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Trade Compliance Flash: U.S. Opens G7 Summit with Significant New Sanctions Targeting Russia

International Alert

In conjunction with the opening of the G7 Summit held in Japan, on May 19, 2023, the U.S. imposed a new round of sanctions targeting Russia in response to its invasion of Ukraine. According to the G7 Leaders' Statement, these actions are intended "to increase the costs to Russia and those who are supporting its war effort." Implementing the new sanctions package, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC), the U.S. Department of State, and the U.S. Department of Commerce's Bureau of Industry and Security (BIS) all announced additional restrictions on dealings with Russia. New sanctions measures include new designation authorities and prohibitions affecting a variety of Russian economic sectors, new reporting requirements related to blocked property of certain Russian entities, and over 300 new designations and blocked property identifications. 

This alert discusses the new sanctions measures announced by OFAC and State Department. We'll follow this up next week with a discussion of the export controls measures announced by BIS.

New Sanctions Measures

Sector-Wide Sanctions Authorizations and New Service-Related Prohibitions 

The most important updates to U.S. sanctions on Russia are two new determinations under Executive Orders (E.O.) 14024 and 14071. Under Section 1(a)(i) of E.O. 14024, Treasury, in consultation with the State Department (or vice versa), has the authority to impose sanctions on persons operating in designated sectors of the Russian economy.1 The new E.O. 14024 determination adds architecture, engineering, construction, manufacturing, and transportation sectors, as defined in the new Frequently Asked Question (FAQ) 1126, to the list. As explained in OFAC's new FAQ 1127, the new determination does not automatically sanction persons operating in these sectors – action by Treasury or State is still required to add designated persons to the list of Specially Designated Nationals and Blocked Persons (SDN List). With this measure, OFAC has given itself the authority to designate entities operating in virtually every major sector of the Russian economy. 

OFAC also issued a determination pursuant to Section 1(a)(ii) of E.O. 14071 prohibiting the exportation, reexportation, sale, or supply, directly or indirectly, from the U.S., or by a U.S. person, wherever located, of architecture services or engineering services to any person located in the Russian Federation. This prohibition goes into effect on June 18, 2023. As background, Section 1(a)(ii) of E.O. 14071 authorizes Treasury to prohibit transactions related to the any category of services provided to any person located in the Russian Federation and has previously been used to prohibit the exportation, reexportation, sale, or supply of quantum computing, accounting, trust and corporate formation, and management consulting services, as well as services related to the maritime transport of Russian-origin petroleum and petroleum products priced above certain price caps. Along with the new prohibition, OFAC issued FAQ 1128, which defines "architecture services" and "engineering services" that are subject to the new prohibition as follows:

  • Architecture services include advisory services; pre-design services; design services including schematic design, design development, and final design; contract administration services; combined architectural design and contract administration services; including post construction services; and all other services requiring the expertise of architects. The prohibition applies to such services as they relate to residential, institutional, leisure, commercial, and industrial buildings and structures; recreational areas; transportation infrastructure; land subdivisions; and not necessarily related to a new construction project. The term also includes urban planning services (i.e., land use, site selection, and servicing of land for systemic, coordinated urban development) and landscape architectural services. OFAC intends to interpret this term consistent with UN Central Product Classification (CPC) Codes 86711-86704, 86719, and 86741-86742.
  • Engineering services include assistance, advisory, consultative, design, and recommendation services concerning engineering matters or during any phase of an engineering project. Engineering design services may be for: the construction of foundations and building structures (i.e., structural engineering); mechanical and electrical installations for buildings; the construction of civil engineering works; industrial processes and production; or other engineering designs, such as those for acoustics, vibration, traffic control systems, or prototype development for new products. The term additionally includes geotechnical, groundwater, and corrosion engineering services; integrated engineering services, such as those for transportation infrastructure or other projects; engineering-related scientific and technical consulting services, including geological, geophysical, geochemical, surface or subsurface surveying, and map making services; testing and analysis services of chemical, biological, and physical properties of materials or of integrated mechanical and electrical systems; and technical inspection services. OFAC intends to interpret this term consistent with UN CPC Codes 86721-86727, 86729, 86731-86733, 86739, 86751-86754, 86761-86764, and 86769. Additionally, OFAC does not consider maritime classification services to be subject to the prohibition, as is consistent with the OFAC Guidance on Implementation of the Price Cap Policy for Crude Oil and Petroleum Products of Russian Federation Origin.

