Sanctions on by US and EU Authorities after forced landing of Flight 4978

On 23rd May 2021, a Ryanair commercial flight was forced to land in Belarus by Mig-29 Fighter jets because of an alleged bomb scare. The Ryanair flight was traveling through Belarusian air space from Athens on route Vilnius when the incident happened. The forced landing of the Ryanair flight and the subsequent removal and arrest of Raman Pratasevich, a Belarusian journalist, has sparked international condemnation from world leaders.

In response the Council of the and the US President had issued statements that further economic sanctions will be imposed on Belarus targeting the Lukashenka regime for its affront to international norms and the undermining of democracy and .

US Sanctions on Belarus

The Office of Foreign Asset Control (OFAC) will re-impose sanction on Belarus on 3 June 2021. These SDN sanctions will fully block nine Belarusian state-owned enterprises previously granted relief under a series of General Licences by OFAC. As a result of this measure, US Persons will be prohibited from engaging in transactions with these entities, their property, or their interests in property.

OFAC is also working very closely with the Council of the European Union and other partners and Allies, to develop a list of targeted sanctions against key members of the Lukashenka regime associated with ongoing abuses of human rights and corruption, the falsification of the 2020 election and the forced landing of the Ryanair flight on 23rd May.

In addition to economic sanctions the US Government has issued a Level 4 travel warning ‘Do Not Travel to Belarus’ to all US citizens and the FBI, along with the US Department of Justice, is working closely with its European counterparts to investigate the Ryanair incident.

EU Proposed Sanctions on Belarus

EU sanctions on Belarus are expected to focus on Belarus’s Potash Industry, Crude Oil Companies, and the Financial Sector, as well as individuals responsible for the forced landing of Ryanair Flight 4978. In addition, there are to be further targeted sanctions against key members of the Lukashenka regime associated with ongoing abuses of human rights and corruption. We are expecting a formal announcement of these measures from the Council of the European Union in the next couple of weeks.

Since October 2020, the EU has progressively imposed restrictive measures against Belarus. These measures were adopted in response to the allegedly fraudulent nature of the August 2020 presidential elections in Belarus, and reports of the intimidation and aggressive repression of peaceful protesters, political opposition members and journalists. A total of 88 individuals and 7 entities are now designated under the EU sanctions regime on Belarus. These include President, and his son and National Security Adviser, Viktor Lukashenko, as well as other key figures of

1 political leadership and of the government, high level members of the Belarusian judicial system and several prominent economic actors.

The UK Government is also in talking with EU Leaders, and in a joint response, the UK Foreign Secretary toughened his stance, indicating that further, more stringent UK sanctions on Belarus were on the table.

How can financial institutions prepare for these coming sanctions?

It is important for all Firms to perform a health check of their operations in, or related to, Belarus. Some areas for thought are:

a) Trade Finance is a particular area extra care should be taken:

o The issuing of letters of credit or advising on letters of credit (L/Cs) that will finance the exportation of Belarusian origin Crude Oil. Belarus’s Crude Oil sector is not unfamiliar to these type of restrictive measures as large Belarusian oil refineries like Belneftekhim and Naftan were under OFAC restrictions until 2015, when the US granted sanctions relief under OFAC General Licences 2G. As of the 3rd June 2021 OFAC General Licences 2G will be replaced by General Licence 2H, under which counterparties to any of the nine sanctioned Belarusian Oil Companies, are advised to complete any transactions by the 3rd June 2021.

o Similarly, L/Cs that will finance the exportation of Belarusian Potash, will also come under scrutiny of EU sanctions. The Council of the European Union are in discussions to impose stringent new measures on Belarus’s Potash (a soil nutrient used to improve crops) Industry.

b) Both the EU and US have hinted on possible restrictive measures on lending to Belarusian Banks and possibly Belarusian bond sales may also be targeted too. It would be prudent for all firms to:

o Screen new clients and corresponding banking relationships to identify a Belarusian nexus. Identifying your exposure to Belarusian Banks early, may help you save time on implementing this measure if it goes ahead.

o Consider if you hold any Belarusian state-owned bonds or securities.

c) All Firms must ensure:

o Effective list management controls ensuring lists are updated in line with these changes.

o Conduct sanctions screening on all counterparties; and

o Perform due diligence on all third parties to ensure they are not doing business with sanctioned entities, nor entities with controllers or beneficiaries who are designated persons to avoid breaches to economic sanctions

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Manmeet Lotay Manager E-mail: [email protected] Tel: +44 (0)203 102 9525 Mobile: +44 (0)7917 303508

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