The U.S. Departments of Commerce and Treasury recently announced that they were expanding restrictions on certain entities that may be aiding Russia’s war in Ukraine with weaponry and technology.
The Commerce Department will add over 100 shell companies – half of which are based overseas in countries sprawled throughout Europe and Asia – onto its entity list. Companies on the list are considered a threat to U.S. security interests and will be required to comply with additional supervision and licensing regulations regarding exports of specific technologies and goods that Moscow’s military can use. Meanwhile, U.S. sanctions continue to target defense firms, mining companies, and financial institutions linked to Russia.
It appears the U.S. is now prioritizing enforcement of its sanctions and export controls, and a recent announcement made by the Department of Treasury suggests that economic restrictions will continue to be a key element of its support for Ukraine.
Meanwhile, a provision in April’s supplemental appropriations bill allows prosecutors to investigate sanctions violations that date back 10 years, forcing companies to invest more in their compliance programs to ensure they are abiding by U.S. regulations and are not engaging in prohibited business with Russian entities.
Though reports suggest that the Russian economy continues to gradually improve, Moscow struggles to keep up with payments to countries such as China, Turkey, and the UAE, forcing it to decrease its imports. Complications are forcing Moscow to re-direct its supply chains to acquire equipment from neighboring countries, which leads to cheaper and lower-quality alternatives that continue to degrade its military capabilities.
Analysis shows that Russia has successfully skirted existing procurement restrictions, and the recent announcement from the Treasury Department suggest the U.S. will take a tougher stance on companies violating sanctions moving forward.
The recent expanded restrictions from the Treasury and Commerce Departments allude to a new approach for the U.S. and its sanctions strategy. Stricter enforcement of sanctions and export controls prove that long-term containment of the Russian economy is a U.S. priority. The implications of economic restrictions are beginning to hammer down on targeted industries in Russia, particularly in its energy sector.
With the apparent U.S. focus on prosecution and compliance, companies will likely continue to de-risk — meaning corporations will sever ties with parties that increase the possibility of violating U.S. law. Ideally, this will lead corporations to end any existing business ties or connections to Russia to prevent violating international trade measures and avoid aiding Putin’s unprovoked war in Ukraine.
Russia’s recent bombardment of Ukraine proves that Putin shows no signs of slowing down any of his vicious attacks. With evidence that Moscow’s aggression will continue to escalate, renewed U.S. economic strategy is more critical now than ever.
