Archive for the ‘Russia’ Category

Russia Will Struggle to Turn on Siemens Turbines in Sanctions-Bound Crimea

Thursday, August 3rd, 2017 by Danielle McClellan

(Source: Reuters, 19 July 2017.)

MOSCOW (Reuters) – Russia outfoxed European Union sanctions by delivering gas turbines made by Germany’s Siemens to the annexed Ukrainian region of Crimea. Now for the hard part, switching them on.

No Russian company, according to Reuters data, has ever got a Siemens turbine working without the help of the manufacturer.

In this case, Siemens said the turbines were shipped to Crimea behind its back and is refusing to be involved, leaving Moscow to work out how to start them up to fulfill President Vladimir Putin’s promise to give Crimea a stable power supply.

Siemens has filed a lawsuit against its Russian customer over the delivery of the turbines to Crimea and says it will do everything in its power to block their installation and commissioning.

If Russia can somehow get the turbines operating at the two new power plants under construction, having already irked Europe by delivering them, it will again demonstrate its ability to thumb its nose at the sanctions.

Ten industry specialists who spoke to Reuters said starting up the turbines without engineers from Siemens or its partners would be a tough test of the country’s engineering resourcefulness, fraught with technical problems, expensive and a legal minefield.

“Without Siemens it will be very hard to do it,” said an industry source.

But the majority of the specialists said it can be done — even if it has never been attempted before.

Hunt for a Contractor

A firm involved in building the Crimean power plants had hired a Russian company called Interavtomatika, which is 45.7 percent owned by Siemens, to help turn on the turbines, according to three sources familiar with the project.

Since then, Siemens said it has got a written undertaking from Interavtomatika that it will halt any activities connected to Crimea.

In an implied threat to pull out of the venture, a company source familiar with the matter has also said Siemens is reviewing its engagement in its Russian businesses. The source declined to say whether that could affect Interavtomatika and Siemens declined to comment.

EU companies are banned from transferring energy technology to Crimea under the sanctions, imposed after Moscow seized the peninsula from Ukraine in 2014. But, in a loophole Moscow seems to have exploited, their Russian subsidiaries are not directly liable.

When asked if its turbines could be assembled, installed, and commissioned without its cooperation, Siemens said it was unwilling to speculate about future developments and did not want to fuel such speculation. Russia’s Energy Ministry did not respond to a Reuters request for comment.

Several of the industry sources said a Russian firm called ROTEK had experience with Siemens turbines. It is part of the Renova conglomerate controlled by billionaire Viktor Vekselberg.

The company, along with its partners, services 13 Siemens gas turbines in Russia similar to the model delivered to Crimea, according to ROTEK’s website. The company, asked by Reuters if it has been approached to help with the Crimea turbines, declined to comment.

Some of the Siemens turbines ROTEK services are installed at power stations owned by gas giant Gazprom and ROTEK services those ones with a Gazprom-owned firm called Teploenergoremont-Servis. That company, via a representative in Gazprom’s power division, declined to comment.

High Risk

Any Russian company that agrees to set up the Crimea turbines must weigh the “very high” risk of sanctions being imposed on any EU or US business it has, according to Artyom Zhavoronkov, partner in the Russian office of law firm Dentons.

Renova has assets in the European Union and the United States. Gazprom has assets in the European Union.

Russian officials have not acknowledged shipping Siemens turbines to Crimea. They say the turbines were obtained second hand and were Russian-made. Siemens makes turbines at a factory it co-owns in Russia.

Technopromexport, the Russian company building the Crimean power plants, has also not confirmed the turbines are made by Siemens. It declined to go into detail on how they would be serviced, beyond saying it would be “by Russian specialists and contractors”.

If no firm wants to take on the job, Technopromexport and its partners could instead assemble a team of specialists themselves to get the task done, several of the industry specialists said.

One person close to the Crimea power plants project said a recruitment drive was already underway to find people in the Russian power sector who had experience of launching Siemens gas turbines.

According to one industry specialist, 18 turbines of the same model now in Crimea have previously been launched in Russian power stations. As a result, there is a pool of people who have at least observed the turbines being commissioned.

“In theory you can try to launch them without Siemens,” said one industry specialist, who, like all the other people in the sector who spoke to Reuters, requested anonymity because of the sensitivity of the subject.

