Overview
On October 30, 2015, the US Department of Treasury, Office of Foreign Assets Control (OFAC) issued a general license that permits US persons to engage in transactions with certain Belarus-based companies that have been designated as Specially Designated Nationals (SDNs), as well as entities owned 50 percent or more by the entities identified in the general license. The general license is valid for six months unless OFAC revokes or extends it.
On October 29, 2015, the Council of the European Union (the Council) announced the suspension of asset freezes and travel bans applying to 170 individuals (including President Lukashenko) and the asset freeze of three entities. The suspension is effective from October 31, 2015, for four months. The situation will be reviewed at the end of February 2016, at which point the EU could re-impose these sanctions, or ultimately, lift sanctions altogether.
The US and EU easing of sanctions comes after the Lukashenko government in Belarus welcomed election monitors and freed political prisoners, and could mark a turning point in relations between Belarus and the West. However, that remains to be seen. While the US and EU measures authorize a range of commercial activity in the short term, companies planning to expand Belarus-related business should proceed with caution, as discussed below.
OFAC General License
Effective October 30, 2015, OFAC issued a general license that permits all transactions prohibited by Executive Order 13405 involving the following nine entities, or any entities that they directly or indirectly own 50 percent or more individually or in the aggregate:
- Belarusian Oil Trade House
- Belneftekhim
- Belneftekhim USA, Inc.
- Belshina OAO
- Grodno Azot OAO
- Grodno Khimvolokno OAO
- Lakokraska OAO
- Naftan OAO
- Polotsk Steklovolokno OAO
President Bush had issued Executive Order 13405 in June 2006 following the Belarus elections of March 2006. EO 13405 blocks the property and interest in property of persons determined to be undermining the democratic process or institutions in Belarus, committing human rights abuses related to political repression, or engaging in public corruption by misusing Belarusian public assets or authority. All property and interest in property of such persons are subject to an asset freeze and may not be transferred, paid, exported, withdrawn or otherwise dealt in by “US persons,” defined to include companies organized under US law (including their foreign branches), US citizens or lawful permanent residents wherever located, and any person within the United States. OFAC has issued the Belarus Sanctions Regulations (BSR), 31 C.F.R. Part 548, implementing EO 13405. Please see our previous advisory for details.
The general license will expire on April 30, 2016, unless revoked or extended. The relief provided under the general license is limited to dealings with the nine entities listed above, and entities they own 50 percent or more – either individually or in the aggregate. The general license authorizes transactions involving these entities otherwise prohibited by EO 13405, including the (i) provision of funds, goods, or services to these entities, (ii) receipt of funds, goods, or services from these entities, and (iii) dealings in securities that are registered in the name of, held for the benefit of, or issued by such entities. See 31 C.F.R. § 548.201. Transactions that are ordinarily incident to a licensed transaction are also authorized. See 31 C.F.R. § 548.404.
It seems likely that under the general license, all aspects of a transaction, including payment, must be concluded by April 30, 2016, unless the general license is extended. This would be similar to the temporary relief from Iran sanctions authorized under the Joint Plan of Action (JPOA), which only authorized activities “initiated and completed entirely” within the relief period. See our previous advisory for details. It is possible that OFAC will issue guidance regarding this issue in the weeks ahead.
US persons engaging in one or a series of transactions authorized by the general license exceeding $10,000 are required to file a report with the US Department of State, Office of Eastern European Affairs, within 15 days, including information regarding the dollar value of the transaction(s), the parties involved, the type and scope of activities conducted, and the dates or duration of the activities.
Significantly, the assets of the nine entities listed above, and of entities they own 50 percent or more, which were blocked pursuant to EO 13405 prior to October 30, 2015, remain blocked. These entities also remain on the SDN List. Practically speaking, this means that funds of the listed entities previously frozen by US persons—such as funds frozen by a US bank—remain blocked and cannot be transferred, despite the authorization to engage in new transactions.
EU Sanctions Relief
The EU first imposed sanctions against Belarus in 2004, in response to the disappearance of former interior minister Yuri Zakharenko, former deputy parliamentary speaker Viktor Gonchar, businessman Anatoly Krasovski, and Russian cameraman Dmitry Zavadski in 1999 and 2000. Thereafter, sanctions were imposed in 2004, 2006, and 2012, in respect of allegedly fraudulent referenda and elections, as well as violations of electoral standards. In 2012, sanctions were extended against individuals who are alleged to have been responsible for human rights violations.
The Council’s decision of October 29, 2015 to suspend the targeted sanctions is said to be “in response to the release of all Belarusian political prisoners on 22 August and in the context of improving EU-Belarus relations.” The Council’s decision was adopted by written procedure on October 30, 2015 through Council Implementing Regulation (EU) 2015/1949, implementing Article 8a(1) of Council Regulation (EC) 765/2006, and Council Decision (CFSP) 2015/1957 amending Council Decision 2012/642/CFSP.
Under Council Decision 2012/642/CFSP (as updated in October 2014), the EU’s restrictive measures against targeted Belarusian individuals and entities were due to expire on October 31, 2015. The EU has therefore agreed to extend those measures until February 29, 2016, whilst at the same time it has agreed to suspend them for 170 individuals (including President Lukashenko) and three entities (Beltechexport, Beltech Holding, and Spetspriborservice).
The arms embargo against Belarus, however, remains in place, and four individuals (members of President Lukashenko’s security service) who are suspected of being involved in the disappearance of political opponents in 1999-2000 will remain under sanctions.
In addition to the sanctions suspensions discussed above, following the judgment of the General Court (First Chamber) on October 6, 2015 in Case T-276/12, four entities that were sanctioned under Regulation (EU) 765/2006, are no longer subject to EU sanctions. Those four entities are:
- LLC Triple Metal Trade
- JV LLC Triple-Techno
- MSSFC Logoysk
- Triple-Agro ACC
As a result of the suspension of sanctions against the three entities mentioned above and the court-ordered lifting of sanctions against the four entities listed directly above, those entities will now be eligible to receive financing from the European Investment Bank.
Conclusion
The US and EU have granted limited and temporary sanctions relief that authorizes transactions with certain Belarusian entities and individuals.
If the relationship between Belarus and the West continues to improve, more extensive and permanent sanctions relief may be forthcoming. However, companies planning to engage with Belarus-based entities and individuals should be aware of the short-term nature of the recent sanctions relief.
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