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Belarus Faces New U.S., UK, and Canadian Sanctions on Election Anniversary

Aug.12.2021

On August 9, 2021, one year after the re-election of Alyaksandr Lukashenka (“Lukashenka”), the U.S., UK, and Canada issued broad sanctions against Belarus. The U.S. action was spearheaded by President Biden’s issuance of a new Executive Order (“EO”) targeted at Lukashenka’s access to funds used to support the Belarusian government. The EO grants the Department of the Treasury a broad set of new designation authorities, including to designate persons operating in numerous key sectors of the Belarusian economy. Acting under this authority, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) designated 23 individuals and 21 entities in an effort to restrict funds from flowing to Lukashenka.

In parallel, the UK and Canada issued similarly targeted sanctions aimed at various sectors of the Belarusian economy, including its potash, petroleum, finance, and insurance sectors. Collectively, these actions largely align the U.S., UK, and Canada sanctions against Belarus with those issued by the EU in June, 2021. 

New Executive Order

The EO authorizes blocking sanctions on persons operating in any sector of the Belarus economy, with a focus on the defense and related material, security, energy, tobacco products, construction or transportation, and others as determined by the Secretary of the Treasury in consultation with the Secretary of State.

The EO also allows for blocking various additional types of persons, including those determined to be: (1) a political subdivision, agency or instrumentality of the Government of Belarus (“GoB”); (2) a leader or official of the GoB; (3) those owned or controlled by or who have acted on behalf of, directly or indirectly, the GoB; and (4) responsible for or complicit in, or to have directly or indirectly engaged or attempted to engage in, or to have materially assisted, sponsored, or provided financial, material or technological support, or goods or services in support of

    (a) actions or policies that threaten the peace, security, stability, or territorial integrity of Belarus;

    (b) actions or policies that prohibit, limit, or penalize the exercise of human rights and fundamental freedoms by individuals in Belarus;

    (c) electoral fraud or other actions that undermine the electoral process in Belarus;

    (d) deceptive or structured transactions or dealings to evade U.S. sanctions against Belarus; and 

    (e) public corruption.

OFAC Actions Taken Under the EO

Acting under the authority granted by the EO, OFAC has undertaken a series of actions including:

  • Designating one of the world’s largest potash producers, Belaruskali OAO (“Belaruskali”), as an SDN. In conjunction with its designation, OFAC issued General License 4 (“GL 4”) which provides U.S. persons 120 days (until Dec. 8, 2021) to wind down transactions involving Belaruskali, or any entity it owns, directly or indirectly, 50 percent or more. As a result, U.S. persons may continue to engage in transactions “ordinarily incident and necessary to the wind down of transactions with Belaruskali” until Dec. 8, 2021. In an additional FAQ, OFAC clarified that GL 4 does not authorize the entry into new purchase contracts, or the stockpiling of inventory involving Belaruskali, or any entity in which Belaruskali owns, directly or indirectly, a 50 percent or greater interest, on or after August 9, 2021 that are not ordinarily incident and necessary to the wind down of transactions. 
  • For non-U.S. persons, the new EO permits OFAC to designate entities found to provide “material support” to any sanctioned person pursuant to the EO or those who are found to be “operating in” the designated sectors of the Belarusian economy. OFAC has provided no guidance on the scope of definitions for these terms but we would expect OFAC to adopt a similar perspective as to that used in the Venezuela context where the shipment of oil was found to constitute “operating in” the Venezuelan oil sector. Accordingly, non-U.S. persons should assess their exposure and business dealings with the designated sectors of the Belarusian economy.
  • The designation of additional state-owned enterprises and government entities, including Grodno Tobacco Factory Neman, the Investigative Committee of the Republic of Belarus, the Department of Internal Affairs of the Gomel Regional Executive Committee, and the National Olympic Committee of the Republic of Belarus.
  • The designation of various government officials and high-ranking officials of Belarusian SOEs.

UK Actions

In parallel, the UK issued similar sanctions against Belarus targeting various individuals and numerous sectors of the Belarussian economy. The UK actions target the following sectors of the Belarussian economy:

  • Finance: It is prohibited to directly or indirectly deal with a transferable security or money-market instrument with a maturity of more than 90 days issued after noon on 9 August 2021 by:
a) Belarus;
b) a Belarusian authority;
c) a person, other than an individual, which is not a person within sub-paragraphs (d), (e) or (f) and which is wholly owned by Belarus or a Belarusian authority;
d) a credit or financial institution which is majority owned by Belarus or a Belarusian authority;
e) a person, other than an individual, which is—
(i) incorporated or constituted under the law of a non-UK country, and (ii) majority owned by a person within sub-paragraph (d);
f) a person acting on behalf of or at the direction of a person within sub-paragraph (d) or sub-paragraph (e).

