New EU and UK Sanctions Against Russia
Does the lack of US designations mean that the risk is reduced?
If you think your compliance risks are declining merely because the United States has not imposed any new sanctions on Russia for its full-scale invasion of Ukraine, I have this bridge to sell you.
Designations continue by US allies.
The UK this week issued roughly 100 new designations against Russia. The EU also has also approved its 17th package of sanctions targeting Russian individuals, entities, and “shadow fleet” vessels. Those helping Russia evade sanctions and access the global financial system and restricted goods and technologies have also been targeted by the EU and the UK.
This week’s UK measures target Russia's supply chains of deadly weapons systems, including Iskander missiles, which have been used to murder Ukrainian civilians. The UK also sanctioned Russian disinformation agents. Sanctions have been levied against 14 more members of the Social Design Agency (SDA), which is also designated by OFAC under EO 14024 and the EU, and which carries out Kremlin-funded information operations.
The UK also sanctioned 46 financial institutions that help Russian attempts to evade sanctions, as well as the St. Petersburg Currency Exchange, and the Russian Deposit Insurance Agency which insures Russian banks.
Eighteen additional "shadow fleet" vessels that carry Russian oil are now designated by the UK, as well as facilitators and enablers.
The EU has approved its 17th package of sanctions against Russia, and has already begun working on the 18th tranche. The current package includes 189 additional shadow fleet vessels, bringing the total number of listings to 342.
The EU package also adds 31 new entities to the sanctions list that provide direct or indirect support to Russia's military industrial complex or engage in helping Russia evade sanctions. This includes 18 companies established in Russia, and 13 established in third countries (six in Türkiye, three in Vietnam, two in the UAE, one in Serbia, and one in Uzbekistan).
And the EU has also sanctioned 17 additional individuals and 58 entities, responsible for actions undermining the territorial integrity, sovereignty, and independence of Ukraine. Some additional trade restrictions are also included in this package.
Still nothing from the United States.
The US administration appears to be walking away from the sanctions that President Trump has been threatening against Russia if Moscow refuses to cooperate in ending the war.
Mr. Trump told President Volodymyr Zelensky of Ukraine and other European leaders after his call with Mr. Putin that Russia and Ukraine would have to find a solution to the war themselves, just days after saying that only he and Mr. Putin had the power to broker a deal. And he backed away from his own threats to join a European pressure campaign that would include new sanctions on Russia, according to six officials who were familiar with the discussion.
Not only has the United States not lived up to its promise to hold Russia accountable for its aggression and war crimes against its neighbor (let alone Trump’s promise to end the war in days), Secretary of State Marco Rubio this week outright refused to admit to House members during a hearing that Vladimir Putin is a war criminal, despite the indiscriminate murder and torture of Ukrainian civilians and despite the kidnapping and “russification” of thousands of Ukrainian children for which the International Criminal Court issued an arrest warrant against Putin and his Commissioner for “Children’s Rights” Maria Lvova-Belova.
Rubio refused to acknowledge these war crimes despite doing so before he became Secretary of State.
More evidence of the Rubio transformation? Here’s the video of then-Senator Rubio questioning then-Secretary of State Rex Tillerson about the same issue.
So, no new sanctions on Russia now that Rubio is Trump’s Secretary of State. Rubio has warned legislators on the Hill that if the United States threatens sanctions, Russia will “stop talking.”
Russia has been talking?
There’s also a glaring silence from the Treasury Department, which has not issued any new designations on Russia since President Trump took office.
In a recent interview with NBC’s Meet the Press, Treasury Secretary Scott Bessent hemmed and hawed through a reply to a question about new sanctions against Russia, and proceeded to blame the Biden administration for the apparent “ineffectiveness” of sanctions against Russia.
Well, I think we will see the – what happens when both sides get to the table. President Trump has made it very clear that if President Putin does not negotiate in good faith that the United States will not hesitate to up the Russia sanctions along with our European partners. What I can tell you is the sanctions were very ineffective during the Biden administration because they kept them low because they were afraid of pushing up domestic oil prices.
Despite Putin’s intransigence about negotiations to pause—let alone end—his war in Ukraine, the United States has done very little.
The Senate is also issuing sanctions threats. Senate Majority Leader John Thune yesterday warned Russia that if Putin does not “make a serious proposal for an immediate ceasefire” with Ukraine, the Senate will impose new sanctions. Senators. Richard Blumenthal (D-Conn) and Lindsey Graham (R-SC) already have a sanctions bill, which has 80 cosponsors, that would impose additional economic sanctions on Russia if Putin refuses good faith negotiations with Ukraine or launches another attack after any peace deal is reached.
Note the language. What are “good faith” negotiations? Sanctions will only be imposed if Russia “launches another attack after any peace deal is reached.” Russia has been murdering Ukrainians with gusto and attacking Ukrainian cities daily. Putin has been stalling repeatedly. This week, the Russians claimed that they’re ready to work with Ukraine on a “memorandum on a possible future peace agreement.”
Translation: We’re ready to talk about a memo that doesn’t end the war but maybe sorta kinda will agree to discuss a possible future peace agreement.”
Is this negotiating in good faith? Is there any possibility of a peace agreement in the near future?
Ukraine has agreed on an unconditional ceasefire. Russia refuses, because a ceasefire would allow Ukraine to shore up its defenses against continued Russian attacks.