The turbines can be launched if you “gather up the people and the know-how from when these turbines were already used, in Russia and abroad,” said the first industry source.

The model of Siemens turbines the German firm and the three sources close to the power plant say is now in Crimea — the SGT5-2000E — is not the latest word in turbine technology, but is highly sophisticated.

It is run by an automatic control system that uses Siemens proprietary software. It contains highly-engineered parts — such as the blades that turn the turbine — which up to now have only ever been bought from Siemens or its partners.

The blades need to be replaced after between three and four years and no home grown Russian company manufactures blades compatible with the Siemens turbines in Crimea, several of the specialists told Reuters.

Workarounds mentioned by people in the industry included sourcing non-original spare parts from manufacturers in China, Russian engineers attempting to replicate the blades themselves or trying to buy them via intermediaries.

“There are organisations in Russia that, in principle, can make the blades,” said an energy sector source in ex-Soviet Belarus who has experience of working with Siemens equipment. “How reliable they are, that’s another matter.”

Beware of Contracts Signed by Specially Designated Nationals

Thursday, August 3rd, 2017 by Danielle McClellan

(Source: Commonwealth Trading Partners)

By: Chalinee Tinaves, Esq., Commonwealth Trading Partners, ctinaves@ctp-inc.com.

On July 20, 2017, the Office of the Foreign Assets Control (OFAC) announced a $2 million penalty against ExxonMobil Corporation and two of its subsidiaries for violating the Ukraine-Related Sanctions Regulations. According to OFAC, ExxonMobil violated the sanctions when its execs dealt in services with Igor Sechin, President of Rosneft OAO, when they signed eight legal documents relating to oil and gas projects in Russia between May 14, 2014, and May 23, 2014.

If you’ll travel back in time to March 2014, as tensions were heating up regarding Russian deployment of military forces in the Crimea region of Ukraine, President Obama issued Executive Order 13661, “Blocking Property of Additional Persons Contributing to the Situation in Ukraine,” in response to actions deemed to constitute an unusual and extraordinary threat to the national security and foreign policy of the U.S. Section 1(a)(ii) authorized the Secretary of the Treasury to designate officials of the Government of the Russian Federation, block any property or interests in property, and prohibit dealing in any property and interests in property of a person listed on the Specially Designated Nationals and Blocked Persons List (SDN List). Section 4 of E.O. 13661 prohibited US persons from making “any contribution or provision of funds, goods, or services by, to, or for the benefit of any person whose property and interests in property are blocked pursuant to this order” as well as receiving “any contribution or provision of funds, goods, or services” from a designated person.

On April 28, 2014, OFAC designated Igor Sechin as an official of the Russian government, thereby generally prohibiting US persons from conducting transactions with him. Although Rosneft OAO is:

  • designated on the Sectoral Sanctions Identifications List (SSI List) pursuant to Executive Order 13662 “Blocking Property of Additional Persons Contributing to the Situation in Ukraine;”
  • subject to Directive 2 (prohibiting transacting in, providing financing for, or otherwise dealing in new debt of greater than 90 days maturity if that debt is issued on or after the sanctions effective date by, on behalf of, or for the benefit of the persons operating in Russia’s energy sector); and
  • subject to Directive 4 (prohibition against the direct or indirect provision of, exportation, or reexportation of goods, services, or technology in support of exploration or production for deepwater, Arctic offshore, or shale projects that have the potential to produce oil in the Russian Federation or in maritime area claimed by Russian Federation and extending from its Territory); nonetheless, Rosneft OAO is not designated on the SDN List and is therefore not subject to blocking sanctions.

As you can see, the conflict lies in how to conduct business transactions with an organization that is not blocked with an executive who is. According to the release, OFAC rejected ExxonMobil’s position that Sechin was acting in his professional capacity as President of Rosneft OAO when they signed the legal documents. Specifically, ExxonMobil referenced comments by a Treasury Department spokesman in April 2014 allowing BP Plc Chief Executive, Bob Dudley, to remain on the board of directors of Rosneft OAO so long as he did not discuss personal business with Sechin. In rejecting this argument, OFAC indicated that statement did not address ExxonMobil’s conduct nor did the plain language of Ukraine-Related Sanctions Regulations include a distinction between “personal” or “professional.” Further, OFAC has not interpreted the Regulations to create a carve-out for designated parties acting in their professional capacity.

