On November 2, 2023, the Treasury Department's Office of Foreign Assets Control ("OFAC") unveiled new sanctions targeting Russia's energy production, metals and mining, and defense procurement sectors. OFAC also continued zeroing in on Russia's procurement network for its military by sanctioning entities in China, Turkey, and the United Arab Emirates ("UAE") (together, "countries of concern"). These countries have been found by OFAC to supply Russia with, among other items and services, certain "high priority items" previously identified by the U.S. government and its allies. OFAC also sanctioned seven Russia-based banks, making it more difficult to conduct banking in, and provide financial services to, Russia. Companies should thoroughly assess the entities mentioned in this notice to avoid engaging in any business activities with Specially Designated Nationals ("SDN"), whether directly or indirectly.
The entities located within these countries of concern show just how expansive Russia's wartime procurement and sanctions evasion efforts can go. The UAE makes up the bulk of the newly-designated entities located outside of Russia with 21 individuals and firms singled out. These UAE-based entities were found to provide Russia with logistical services for the delivery of satellite technology, industrial equipment, aircraft parts, and other technology and equipment critical to Russia's ability to wage war. Turkey-based entities that were designated assisted Russia in procuring microelectronics, batteries, and metal processing instruments, among other things. One Turkish firm was also designated for working with Russian intelligence services to arrange payment and shipping details to overcome sanctions barriers to move goods from Turkey to Russia. In China, three firms were designated for supplying optical, telecommunications, and radar equipment to Russia.
Importantly, many of these newly-sanctioned entities operate in technology-adjacent sectors that supply parts and components for finished items such as vehicles or communication devices. Because of this, it may not be obvious to U.S. companies that their components' end use could be for the benefit of an SDN that is supplying Russia's war effort via circumvention of U.S. sanctions. U.S. companies that manufacture or supply the items linked above should look for warning signs that indicate potential circumvention when approving purchase and shipping orders, including complex corporate structures, entities in multiple different countries, and entities increasing their orders from countries of concern.
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