White House Issues Round One of the Ukraine-Russian Sanctions

The White House has announced that it will be issuing sanctions “to respond to President Putin’s action to purportedly recognize the so-called Donetsk and Luhansk People’s Republics (DNR and LNR) as “independent” states.” What does this announcement mean for ASA members who have Russian or Ukrainian business partners?

At the root of the sanctions is an Executive Order that was signed last night. It defines the “Covered Regions” as the areas covered by the Donetsk People’s Republic (DNR) and the Luhansk People’s Republic (LNR). It also authorizes the Secretary of the Treasury to identify other parts of Ukraine to be identified as a part of the Covered Regions (typically this would be accomplished through an OFAC rule, so it will be important to watch whether this scope expands to include other parts of Ukraine).

• The Executive Order prohibits investment in the Covered Regions;
• The Executive Order prohibits export (or other sale/supply) to the Covered Regions;
• The Executive Order prohibits import from the Covered Regions;
• The Executive Order prohibits participation by a United States person in a transaction by a foreign person that would have been prohibited in the United States.

The Executive Order also permits the addition of people and entities to the Specially Designated Nationals (SDN) list, so it will be important to check our business partners against this list for each export transaction (you should already be doing this).

Previously issued licenses may not cover this new Executive Order, so they may be inadequate to overcome this new Executive Order’s restrictions. Thus even a previously licensed transaction may require a new license if it is within the scope of the Executive Order.

Don’t forget that there are existing sanctions against Russia and the Crimean region. So make sure that you comply with those, as well. The White House has signaled that more sanctions may be issued, soon, against Russia; this means that keeping abreast of the changing regulations and standards is especially important.

There are special wind-down rules. If you need to engage in a wind-down operation to exit business in the Covered Regions, then make sure you consult with an attorney, and review the OFAC wind-down general license.

In summary, if you’ve been buying from or selling to a partner in a Covered Region, then you will need to assess your aircraft parts transactions to ensure that they remain in compliance with the law – full compliance may require a new license, or it may require termination of the business. I would recommend against any aircraft parts transaction that involves the Covered Regions unless you have the advice of an attorney who understand this area of the law.

Resources:

• Ukrainian Covered Regions Executive Order (Feb. 21, 2022)
• Sanctions Fact Sheet (Feb. 21, 2022)
• Magnitsky Sanctions Against Russia
• Ukraine – Russia – Crimean Region Sanctions