Interestingly, in support of its position, OFAC pointed to its Frequently Asked Question #285 published on March 18, 2013, regarding the Burma Sanctions Program. Although conveniently now removed from OFAC’s FAQs and website following the termination of the Burma Sanctions Regulations, an archived link detailing FAQ #285 captured the full text of OFAC’s response to ministry dealings with a designated Burmese Government minister. According to OFAC:

A government ministry is not blocked solely because the minister heading it is an SDN. U.S. persons should, however, be cautious in dealings with the ministry to ensure that they are not, for example, entering into any contracts that are signed by the SDN.

However, in Treasury’s restatement of FAQ #285 in the ExxonMobil announcement, OFAC indicated that US parties should “be cautious in dealings with [a non-designated] entity to ensure that they are not providing funds, goods, or services to the SDN, for example, by entering into any contracts that are signed by the SDN.”

Rejecting ExxonMobil’s rebuttal that OFAC regulations state that different interpretations may exist among and between the sanctions programs that it administers, FAQ #285 “clearly signaled” that OFAC views the signing of a contract with an SDN as prohibited, even if the entity on whose behalf the SDN signed was not sanctioned in situations where sanctions programs also involve SDNs. These reasons, in addition to the definitions of “property” and “property interest” in the Ukraine-Related Sanctions Regulations, E.O. 13661, and statements issued by the White House and the Department of Treasury, served to provide ExxonMobil with notice that signing the legal documents with Sechin would violate the prohibitions in the Ukraine-Related Sanctions Regulations.

In assessing the penalty based on OFAC’s Economic Sanctions Enforcement Guidelines, among other aggravating factors, OFAC viewed ExxonMobil’s transaction to be a show of “reckless disregard for U.S. sanctions requirements when it failed to consider warning signs associated with dealing in the blocked services of an SDN” and contributed “significant harm” to the objectives of the Ukraine-Related Sanctions Program. Following the announcement, ExxonMobil stood by its position that it acted in full compliance with the sanctions guidelines in 2014 and argued that the Treasury Department is “trying to retroactively enforce a new interpretation of an executive order that is inconsistent with the explicit and unambiguous guidance from the White House and Treasury issued before the relevant conduct and still publicly available today.”

What does all this mean for U.S. companies? While FAQ #285 was initially crafted to address contracts with a designated government official (which Sechin satisfied based on his designation as a Russian official), it is unclear whether this interpretation would also be applicable in situations involving non-government SDNs and their corporate dealings. Further, the prohibited conduct of entering into a contract signed by an SDN in FAQ #285 was listed as an example. It is entirely possible that a range of other contract activities are prohibited by SDNs like negotiating a contract. Companies must be aware of the risks associated with projects that would require authorization by an SDN. Further, companies can mitigate their risk by screening all the parties involved in a transaction to avoid potentially violating a sanctions program.

Cryomech Charged for Illegal Export to Russian Company on Entity List

Wednesday, July 19th, 2017 by Danielle McClellan

By: Ashleigh Foor

Cryomech, Inc. of Syracuse, NY has received a charge involving its exports of  an LNP-20 Liquid Nitrogen Plant, an item classified as EAR99 in the EAR, from the United States to the All-Russian Scientific Research Institute of Experimental Physics (VNIIEF) a.k.a Russian Federal Nuclear Center-VNIIEF (RFNC-VNIIEF) in Sarov, Russia. Cryomech shipped this item, valued at $33,587, without the required BIS License on or around August 16, 2012. On June 9, 2017 the company received a civil penalty of $28,000 as well as an order to hire an unaffiliated third-party consultant with expertise in U.S. export control laws to complete an external audit of its entire export controls compliance program. Cryomech will not be debarred if penalty is paid and audit is completed with results submitted.

