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Archive for the ‘Russia Sanctions’ Category

Jul

8

FIFA and Gazprom: Blame Canada?

Posted by Clif Burns at 10:25 pm on July 8, 2015

Vladimir Putin via http://www.gazprom.com/f/posts/14/173114/1lm_6189-1.jpg [Fair Use] Today in conspiracy news, we bring you Canada’s National Post. Â The Toronto-based dailyÂ speculates that, for some nefarious, but unstated, reason, the Canadian government “waited until the last week of the FIFA Womenâ€™s World Cup to sanction” Gazprom, whichÂ was one of the sponsors of the tournament being hosted by Canada. Not stopping there, the Post wonders “if the sanctions had been broken during the World Cup” by festooning World Cup stadiums with Gazprom banners and ads.

Apparently, they don’t have Google at the National Post. Gazprom was added June 29, 2015 to Schedule 3 of the Special Economic Measures (Russia) Regulations. the Canadian equivalent of the U.S. Sectoral Sanctions Identifications List. Those Canadian regulations prohibit “any person in Canada and any Canadian outside Canada to transact in, provide financing for or otherwise deal in new debt of longer than 90 daysâ€™ maturity” for any person on Schedule 3. So, no, nothing in these sanctions would affect Gazprom’s sponsorship of the Women’s World Cup.

The National Post did have the good sense to ask John Boscariol, one of Canada’s top trade lawyers, whether the sanctions had been violated by Gazprom’s sponsorship. He said

itâ€™s unlikely any rules were broken as the measures against Gazprom are â€œabout as soft as you can get.â€ Unlike those that forbid all financial transactions, the sanctions against Gazprom ban only certain loans to and from the company.

â€œSo in some ways, I guess what youâ€™re saying is we donâ€™t want you to support Gazprom through financing,â€ Boscariol said. â€œBut otherwise you can deal with them.â€

Those of us in the U.S. can now rest easy that there is nothing, nothing at all, to detract from our women’s team’s ultimate victory in the final round!

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May

19

BIS Publishes Tips You Can Use (or Not) to Unmask Russian Straw Purchasers

Posted by Clif Burns at 9:48 pm on May 19, 2015

By Daderot (Own work) [CC0], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3APatent_quote_-_United_States_Department_of_Commerce_-_DSC05103.JPG The Bureau of Industry and Security (“BIS”) just released new guidance, snappily titled “Guidance on Due Diligence to Prevent Unauthorized Transshipment/Reexport of Controlled Items to Russia,” which attempts to reveal ways in which U.S. exporters can detect whether a purchaser is sneakily trying to buy things not for itself but for the bad guys in Russia. This, of course, is a laudable purpose, not just for the Russians, but for the many other countries and entities that know they can’t directly buy certain export-controlled goods and have a straw purchaser do their dirty work. But, sadly, most of the advice for sniffing out secret Russian intermediaries is about as useful as the secret decoder rings that used to be found in cereal boxes.

Here it is:

When inquiring into the ultimate destination of the item, an exporter should consider e-mail address and telephone number country codes and languages used in communications from customers or on a customerâ€™s website. The exporter should also research the intermediate and ultimate consignees and purchaser, as well as their addresses, using business registers, company profiles, websites, and other resources. â€¦ Furthermore, exporters should pay attention to the countries a freight forwarder serves, as well as the industry sectors a distributor or other non-end user customer supplies.

Particularly risible is the advice to pay attention to the “email address and â€¦ languages used in communications from customers or on a customerâ€™s website.” Because, of course, if you’re trying to hide the fact that your acting on behalf of the Russians you’re going to put up a website in Russian, email from a .ru domain, and say “Nyet” when asked if you’re secretly working for the Russkis.

It’s not quite clear why BIS mentions these factors — which may from time to time catch a really stupid Russian intermediary who slips and starts babbling in Russian — rather than more reliable red flags. The most frequent indicators that you’re dealing with an imposter is a purchaser who appears to have no clear understanding of, or use for, the item he or she is seeking to purchase. Small purchasers that your company has never dealt with or who say that they are simply a reseller should set off alarm bells. And here’s a personal favorite: Google Maps Street View is your friend. If you track down the address in Amsterdam and see that the purchaser of a controlled accelerometer is a bicycle store or a car repair garage, well, your work is done.

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Jan

6

OFAC Issues Wind-Down License for Crimea

Posted by Clif Burns at 9:44 pm on January 6, 2015

Category: Crimea Sanctions • OFAC • Russia Sanctions

By Ð˜ÐµÑ€ÐµÐ¹ ÐœÐ°ÐºÑÐ¸Ð¼ ÐœÐ°ÑÑÐ°Ð»Ð¸Ñ‚Ð¸Ð½ (originally posted to Flickr as Ð›Ð°ÑÑ‚Ð¾Ñ‡ÐºÐ¸Ð½Ð¾ Ð³Ð½ÐµÐ·Ð´Ð¾) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons http://http://commons.wikimedia.org/wiki/File:%D0%9B%D0%B0%D1%81%D1%82%D0%BE%D1%87%D0%BA%D0%B8%D0%BD%D0%BE_%D0%B3%D0%BD%D0%B5%D0%B7%D0%B4%D0%BE.jpg Right before the New Year, the Office of Foreign Assets Control (“OFAC”) started some of the inevitable clean-up on the Executive Order sanctioning Crimea that the agency rushed out before the President went on vacation. Not having time to calibrate the sanctions, the order just prohibited all imports and exports (except for the statutorily required exceptions for agricultural products, medicine and medical devices, which, somehow or other, became “medical supplies”). The first of these was General License No. 5 which permits U.S. persons to wind-down operations in Crimea.

