International Regulatory Enforcement (PHIRE)
U.S. Expands Sanctions on Belarus, Aligning More Closely with Canada, EU, and UK
By Tom Best, Randall Johnston, and Sam Pickett
On December 2, 2021, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) expanded sanctions against Belarus. The new designations cover 20 individuals and 12 entities, and identify three aircraft as blocked property pursuant to Executive Orders (“E.O.”) 14038 and 13405. In addition, OFAC imposed restrictions on dealings in new issuances of Belarusian sovereign debt in the primary and secondary markets.
The announcements represent an effort by the U.S. to more closely align its Belarusian sanctions with those of allies Canada, the European Union (EU), and the United Kingdom (UK). The trend toward fusion of various transnational compliance and risk management issues in this context is noteworthy, as evidenced by OFAC’s citing of the corruption of Belarusian regime figures, their family members and close associates, and human rights abuses, as the basis for the expanded sanctions. The fallout from Belarus’ August 2020 election, which is widely considered fraudulent, and the recently manufactured migrant crisis at Belarus’ border with Poland and other EU member states have led OFAC to augment U.S. sanctions on Belarus for the fifth time since the election in an effort to hold the Lukashenka regime accountable for its “attacks against democratic freedoms” and otherwise “malign behavior.”
From a purely practical and commercial perspective, the new designations are likely to most affect agricultural and other industries which most rely on Belarusian potash and potash-derived inputs, and on financial institutions dealing with Belarussian state organs which issue debt and extend credit in capital markets and commercial transactions. Perhaps learning from experience, OFAC’s FAQs address many – though not all – of the questions surrounding sectoral sanctions debt restrictions that have been raised by industry stakeholders in response to similar programs for Russia and Venezuela.
Restrictions on Dealings in “New Debt” of Certain Belarus State Organs
As part of its expanded sanctions, OFAC announced a new Directive 1 under E.O. 14038 prohibiting for U.S. persons “all transactions in, provision of financing for, and other dealings in new debt with a maturity of greater than 90 days issued on or after December 2, 2021 by the Ministry of Finance of the Republic of Belarus or the Development Bank of the Republic of Belarus.”
The FAQs issued alongside Directive 1 provide some clarity on issues that have arisen with similar sectoral sanctions in the past. Notable are FAQ 947, which specifically states that drawdowns on revolving credit facilities that were entered into before December 2, 2021 may still take place, so long as the term, maximum amount and interest rate all were negotiated before December 2, 2021 and did not change thereafter. While welcome (if not already relatively well-understood by the user community), even this FAQ does not answer the question of whether pre-negotiated credit revolvers with fixed term and amount provisions – but which leave interest rates subject to determination at the time of drawdown, either depending on term and amount, or external factors – nevertheless may be permitted due to the underlying terms having been negotiated before December 2, 2021. As in the past, such questions will continue to be resolved by institutions and, if necessary, with OFAC, on a case-by-case basis.
As OFAC made clear in its press release, the new U.S. restrictions on dealings of Belarusian sovereign debt align the U.S. position with measures already in place in Canada, the UK and EU, thereby demonstrating the “close coordination with partners and allies” which the Biden Administration has prominently featured since it took office in January 2021.
Support of Human Rights
The new sanctions also targeted Belarus’ recent human rights abuses, accusing the Lukashenka regime of manufacturing a migrant crisis by allowing the trafficking of drugs and migrants into the EU. Like the EU, OFAC has accused the Lukashenka regime of luring migrants into Belarus through additional visas and flights from the Middle East, transporting those individuals to EU member state borders, and denying those individuals reentry to Belarus after forcing them to attempt to enter the EU. This practice has left migrants vulnerable to the harsh winter conditions. To at least express the U.S. position on the Lukashenka regime’s “flaunting of internationally recognized human rights,” OFAC designated Belarus’ state-owned tourism company and seven Government of Belarus officials who hold leadership positions in the national Border Committee as Specially Designated Nationals (“SDN”).
Targeting Agriculture- and Chemical-Related Exports
In an effort to financially handicap the Lukashenka administration and deprive the regime and its supporters of the proceeds of alleged corruption, OFAC also designated as SDNs major potash entities in Belarus, and identified a luxury helicopter as blocked property. Having already designated the largest potash-producing entity in Belarus in August 2021, these latest actions expand the prohibition to cover its trading company and a subsidiary, as well as another major producer of Potash fertilizer Potash is a key input in many agricultural fertilizers and chemicals, and a significant export from Belarus.
To facilitate the winding-down of any U.S. person dealings associated with those entities, OFAC also issued a general license – Belarus General License 5 – that gives U.S. persons 120 days in which to wind down transactions involving the sanctioned entities.
Defense Firms and Additional Belarusian Officials
In addition to the potash and migration crisis-related sanctions, OFAC designated five entities that produce or export Belarusian defense materials, which OFAC also alleged provide funding for the regime, including funding used for corrupt purposes in Belarus. These entities include the company that manufactured riot control equipment deployed against peaceful demonstrators following the controversial August 2020 presidential elections, a producer of surveillance systems, and a state weapons exporter. OFAC also targeted a state-owned cargo carrier that it says shipped ammunition and weapons to foreign conflict zones such as Libya.
Finally, in order to “continue to expose and pressure those repressing civil society in Belarus,” OFAC designated a number of Belarusian officials. The new list includes ten senior officials of the Main Directorate for Combating Organized Crime and Corruption of the Ministry of Internal Affairs (GUBOPiK), whose members are alleged to have undermined democracy and to have physically suppressed and detained participants in peaceful protests following the presidential election. Also designated were Lukashenka’s middle son and the sports club he owns, a Deputy Minister, and an executive of the National Olympic Committee of the Republic of Belarus.
As the corruption and human rights situation in Belarus continues to worsen, the U.S. has placed its fifth round of sanctions on Belarus in a little more than a year. These actions represent an effort to increase coordination with U.S. allies and further condemn the Lukashenka regime. Companies and individuals considering business in Belarus should exercise caution that their activities will not inadvertently run afoul of existing sanctions. While always unpredictable, the direction of travel for Western (U.S., UK, EU, Canadian and others) sanctions on Belarus seems to be towards even more draconian restrictions on business going forward rather than less.
 Press Release, OFAC, Treasury Expands Sanctions Against Belarusian Regime with Partners and Allies (Dec. 2, 2021), https://home.treasury.gov/news/press-releases/jy0512.
 Treas. Dir. 1 (E.O. 14038) (Dec. 2, 2021), https://home.treasury.gov/system/files/126/belarus_sovereign_debt_prohibition_directive_1.pdf.
 OFAC, FAQ 947 (Dec. 2, 2021), https://home.treasury.gov/policy-issues/financial-sanctions/faqs/topic/7771.
 Press release, OFAC.
 Vanessa Gera, et. al, EU accuses Belarus of ‘trafficking’ migrants toward border, Associated Press, Nov. 10, 2021, https://apnews.com/article/european-union-belarus-europe-poland-migration-ee8912d6998a95f421c97b7c99e06f55.
 Potash is a common name for a group of minerals and chemicals containing potassium and that is commonly used to make fertilizer.
 Press release, OFAC.