Settlement Documents: https://efoia.bis.doc.gov/index.php/documents/export-violations/export-violations-2015/1114-e2501/file

Rosoboronexport Added to Nonproliferation Act by State

Thursday, May 11th, 2017 by Danielle McClellan

On March 21, 2017, the Department of State applied the measures authorized in Section 3 of the Iran, North Korea, and Syria Nonproliferation Act against Rosoboronexport (ROE) (Russia) and any successor, sub-unit, or subsidiary thereof. The measures below will remain in place for two years from the effective date unless the Secretary of State determines otherwise.

Rosoboronexport accounts for more than 90% of Russia’s annual arms sales and India is their major client, other leading clients include China, Algeria, Syria, Vietnam, Venezuela and recently Iraq.

Section 3 of the Act, imposes the following measures against Rosoboronexport:

  1. No department or agency of the United States Government may procure or enter into any contract for the procurement of any goods, technology, or services from this foreign person, except to the extent that the Secretary of State otherwise may determine. This measure shall not apply to subcontracts at any tier with ROE and any successor, sub-unit, or subsidiary thereof made on behalf of the United States Government for goods, technology, and services for the maintenance, repair, overhaul, or sustainment of Mi-17 helicopters for the purpose of providing assistance to the security forces of Afghanistan, as well as for the purpose of combating terrorism and violent extremism globally. Moreover, the ban on U.S. government procurement from the Russian entity Rosoboronexport (ROE) and any successor, sub-unit, or subsidiary thereof shall not apply to United States Government procurement of goods, technology, and services for the purchase, maintenance, or sustainment of the Digital Electro Optical Sensor OSDCAM4060 to improve the U.S. ability to monitor and verify Russia’s Open Skies Treaty compliance. Such subcontracts include the purchase of spare parts, supplies, and related services for these purposes;
  2. 2. No department or agency of the United States Government may provide any assistance to this foreign person, and this person shall not be eligible to participate in any assistance program of the United States Government, except to the extent that the Secretary of State otherwise may determine;
  3. No United States Government sales to this foreign person of any item on the United States Munitions List are permitted, and all sales to this person of any defense articles, defense services, or design and construction services under the Arms Export Control Act are terminated; and;
  4. No new individual licenses shall be granted for the transfer to this foreign person of items the export of which is controlled under the Export Administration Act of 1979 or the Export Administration Regulations, and any existing such licenses are suspended.

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2017-03-29/pdf/2017-06224.pdf

BIS Adds 23 Russian Entities to Entity List & Explains License Review Policy

Tuesday, January 31st, 2017 by Danielle McClellan

On December 27, 2016 the Bureau of Industry and Security published a final rule adding 23 Russian Entities to the Entity list and revises the licensing policy in three sections of part 742 of the EAR to clarify that BIS’s review of license applications for exports, reexports and transfers (in- country) to Russia.

BIS revised the CCL based controls sections of the EAR to clarify that it will review license applications to export or reexport to Russia items subject to the EAR and controlled for chemical and biological weapons proliferation (CB), nuclear nonproliferation (NP) or national security (NS) reasons under a presumption of denial, if the items proposed for export or reexport would make a direct and significant contribution to Russia’s military capabilities.

This final rules revises 742.2 and 742.3 of the EAR to clarify that license applications for items controlled for CB and NP reasons will be reviewed in accordance with the revised licensing policies in paragraph (b)(4) of both 742.2 and 742.3 and with the revised licensing policy in paragraph (b)(7) of 742.4 of the EAR. This rule revises 742.4(b)(7) of the EAR to clarify that license applications for items controlled for NS reasons will be reviewed under a presumption of denial if the items would make a direct and significant contribution to Russia’s military capabilities, including but not limited to, the major weapons systems described in Supplement No. 7 to part 742 of the EAR.

This final rule adds the following twenty-three entities to the Entity List:

Crimea Region of Ukraine:

  1. Crimean Ports, a.k.a., the following three aliases:
  • State Unitary Enterprise of the
  • Republic of Crimea ‘Crimean Ports’;
  • Sue RC ‘KMP’;
  • Sue RK ‘Crimean Ports’

28 Kirov Street, Kerch, Crimea Region of Ukraine 98312

 

  1.  Crimean Railway, a.k.a., the following three aliases:
  • Federal State Unitary Enterprise ‘Crimean Railway’;
  • Krymzhd;
  • The Railways of Crimea

34 Pavlenko Street, Simferopol, Crimea Region of Ukraine 95006.
Russia:

  1.  DJSC Factory Krasnoe Znamya, a.k.a., the following five aliases:
  • OJSC Factory Krasnoe Znamya;
  • OAO Zavod Krasnoe Znamya;
  • AO Krasnoye Znamya;
  • Krasnoye Znamya Plant OAO;
  • Krasnoye Znamya Plant JSC.