The leaders of Britain, France, Germany, and Poland delivered a ceasefire ultimatum to Putin early this month. The Kremlin in response proposed talks in Istanbul, which Putin refused to attend, sending a low-level flunky—Vladimir Medinsky, a former Russian culture minister—to the talks with the Ukrainian president.
Bottom line.
All that said, US refusal to issue additional sanctions doesn’t mean that the compliance environment has gotten simpler or less volatile.
The United States since Russia’s 2014 invasion and illegal annexation of Crimea has more than 7300 designations against Russia, according to compliance firm, Castellum.ai.
Other countries have thousands more, and this graphic does not even include the latest designations on the anniversary of Russia’s full-scale invasion of Ukraine in February and subsequent sanctions by US allies.
In addition, the Trump administration last month quietly allowed general license 8L, authorizing energy transactions with Russian financial institutions, including Sberbank, VTB, and Russia’s Central Bank after the Biden administration in January (finally) imposed sanctions against Gazprom Neft and Surgutneftegaz, to expire. This highlights the need not to just monitor changes to sanctions lists, but also to licenses authorizing or ending authorizations of certain transactions.
The White House last month also extended the National Emergency with respect to specified Russian harmful foreign activities declared by Biden in April 2021 for another year, meaning that sanctions under Executive Order (EO) 14024, and secondary sanctions risks are very much in effect.
If your organization has questions about secondary sanctions, you may want to consult a sanctions expert. That risk is very real.
If your organization transacts internationally—especially in the UK or the EU—you may want to check about the expansion of the list of dual use and advanced technology items subject to export restrictions.
If you’re involved in the trade of restricted dual use and advanced technology items, such as chemical precursors to energetic material and spare parts and components for CNC machine tools, you should do extra research into your supply chain.
And remember that sanctions regulators like OFAC and OFSI aren’t the only ones who can slap you with penalties. Haas Automation in February was penalized by the Commerce Department’s Bureau of Industry and Security (BIS) for 42 violations of the Export Administration Regulations (EAR) for selling CNC machines to parties on the Entity List in China and Russia.
Specifically, Haas sold machine tool parts to certain Haas authorized distributors, which were then used by such distributors to service CNC machines owned by 6 Entity List parties in China and 2 Entity List parties in Russia. All relevant parts sold by Haas were of U.S.-origin, subject to the Regulations, and designated as EAR99 (e.g., gearboxes, magnetic encoder adapters, and dual battery replacement kits). Haas supplied such parts to its distributors for customers in China and Russia after the relevant customers had been added to the Entity List, and without the requisite license or authorization from BIS.
This was in addition to OFAC’s settlement with Haas for $1,044,781 to resolve 21 apparent sanctions violations.
OFAC determined that eight of the 21 violations were egregious because of their impacts on US efforts to degrade Russia’s military capabilities.
In addition to the fines, Haas’s reputation definitely sustained a hit. Haas is known for its support of US national security and is a big supporter of the US military. The penalties will almost certainly impact the company’s reputation and highlight the need to perform enhanced due diligence, recognizing product risk, geographical risk, and customer risk.
Customer risk. Abamet was authorized regional distributor to Russia and Belarus.
Geographical risk. Abamet was sanctioned in 2024, but its location in Russia should have been a red flag to conduct more stringent enhanced due diligence research.
Product risk. CNC machines and their components are critical for Russia’s war effort. Haas machine tools are used often by the Russian military industrial complex to mill, cut, or shave metal into almost any shape necessary, according to a PBS report. These are restricted items at high risk of being diverted to Russia, so extra due diligence into the end-users of the goods should have been conducted.
OFAC in February echoed what I said above in its enforcement release:
Haas failed to exercise due care in relation to the high-risk environment in which it was operating when, over the course of two years and three months, it failed to perform adequate due diligence and, as a result, exported goods and services to customers that were either identified on OFAC’s SDN List or that were owned 50 percent or more by such persons. In light of the advanced nature of the machinery Haas produces and the risks posed by transacting with a customer base in Russia during the relevant time period, including dealings with the arms, defense, and/or related materiel sectors of the Russian Federation economy, Haas exercised inadequate caution or care. Reasonable due diligence and screening controls that took into account the risk related to Haas’s industry and customer base should have prevented the Apparent Violations.
Additional risk is posed by Russia’s continued changes in vessel registration in its shadow fleet to evade restrictions. Please research vessel history if you are a stakeholder in the maritime transport of oil. Russia tends to switch flags and registrations as soon as sanctions are imposed, registering its aged vessels in countries with lax regulatory controls.
Check the International Chamber of Shipping (ICS) and its list of nations and its Flag State Performance Table. The ICS notes that getting as much information as possible about flag state performance is vitally important for stakeholders in the maritime industry, and shipping companies are actively discouraged from choosing to use flag states that may not fully meet their international obligations. This year, the ICS aded four new flag states to it monitoring system: Cambodia, Eswatini, Gabon, and Guinea-Bissau. Note the number of red flags present, and treat vessels recently registered in these jurisdictions with extra caution.
Examine other states that allow vessels to fly their flags and look at the red flags (here’s looking at you, Bolivia!), and examine the ownership and management of these ships. New ownership? New registration? Take a closer look to avoid violations.
Any number of mitigating actions can help your institution avoid high penalties and reputational risk. No one expects you to be perfect, but you are expected to do everything reasonably possible to mitigate your vulnerabilities.