By Stephanie Brown Cripps and Ryan Dykhouse
On August 27, 2018, the US State Department imposed new sanctions on Russia in response to the use of the nerve agent “Novichok” in the attempted assassination in England of UK citizens Sergei and Yulia Skripal. These sanctions, announced by the State Department on August 8, are being implemented pursuant to the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (the CBW Act).
Under the CBW Act, five measures are to be imposed upon an initial finding of use of chemical weapons. Certain of these measures have been fully or partially waived, however. The initial sanctions are:
- Termination of arms sales to Russia of goods and services subject to the Export Administration Regulations (EAR) and the termination of licenses for export of any item on the United States Munitions List (i.e., items subject to the International Traffic in Arms Regulations (ITAR))
- The issuance of licenses in support of government space cooperation and commercial space launches may be authorized on a case-by-case basis
- Termination of all US Government military financing for Russia; the US Government, however, does not currently provide any foreign military financing to Russia
- Denial of US Government credit, credit guarantees, or other financial assistance to Russia, including from the Export-Import Bank of the United States
- Prohibition on the export to Russia of national security-sensitive goods or technologies controlled (i.e., NS-controlled) under the EAR, with certain exceptions that are consistent with current US licensing policy
- A “presumption of denial” applies to applications for licenses to export these items to Russia, and for licenses to export or re-export goods or technology to Russian state-owned or state-funded enterprises, instead of the previous policy of case-by-case determination
- The sanctions will not affect the licensing policy for exports and re-exports (i) under certain license exceptions; (ii) for safety of flight; (iii) to wholly-owned US subsidiaries; (iv) for commercial end-users or civil end-users in Russia; or (v) for government space cooperation or commercial space launches. Deemed exports and re-exports to Russian nationals will not be affected
- Prohibition on US foreign assistance to Russia under the Foreign Assistance Act of 1961, which has been waived
Second Round Sanctions
90 days after the determination of sanctions against Russia (i.e., by November 4, 2018), the President must impose a second round of sanctions unless one of two sets of conditions is met: either (1) the foreign government is no longer using chemical or biological weapons, has provided assurances it will not do so, and is willing to allow inspections by international observers, or (2) the President makes a determination that waiver of the sanctions is essential to the national security interests of the United States.
The six possible measures, at least three of which must be imposed, are:
- US opposition to multilateral development bank assistance (including loans, financial or technical assistance) for Russia
- A prohibition on any US bank providing credit to the government of Russia (except for urgent humanitarian assistance, food or other agricultural products)
- A prohibition of exports to Russia of all other goods and technology (excluding food and other agricultural commodities and products)
- An import restriction on articles that are the growth, product or manufacture of Russia
- Downgrading or suspension of diplomatic relations between the United States and Russia
- Termination of all service to and from the United States by Russian state-owned or -controlled airlines
The second-round sanctions are subject to the same waiver process as the initial sanctions. Given that the State Department was willing to issue significant waivers in the first round, it is likely that the State Department may similarly waive some of the more restrictive sanctions if President Trump does not make a determination that Russia is no longer using chemical weapons.
The first round of CBW Act sanctions is unlikely to have a widespread impact on US-Russian trade or business, as the sanctions are essentially limited to further restrictions on an already-restrictive export control regime. It is important to note that the export restrictions in the CBW Act (and all US export controls) apply to all persons worldwide – whether US persons or not – who export or re-export US export-controlled defense articles and dual-use items. Certain of the second round sanctions could have more significant impact, if second round sanctions are introduced and waivers are not issued.
Although the second round of sanctions is “mandatory,” it would be a political decision to expand the sanctions in a meaningful way. For example, the United States imposed CBW Act sanctions on Syria in August 2013 and second round measures followed in December 2013, whereas the initial CBW Act sanctions on North Korea in March 2018 have not been followed by either a determination or second round measures, even though the 90-day period has elapsed.
In addition to the CBW Act sanctions, there are several proposed pieces of Russia sanctions-related legislation pending in the US Senate which, if enacted in their current form, could potentially significantly expand the US sanctions on Russia. We are following these developments closely.
Please contact any member of our Global Sanctions and Trade team if you have any questions or would like to discuss any of these points.