Shabulina Travel 2a, Ryazan, 390043, Russia

  1.  Ekran Scientific Research Institute, FSUE, a.k.a., the following one alias:
  • FGUP Ekran.

Kirov Avenue 24, Samara 443022, Russia; and Krzhizhanovskogo Street 20/30, Moscow, 117218, Russia;

  1. ElTom Research and Production Company, a.k.a., the following one alias:
  • NPP ElTom

Garshin Street 11, Tomilino, Lyuberetsky, Moscow, 140070, Russia

  1.  FSUE FNPC Nizhegorodsky Scientific Research Institute of Radiotechnics (NNIIRT),

Shaposhnikov Street 5, Nizhny Novgorod, 603950, Russia

  1.  Institut Stroiproekt, AO, a.k.a., the following six aliases:
  • Aktsionernoe Obshcestvo Institut Stroiproekt;
  • AO Institut Stroiproekt;
  • AO Institute Stroyproekt (f.k.a., Institut Stroiproekt Zakrytoe Aktsionernoe Obshchestvo);
  • Institute Stroyproect;
  • Stroyproekt;
  • Stroyproekt Engineering Group

D. 13 Korp. 2 LiteraA Prospekt Dunaiski, St. Petersburg 196158, Russia; and 13/2 Dunaisky Prospect, St. Petersburg 196158, Russia

  1. JSC GOZ Obukhov Plant, a.k.a., the following one alias:
  • GOZ Obukhov Plant

Prospekt Obukhovskoi Oboroni 120, Saint Petersburg, 192012, Russia

  1. JSC Institute of Instrumentation— Novosibirsk Plant Comintern (NPO NIIP–NZIK), Planetnaya Street 32, Novosibirsk, 630015, Russia
  2.  JSC Scientific Research Institute of Aircraft Equipment (NIIAO), a.k.a., the following three aliases:
  • SRIAE;
  • NIIAO;
  • Aviation Instrument Scientific Research Institute

Tupoleva 18, Zhukovsky, Moscow, 140182, Russia

  1.  Kaluga Scientific Research Radio Technology Institute (KRRTI), a.k.a., the following two aliases:
  • KNIRTI;
  • KRRTI

Lenin Street 2, Zhukov, Kaluga Oblast, 249192, Russia

  1.  Karst, OOO, a.k.a., the following four aliases:
  • Construction Holding Company Old City—Karst;
  • Karst Ltd.;
  • LLC Karst;
  • Obshcestvo S Ogranichennoi Otvetstvennostyu Karst

D. 4 Litera A Pomeshchenie 69 ul. Kapitanskaya, St. Petersburg 199397, Russiaand 4 Kapitanskaya Street, Unit A, Office 69–N, St. Petersburg 199397, Russia

  1. LLC Ruschemtrade, St. Mashinostroitelnyj, 3, Rostov-on- Don 344090, Russia; and 86/1, Temryuk, Krasnodar 353500, Russia
  2.  OAO All-Russia Research Institute of Radio Equipment (JSC VNIIRA), a.k.a., the following three aliases:
  • OJSC VNIIRA;
  • OAO All-Russia Research Institute of Radio Technology;
  • All-Russian Scientific Research Institute of Radio Equipment

Shkipersky Protok 19, V.I. St. Petersburg, 199106, Russia

  1.  OJSC Ural Production Company Vector (UPP Vector), a.k.a., the following two aliases:
  • JSC ‘SCP’ Vector;
  • JSC PPM Vector

