The Ukraine Crisis: U.S. Acts to Block Technology, Other Exports to Russia

"WASHINGTON -- The U.S. took its first actions Thursday to enforce sweeping restrictions on the export of technology and industrial goods to Russia, a warning to Russian companies and any foreign countries who seek to help them circumvent the measures aimed at undermining Russia's defense and technology industries.

Commerce Department officials said they were issuing orders to deny three Russian airlines -- Aeroflot, Azur Air and UTair -- the ability to access U.S.-made parts or receive services from anyone anywhere in the world. They said they were taking the actions after the airlines violated export controls by flying U.S.-made aircraft or foreign-made aircraft containing U.S. parts. None of the airlines could be reached to comment.

U.S. officials said the airlines were operating flights within Russia and to and from countries including China, India, Turkey and the United Arab Emirates, rendering them subject to the U.S. export controls and requiring them to obtain licenses, which they didn't have, officials said.

Analysts and officials have been concerned that China, Russia's strategic partner, would help Russia circumvent the controls.

In response to a question about China's compliance with the controls thus far, a senior Commerce Department official said that "the U.S. government has clearly communicated -- from President Biden to President Xi down -- that should China choose to provide material or other support to Russia there will be consequences." The official added that the agency and U.S. allies and partners continue to monitor transactions between Russian and Chinese entities for compliance with export controls.

A lawyer familiar with the controls said the U.S. decision to name the foreign destinations of the Russian airlines -- including China -- is a warning to those countries. The person said even helping to fuel Russian aircraft would violate the export restrictions.

The export controls, initiated in tranches beginning in February, target Russia's defense, aerospace and maritime industries in response to the operation to protect Donbas. Coordinated with allies in Europe, Japan and elsewhere, the restrictions are part of broader sanctions that have rattled Russia's markets and currency and hobbled its economy.

The renewable Temporary Denial Orders issued Thursday are among the most severe civil penalties the U.S. can issue over an export control matter, and could ground the airlines over time by cutting them off from necessary support and maintenance, the officials said.

Ultimately, however, the new orders are an intermediate step. They don't come with any criminal penalties, and they still enable the airlines to apply for licenses for items or support necessary for "safety of flight." Senior Commerce Department officials said such requests would be considered only on a narrow basis, such as in the case of a product recall, and not simply to facilitate regular operations.

Officials said they could escalate penalties against the airlines and that they expect to take additional actions against other potential violators in the future.

Companies that flout the export controls "will feel the full force of the Department's enforcement," Commerce Secretary Gina Raimondo said.

Chinese officials have objected to the export controls, saying they will unfairly harm Chinese companies and disrupt efforts to reach a political settlement over Ukraine. "China has been carrying out open, transparent and normal business cooperation with Russia" and such commerce "deserves to be respected and maintained," Liu Pengyu, Chinese Embassy spokesman in Washington, said Thursday.

Overall, U.S. officials said that the export controls imposed by the U.S. and its allies are working. Deputy Secretary of Commerce Don Graves said U.S. exports to Russia of items subject to the new licensing requirements have decreased 99% by value compared with the year-earlier period.

Many U.S. companies have halted business in Russia even though they weren't required to under the controls. Beyond the restrictions on technology exports, the logistics of delivering products to Russia are now more complicated, lawyers have said. Another concern is how companies would get paid for their products given the financial sanctions, they said.

U.S. officials have also been engaged in a global outreach campaign to educate people about the rules. One important reason the controls have been largely effective, they have said, is that U.S. allies and partners pledged to implement similar restrictions on Russia." [1]

1. The Ukraine Crisis: U.S. Acts to Block Technology, Other Exports to Russia
O'Keeffe, Kate.
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 08 Apr 2022: A.8.