It is further prohibited to directly or indirectly grant a loan or credit with a maturity exceeding 90 days with designated individuals.

  • Insurance and Reinsurance: It is prohibited (subject to certain exceptions) to provide insurance or reinsurance services to Belarus or those it wholly owns, a Belarusian authority or those it wholly owns and anyone acting on behalf or at the direction of those above.
  • Potash: For contracts concluded on or after August 9, 2021 it is prohibited to: (a) import of potash that is consigned from or originates in Belarus; (b) indirectly supply or deliver of potash consigned from or originating in Belarus to a third country or from a non-UK country to a non-UK country; and (c) acquire, directly or indirectly, potash which originates in Belarus, is located in Belarus, or from a person connected with Belarus.

The potash products covered by the prohibitions are the same as those previously identified by the EU in its Belarus sanctions issued in June, 2021.

  • Petroleum Products: The same restrictions as above apply to petroleum products and there are also restrictions on the provision of technical assistance, financial services, funds and brokering services relating to petroleum products. The UK has listed the same products that were listed as restricted by the EU.
  • Tobacco Products: It is prohibited to export, make available, supply, or deliver tobacco industry goods for contracts entered into after on or after August 9, 2021. The UK has listed the same products that were listed as restricted by the EU.

Notably, in guidance issued on the same day the UK Government has indicated that it will consider granting licenses for continued import, acquisition, supply, or delivery of the above potash, petroleum or tobacco products if it relates to the execution of contracts entered into prior to August 9, 2021 or ancillary contracts necessary for the execution of such contracts.

  • Military Goods, Military Technology, and Dual-Use Goods and Technology: The sanctions prohibit the transfer of dual-use military goods and technology for military use in Belarus or to a person connected with Belarus, including the transfer, directly or indirectly, from a third country to Belarus.
  • Technical Assistance: The provision of technical assistance, defined as “technical support relating to the repair, development, production, assembly, testing, use or maintenance of the goods or technology, or any other technical service relating to the goods or technology” is prohibited if it relates to restricted goods or technology, such as military or dual-use items or the trade in petroleum products, to persons connected with Belarus or for use in Belarus.
  • Brokering Services: It is prohibited to secure an arrangement, including but not limited to the settlement or introduction of persons as parties to the arrangement, the negotiation of an arrangement, the facilitation of anything that enables the arrangement to be entered into, and the provision of any assistance that in any way promotes or facilitates the arrangement, if the arrangement is in relation to petroleum products, technical assistance, and other certain specified goods and technology.
  • Interception and Monitoring Services: The direct or indirect provision of interception and monitoring services to or for the benefit of the Government of Belarus, its public bodies, corporations or agencies, or any person acting on its behalf, are prohibited.

Canada Actions

Similar in scope to those imposed by the UK and EU, Canada issued additional sanctions against Belarus, including prohibitions on:

  • Dealing in transferable securities and money market instruments issued by designated individuals or entities;
  • Transacting in, providing financing for or otherwise dealing in debt of longer than 90 days’ maturity with designated individuals or entities;
  • Providing insurance or reinsurance, directly or indirectly, to Belarus or an organization controlled by Belarus, to anyone acting on behalf of or at the direction of those above, and to designated individuals or entities.
  • Importing, purchasing, acquiring, shipping or otherwise dealing in petroleum goods exported from Belarus. The restricted goods are the same as those listed as restricted by the EU and UK, and these prohibitions including restrictions on the provision of any financial, technical or other services such as insurance or reinsurance related to these goods; and
  • Importing, purchasing, acquiring, shipping or otherwise dealing in potassium chloride (potash) goods exported from Belarus. The restricted goods are the same as those listed as restricted by the EU and UK, and these prohibitions including restrictions on the provision of any financial, technical or other services such as insurance or reinsurance related to these goods.

Similar to the UK, these restrictions do not prohibit payments made pursuant to contracts entered into prior to August 6, 2021, provided payments are not made to a designated person or a person acting on their behalf.

For more information, please contact the professional(s) listed below, or your regular Crowell & Moring contact.

Michelle J. Linderman
Partner – London
Phone: +44.20.7413.1353
Email: mlinderman@crowell.com
Brian McGrath
Associate – New York
Phone: +1 212.895.4222
Email: bmcgrath@crowell.com