Gagarin Street 28, Ekaterinburg, 620078, Russia

  1.  Olid Ltd., a.k.a., the following one alias:
  • OOO Solid

ul Mira 4, Novorossiysk, Krasnodarskiy kray 630024, Russia

  1.  Research and Production Association KVANT, a.k.a., the following one alias:
  • NPO Kvant

Bolshaya Saint Petersburg 73, Velikii- Novgorod 173003, Russia

  1.  Research and Production Association M.V. Frunze, a.k.a., the following two aliases:
  • NNPO Frunze;
  • NZIF

Gagarin Prospect 174, Nizhny Novgorod, 606950, Russia

  1.  Ryazan State Instrument Enterprise (RSIE), a.k.a., the following two aliases:
  • RSIE;
  • GRPZ

Seminarskaya Street 32, Ryazan, 390000, Russia

  1.  Scientific and Production Association ‘‘Lianozovo Electromechanical Plant’’ (NPO LEMZ), a.k.a., the following four aliases:
  • JSC LEMZ R&P Corporation;
  • OAO Design Bureau Lianozovsky Radars Moscow;
  • Lianozovsky Electromechanical factory;
  • OAO Design Bureau Lianozovsky

Radars Moscow. Dmitrovskoye Shosse 110, Moscow, 127411, Russia

  1.  Svyaz Design Bureau, OJSC, a.k.a., the following one alias:
  • KB Svyaz. Prospect Sokolova 96

Rostov-on-Don 344010, Russia

  1.  Trans-Flot JSC, a.k.a., the following one alias:
  • JSC Trans-Flot

ul Ventseka 1/97, Samara 443099, Russia

  1.  Transpetrochart Co. Ltd., Prospekt Engelsa 30, St. Petersburg 194156, Russia.

 

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2016-12-27/pdf/2016-31124.pdf

White House Posts Actions in Response to Russian Malicious Cyber Activity and Harassment

Tuesday, January 31st, 2017 by Danielle McClellan

(Source: White House) [Excerpts.]

(Former) President Obama authorized a number of actions in response to the Russian government’s aggressive harassment of U.S. officials and cyber operations aimed at the U.S. election in 2016. Russia’s cyber activities were intended to influence the election, erode faith in U.S. democratic institutions, sow doubt about the integrity of our electoral process, and undermine confidence in the institutions of the U.S. government. These actions are unacceptable and will not be tolerated.

Sanctioning Malicious Russian Cyber Activity

In response to the threat to U.S. national security posed by Russian interference in our elections, the President has approved an amendment to Executive Order 13964. As originally issued in April 2015, this Executive Order created a new, targeted authority for the U.S. government to respond more effectively to the most significant of cyber threats, particularly in situations where malicious cyber actors operate beyond the reach of existing authorities. The original Executive Order focused on cyber-enabled malicious activities that:

  • Harm or significantly compromise the provision of services by entities in a critical infrastructure sector;
  • Significantly disrupt the availability of a computer or network of computers (for example, through a distributed denial-of-service attack); or
  • Cause a significant misappropriation of funds or economic resources, trade secrets, personal identifiers, or financial information for commercial or competitive advantage or private financial gain (for example, by stealing large quantities of credit card information, trade secrets, or sensitive information).

The increasing use of cyber-enabled means to undermine democratic processes at home and abroad, as exemplified by Russia’s recent activities, has made clear that a tool explicitly targeting attempts to interfere with elections is also warranted. As such, the President has approved amending Executive Order 13964 to authorize sanctions on those who:

  • Tamper with, alter, or cause a misappropriation of information with the purpose or effect of interfering with or undermining election processes or institutions.

Using this new authority, the President has sanctioned nine entities and individuals: two Russian intelligence services (the GRU and the FSB); four individual officers of the GRU; and three companies that provided material support to the GRU’s cyber operations. …

Read full Release: https://www.whitehouse.gov/the-press-office/2016/12/29/fact-sheet-actions-response-russian-malicious-cyber-activity-and

Living out Your Fantasy to Work with Russian Spies Can Cost You

Tuesday, August 9th, 2016 by Danielle McClellan

By: Danielle McClellan

Gregory Allen Justice, 49 of Culver City, worked the night shift at Boeing Satellite Systems in El Segundo as an engineer. He felt unappreciated after over a decade with the company and had a sick wife who had mounting medical bills. To get away from the perils of his life he found a special love for “The Americans,” the FX series about KGB spies in the US and a mysterious woman in Long Beach.