But, sadly, the General License is a mess. For starters, although the license permits transactions and activities “normally incident” to “the winding down of operations, contracts, or other agreements that were in effect prior to December 20, 2014,” the General License gives no indication of what types of transactions might be “normally incident” to winding down. The General License does say what is not incident to winding down. New exports of goods and services to Crimea don’t qualify. And, in a masterpiece of useless circular definition, neither are new imports of goods and services from Crimea “except as needed to wind down operations, contracts, or other agreements.” Thanks, that clears everything up.

Let’s take a concrete example. Let’s say that money is owed under a contract for services performed prior to December 20, 2014, in Crimea. Can that money be paid? Who knows. But if you decide that it is, you have to make the payment by February 1, 2015, and file a report within 10 days with OFAC about everything you did to wind down operations. That way OFAC can decide (after the fact, of course) whether what you did was normally incident to winding down and send you a charging letter (too late for a voluntary disclosure) if it decides that it was not.

The February 1, 2015 deadline is pretty unrealistic for certain wind downs that involve divestiture of assets in Crimea. Any potential purchaser who knows about the deadline (and they all will know about it) will, of course, wait until January 31 and offer Â the U.S. seller fire-sale prices. So who’s being sanctioned here?

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Dec

22

A Lump of Coal in Crimea’s Stocking

Posted by Clif Burns at 5:42 pm on December 22, 2014

Category: Russia Sanctions

Foros Church near Yalta by Kiyanka (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3A%D0%A6%D0%B5%D1%80%D0%BA%D0%B2%D0%B0_%D0%92%D0%BE%D1%81%D0%BA%D1%80%D0%B5%D1%81%D1%96%D0%BD%D0%BD%D1%8F_%D0%A5%D1%80%D0%B8%D1%81%D1%82%D0%BE%D0%B2%D0%BE%D0%B3%D0%BE_%D0%A4%D0%BE%D1%80%D0%BE%D1%81_01.jpg Last Friday, the White House tied a ribbon around a big lump of coal and delivered it to Crimea in the form of an executive order that institutes a comprehensive embargo against that region of Ukraine. The order prohibits all exports of goods and services to, and all imports of goods and services from, the Crimea region of Ukraine with the exception of agricultural commodities, medicine, medical supplies, and replacement parts as described in a General License issued at the same time. The Executive Order, however, raises more questions than it answers, leaving aside the obvious policy question of how imposing sanctions on the people of Crimea furthers any legitimate policy interests.

Notably absent from the order are any of the typical exceptions to sanctions regimes, such as the exception for hardware and software for personal communications over the Internet. As of the date of the Executive Order, it is now illegal for Google to provide Gmail to anyone in Crimea. Facebook can’t provide messaging services to and from Facebook members in Crimea. The problem, of course, is how Google or Facebook can determine where a user is located given that IP addresses assigned to Crimea will, in most instances probably, still indicate a location in Ukraine for obvious historical reasons.

This locational ambiguity exists not only in the virtual world of the Internet, but in the brick and mortar physical world as well. Suppose a merchant receives a mail order from Nikolai Gogol, 19 Haharina Street, Sudak, Russia. Do exporters have to look up every address in Russia before sending packages? (Sudak is a resort city in Crimea).

Finally, and not surprisingly, although the Crimea order was immediately effective, not everyone has received the message yet. One U.S. car company was happy to book me a car rental just a few moments ago at the Simferopol Airport in Crimea for mid-January. (I was offered a good rate too!) Needless to say, I did not push the confirm reservation button, so perhaps it was all a tease and I would have gotten the hook if I had actually let them charge my credit card.

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Nov

20

BIS Updates FAQs on Shale Issue

Posted by Clif Burns at 8:54 pm on November 20, 2014

Category: BIS • OFAC • Russia Sanctions

Ocean Star Drilling Rig by Ed Schilpul [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr http://www.flickr.com/photos/eschipul/4577660624 In our prior post on the Russia sanctions and export of equipment to be used in oil production and exploration in shale, we noted that BIS had not yet weighed in on whether its export ban, like OFAC’s restriction, covered only production and exploration of oil in shale and not production and exploration which went through shale to oil reservoirs below. Well, in fact BIS has also recently updated its FAQs and has reached the same conclusion as OFAC. BIS is to be commended for phrasing its FAQ on this issue in a clear and intelligible way, unlike the cryptic version posted by OFAC.

Q11: When the August 6 rule refers to shale and uses the terms exploration or production in shale, do the restricted end uses apply only to situations, such as fracking, where the hydrocarbon is located in shale formations, or do they also apply to projects involving penetrating a layer of shale to reach a reservoir located below the shale formation? What about projects that involve unconventional methods of extracting oil from shale (e.g., from shale reservoirs or oil shale processing)?

A11: The license requirements of Â§746.5 of the EAR apply to the specified items when you know that the item will be used directly or indirectly in exploration for, or production of, oil or gas in Russian deepwater (greater than 500 feet) or Arctic offshore locations or shale formations in Russia, or are unable to determine whether the item will be used in such projects. Thus, the license requirement applies to exploration for, or production of, oil or gas from a shale formation. The license requirement does not apply to exploration or production through shale to locate or extract crude oil or gas in reservoirs.

You can’t get any clearer than that.

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