Levoberezhny and SDM-bank have foreign correspondent accounts in US dollars, follows from the information on their websites as of the evening of February 24th.

MTS Bank, which was subject to blocking sanctions by both the UK and the US, received a license to operate in the UAE in early 2023. Following the imposition of sanctions, the Central Bank of the UAE said that MTS Bank received permission to open a branch in Abu Dhabi, having gone through all the necessary procedures. With its operations, the bank supported legitimate trade between Russia and the UAE and served Russian expats in the Emirates, the Central Bank of the United Arab Emirates emphasized. Now the regulator is “exploring available options”, given the “new status” of MTS Bank (inclusion in the US sanctions list SDN. -).

In justifying the sanctions against Metallinvestbank, the US Treasury indicated that it used "alternative payment channels" to assist in obtaining settlements for Russian exports, but for other banks, OFAC did not provide specific reasons for imposing sanctions.

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In fact, now the sanctions have hit second-tier banks - most of the largest credit institutions in Russia have already been under the restrictions of Western countries since the spring of 2022, including Sberbank, VTB, Promsvyazbank and Otkritie. Tinkoff Bank did not fall under the new UK and US sanctions. Earlier, Bloomberg, citing sources, reported that the European Union could impose sanctions against him.

US counterparties are prohibited from doing business with persons on the SDN list. However, it is allowed until May 25, 2023 to complete all transactions with sanctioned banks (provided that, if any payments are due to these banks, they will go to the blocked account). For some reason, MTS Bank and Levoberezhny are not included in the general license of the US Department of the Treasury, which allows these transactions. Banks Zenit and St. Petersburg have also been added to the list (along with Sberbank, VTB, VEB, etc.) of credit institutions that are allowed by the United States to service transactions for the sale of energy resources in dollars through intermediaries in other countries (the corresponding license is valid until May 16 and may be extended).

Principles for selecting targets in the financial sector

The choice of new sanctions “suggests that there are no large financial institutions that could be added to the sanctions lists for the greatest effect,” says George Voloshin, an expert on sanctions of the Association of Certified Money Laundering Specialists (ACAMS). Obviously, no one will restrict the activities of Raiffeisenbank or UniCredit until they change owners to Russian ones, and President Vladimir Putin's decree [to ban transactions without special permission] makes any negotiations very difficult, he adds. “I think the goal is to increase the pressure on the Russian financial system, both by closing the loopholes that exist through non-sanctioned banks, and simply complicating Russia's relations with the outside world in general. The movement is increasingly moving towards the Iranian scenario,” Voloshin believes.

The new sanctions are aimed at “making it difficult to carry out previously familiar financial transactions and the implementation of economic relations between Russian companies and companies from other countries,” said Yegor Krivosheya, head of the blockchain and fintech laboratory at the Skolkovo School of Management. Most of them “have been working on scenarios for the imposition of sanctions for more than one month, therefore, most likely, the effects on these credit institutions and the entire banking system may be less pronounced than before,” he said.

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Restrictions and tariffs against metals

The United States by a special decision (.pdf) has identified another sector of the Russian economy, against the participants of which blocking sanctions can be introduced - it has become the sector of metals and mining. In accordance with this decision, four enterprises were included in the SDN list: Burevestnik Research Institute (develops artillery weapons), Metallurg-Tulamash LLC, TPZ-Rondol LLC and Mtsenskprokat (according to the US Treasury Department, this company manufactures "unique alloys" used in the aviation and defense industries). Previously, such industries included quantum computing, accounting services and management consulting, aerospace, shipping, electronics, financial services, technology and defense sectors.

U.S. President Joe Biden also signed two decrees on February 24 to increase import tariffs on "over 100 Russian metals, minerals and chemicals" worth $2.8 billion to Russia. Apparently, we are talking about the volume of imports in 2021: during 2022, imports of Russian goods to the United States fell sharply: to $3.5 billion in the second half of the year compared to $11.6 billion in the first.

One of the acts raises duties on aluminum and aluminum products from Russia to 200% of the customs value. As Bloomberg noted, this decision will effectively stop the supply of Russian aluminum to the United States. Imports of iron, steel and aluminum from Russia to the United States and so almost zeroed by the fall, RBC reported. According to ING, last year the United States bought only 200,000 tons of aluminum and products from Russia from Russia - this is 3% of total aluminum imports to the United States.

In the second decision, Biden increased import duties from 35% to 70% on a number of Russian products (they were initially subject to a 35% import tariff as a result of the removal of the most favored nation trade regime for Russia in the spring of 2022). RBC noted that these tariffs bypassed strategic metals from Russia (nickel, palladium, rhodium, titanium).

Non-standard solutions

The US Treasury also made a number of unusual sanctions decisions. He added to the sanctions list several foreign citizens - the Swiss-Italian businessman Walter Moretti, the German Markus Müller, the Swiss Ronald Eric Kosman and Bruno Koller and a number of others, as well as their companies, since they "secretly acquired sensitive Western technologies and equipment" in the interests of Russian intelligence agencies and the military. “Due to the impact of sanctions and export controls, Russian intelligence services have been tasked with finding channels to circumvent sanctions and replenish stocks [of essential products],” the US Treasury said.

The US has also imposed sanctions aimed at structures working with wealthy Russians. In particular, the Veles group of companies (Veles Capital, Veles Active, Veles Management Ltd, Veles Trust, Veles International Limited) was included in the list. They are participants in the Russian debt market and, according to OFAC, serve Russian wealthy individuals. The Moscow law firm CONFIDERI, specializing in asset structuring and protection of personal capital, has also been added to the SDN list. The SDN list also includes a number of former and current top managers of sub-sanctioned banks - specialists in private banking.

The U.S. Treasury also added the St. Petersburg shipping company Paula Rise and more than 20 of its ships to the sanctions list. The State Department memo explains that the company is involved in growing trade with Turkey, as well as transporting materials to Russian construction sites in the Arctic.

Another part of the sanctions is directed against companies and citizens whom the United States considers involved in the development of software and the production of hardware for SORM - the System of Technical Means for Providing the Functions of Operative-Search Activities. According to the American authorities, in Russia SORM is used to "suppress dissent", its elements are installed on the infrastructure in new regions. One such company is Citadel, which, according to the State Department, occupies 60-80% of the Russian SORM market. In the tech sector, the U.S. also listed Igor Borisov, developer of the Strelok mobile app and Strelok Pro, a ballistic calculator that U.S. officials say is used by Russian forces in Ukraine. Applications are available in the AppStore and Google Play.

The US Department of Commerce, in turn, increased export restrictions on Russia by adding about 80 Russian organizations to the Entity List (legal entities that are prohibited from exporting US-origin technologies), including the Zelenograd Nanotechnology Center, VisionLabs (for trying to acquire US technology as opposed to national US security), NPO them. Lavochkin, Institute of Applied Mathematics. Keldysh of the Russian Academy of Sciences, the Skolkovo Foundation, the Avtomatika concern, PJSC MegaFon (for trying to buy American products in support of the Russian armed forces, according to the justification of the US Department of Commerce). MegaFon has already stated that they do not understand the motives and reasons for including the company in the list of foreign trade restrictions and that this restriction does not apply to the telecom services it provides.