Justice had access to sensitive technical data about military and commercial satellites; he tried to sell them to a Russian spy, who just happened to be an undercover FBI agent. It is unclear how Justice met the agent but over the course of 5 meetings he provided the agent with USB drives that contained satellite information in exchange for payments of cash, in stacks of $500 or $1,000 bills. Justice told the agent that he needed the money to pay for his sick wife’s huge medical bills; however, it was found that he provided an unnamed woman in Long Beach with over $21,000 in cash as well as TVs, a $900 IPhone and a purse among other things.

Justice told the agent on numerous occasions that he loved the “The Americans,” and the agent told him, “You’re very, very important to the Russians.” There was also a secret recording of Justice released where he expressed his frustration with his inability to grow within his current position at Boeing, “I’m going to stop trying…Why put out the effort if there’s not going to be any reward? I’m tired and I’m done…What I can’t do is keep putting myself out, without being rewarded for it.” It seems that this was a perfect storm of events for Justice, live out a life similar to his favorite TV show and make money while getting back at the company he felt so unappreciated by.

Justice’s father, William Justice, told journalist, “He’s a good kid…I’ve never known him to do anything that was inappropriate.” When asked about his son’s wife, William Justice explained that she had a variety of health problems, including diabetes and chronic accident-related back pain.

Gregory Allen Justice has been arrested and is being held without bail. He faces 15 years in prison if convicted of a charge of economic espionage, in addition to 20 years on charges of violating the Arms Export Control Act (AECA).

Criminal Complaint: http://www.courthousenews.com/2016/07/11/US%20v%20Justice.pdf

More Information: http://www.latimes.com/local/lanow/la-me-ln-espionage-charges-20160709-snap-story.html

Military Importers and Exporters Beware: State Department Modifies Sanctions against Rosoboronexport

Tuesday, January 19th, 2016 by Danielle McClellan

By: Danielle McClellan

It is the significance of the target, Rosoboronexport, that makes this a noteworthy development.   According to its own website:

The Joint Stock Company Rosoboronexport, part of the Russian Technologies State Corporation, is the sole Russian state intermediary agency responsible for import/export of the full range of defense and dual-use end products, technologies and services.

Rosoboronexport was set up by RF President’s Decree 1834 of 4 November 2000 as a federal state unitary enterprise tasked to implement the national policy in the area of military-technical cooperation between Russia and foreign countries. Since 1 July 2011 Rosoboronexport has been operating as an open joint stock company.
Rosoboronexport operates under the strict supervision of the Russian President, the Russian Government, and in full conformity with the UN arms control treaties and the relevant international agreements.
Only Rosoboronexport has the right to supply the world market with a full range of arms and military equipment manufactured by Russia’s defense industrial complex and approved to be exported. Rosoboronexport accounts for more than 85% of Russia’s arms exports.
Rosoboronexport is among the major operators in the world market for arms and military equipment. Rosoboronexport cooperates with more than 70 countries.

The official status of the exclusive state intermediary agency gives Rosoboronexport unique opportunities to expand long-term mutually beneficial cooperation with foreign partners, provide guaranteed state support of all export-import operations, and strengthen Russia’s leadership in the world arms market.

On September 2, 2015 the US Government  released the following notice: ‘No department or agency of the United States Government may procure or enter into any contract for the procurement of any goods, technology, or services from [Rosoboronexport (ROE) (Russia) and any successor, sub-unit, or subsidiary thereof], except to the extent that the Secretary of State otherwise may determine .  .  .  .’’

The Department of State has now released (November 19, 2015) the following modification to the September notice: “The United States Government has decided to modify the measure described above against ROE and any successor, sub-unit, or subsidiary thereof as follows. The measure described above shall not apply to subcontracts at any tier with ROE and any successor, sub-unit, or subsidiary thereof made on behalf of the United States Government for goods, technology, and services for the maintenance, repair, overhaul, or sustainment of Mi-17 helicopters for the purpose of providing assistance to the security forces of Afghanistan, as well as for the purpose of combating terrorism and violent extremism globally.”

This modification includes subcontracts for the purchase of spare parts, supplies, and related services for these purposes and can be applied retroactively as of the effective dates of the sanctions (they will remain in place for 2 years unless otherwise determined by the US Government).

This change does not apply to any other measures imposed pursuant to INKSNA.