Amendment to Directive 4 under E.O. 14024

OFAC has also amended Directive 4 under E.O. 14024 to require U.S. persons to submit certain reports on blocked property in which Directive 4 entities have an interest. Directive 4 prohibits "any transaction involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation, including any transfer of assets to such entities or any foreign exchange transaction for or on behalf of such entities." The amended Directive 4 imposes a new reporting requirement, under which U.S. persons holding blocked property in which a Directive 4 entity has any interest must submit a report to OFAC on or before June 18, 2023, with annual reporting due by June 30 of the following year. 

Notably, OFAC issued a new General License 13E, which authorizes transactions with Directive 4 entities related to the payment of pay taxes, fees, or import duties, and the purchase or receipt of permits, licenses, registrations, or certifications until 12:01 a.m. eastern daylight time on August 17, 2023.

New Designations and General Licenses

The U.S. sanctions package also includes a significant number of new designations issued by both OFAC and the State Department. According to its press release, OFAC targeted 22 individuals and 104 entities located in more than 20 jurisdictions and "target[s] those 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." The State Department action goes even further, designating or identifying as blocked property almost 200 individuals, entities, vessels, and aircraft. 

Included in the State Department designation tranche is Russia's largest gold mining company, PJSC Polyus (Polyus), which prior to the Russian invasion of Ukraine was controlled by sanctioned Russian billionaire Suleiman Kerimov, who later divested his stake in the company. Reflecting the significance of the action and the fact that Polyus American Depositary Receipts (ADRs) are traded in the U.S., OFAC issued General License 66 authorizing wind-down transactions involving the company and its 50 percent or greater owned subsidiaries through August 17, 2023. OFAC also issued General License 67 authorizing certain debt- and equity-related transactions involving Polyus and its subsidiaries. The State Department additionally designated JSC Polimetall AO (Polimetall), which it described as the "Russian Holding company for a top ten global gold producer and top five silver producer." Consistent with OFAC's 50 Percent Rule, OFAC published FAQ 1129, which makes clear that the designation does not apply to Polimetall parent company, Jersey-based Polymetal International PLC. 

OFAC issued General License 68 authorizing wind-down transactions involving certain designated Russian universities and institutes through July 18, 2023.

Sanctions Takeaways

  • The designations included individuals and entities in allied jurisdictions, including Switzerland, Germany, Liechtenstein, the Netherlands, Czechia, Poland, Finland, Estonia, and Canada. While it is likely that these designations were done in coordination among allied sanctions authorities, non-U.S. companies should take note that being located in a country generally allied with the U.S. will not be a shield from U.S. sanctions. 
  • Relatedly, the designations included a person sanctioned for having "materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of" a person sanctioned under E.O. 14024. Similar provisions exist in various executive orders authorizing sanctions in connection with a lot of different U.S. sanctions programs, but these provisions are used sparingly even though many transactions are arguably within their scope. One reason for the sparing use of these provisions is that allied countries often object to the seemingly extraterritorial scope of these provisions when applied to transactions with no connection to the U.S. At the outset of the invasion, this provision was not frequently used. Recently, however, OFAC has begun to more frequently use this provision as the basis for adding persons to the SDN List under E.O. 14024, which underscores the potential risks facing non-U.S. persons who continue to do business with sanctioned Russian persons. 
  • Persons engaged in efforts to circumvent sanctions also feature prominently among the designees. There appears to be a particular focus on companies supplying Russia with advanced technology and electronics through diversion channels, which is unsurprising given the press reporting and OFAC communications surrounding Undersecretary of Terrorism and Financial Intelligence Brian Nelson's April 2023 travel to Europe and other countries that share a border with Russia.  

For more information, please contact members of Miller & Chevalier's Sanctions and Export Controls Group:

Timothy P. O'Toole,, 202-626-5552

Manuel Levitt,, 202-626-5921

Caroline J. Watson,, 202-626-6083

Anton Berezin*

Samuel B. Cutler*

Lara Hakki*

Christopher Stagg*

*Former Miller & Chevalier attorney


Prior determinations under E.O. 14024 have identified entities operating in the financial services, aerospace, electronics, marine accounting, trust and corporate formation services, management consulting quantum computing, metals and mining sectors of the Russian economy as potentially subject to sanctions. A complete list of designated sectors is contained in FAQ 1126.

The information contained in this communication is not intended as legal advice or as an opinion on specific facts. This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. For more information, please contact one of the senders or your existing Miller & Chevalier lawyer contact. The invitation to contact the firm and its lawyers is not to be construed as a solicitation for legal work. Any new lawyer-client relationship will be confirmed in writing.

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