Federal Register Notice: https://www.gpo.gov/fdsys/pkg/FR-2015-11-25/pdf/2015-30058.pdf

No Means No…and So Does a TDO!

Thursday, October 1st, 2015 by Danielle McClellan

By: Danielle McClellan

On March 19, 2015, a Temporary Denial Order (TDO) was put in place for Flider Electronics LLC, d/b/a Trident International Corporation, Pavel Semenovich Flider (President of Trident), and Gennadiy Flider (Trident office manager) for 180 days. The TDO denied the export privileges of the above mentioned parties as well as prohibited them from participating in any way, in any transaction involving any item subject to the EAR that is to be exported from the US, including carrying on negotiations concerning, ordering or buying any such items…this is important to this story.

Beginning in 2013, Flider and/or Trident repeatedly exported Xilinx field programmable gate array (FPGA) circuits (ECCN 3A001.a.2.c) to Russia without the required export license. CBP ultimately seized some of the shipments. After additional seizures, another detained shipment and interviews by Pavel Flider and Gennadiy Flider, OEE had reason to believe that Trident had been making transshipments to Russia. In addition, Trident and Pavel Flider were indicted for smuggling and money laundering. There is much more to this story…but I have kept it short for the purposes of this article. View more details at: http://learnexportcompliance.bluekeyblogs.com/2015/04/27/potential-poster-child-for-violating-us-export-controls-on-russia-flider-electronics-put-on-the-u-s-denial-list-for-shipments-to-russia/

Now comes the interesting part of the story. The TDO denies negotiations concerning, and ordering items subject to the EAR as mentioned above. After laying low for a few months after the initial TDO, on July 10, 2015, Trident, via Pavel Flider, contacted employees of their previous electronics distributor requesting their account to be reestablished so that additional purchases could be made. The distributor declined to accept or fill any orders following several solicitations by Pavel Flider, including a phone call by him to the company where he was strictly informed that the company’s corporate policy was that they could not conduct business with a company such as Trident.

After this information came to light, OEE requested the TDO be renewed on August 21, 2015.

View both TDO’s: http://efoia.bis.doc.gov/index.php/electronic-foia/index-of-documents/7-electronic-foia/227-export-violations

No More Oil from Yuzhno-Kirinskoye Field

Friday, September 11th, 2015 by Danielle McClellan

By: Danielle McClellan

The Bureau of Industry and Security (BIS) has added the Russian oil and gas field, the Yuzhno-Kirinskoye Field to the Entity List. This field is located in the Sea of Okhotsk and has been reported to contain substantial reserves of gas and oil. Due to this information the US Government has decided that exports, reexports, and transfers (in-country) of items subject to the EAR to Yuzhno-Kirinskoye will require a BIS license.

This field will be listed on the Entity List under the destination of Russia effective August 7, 2015. The rule will also change the following:

Clarify the introductory text of the Entity List to specify that the embargoes and other special controls part of the EAR is also used to add entities to the Entity List

  • The first sentence of the introductory text of the Entity List to add a reference to part 746. This clarification to the introductory text will make it clear that this Supplement lists certain entities subject to license requirements for specified items under this part 744 and part 746 of the EAR.

Change the Russian industry sector sanctions by clarifying the additional prohibition on those informed by BIS also includes end-uses that are within the scope of the Russian Industry sector sanctions.

  • In § 746.5 (Russian industry sector sanctions), this final rule revises the second sentence of paragraph (a)(2) for the additional prohibition on those informed by BIS to add the term ‘‘end- use’’ after the term ‘‘end-user.’’ This change clarifies that the additional prohibition described in this paragraph (a)(2), as part of the BIS ‘‘is informed’’ process, may be based on an end-user or end-use when BIS determines there is an unacceptable risk of use in, or diversion to, the activities specified in paragraph (a)(1) of this section in Russia. This clarification does not change the scope of § 746.5, but rather clarifies the cases in which BIS will use the ‘‘is informed’’ process to assist exporters, reexporters, and transferors to ‘‘know’’ when an export, reexport, or transfer (in-country) is subject to the license requirements specified in § 746.5.

Federal Register Notice: http://www.gpo.gov/fdsys/pkg/FR-2015-08-07/pdf/2015-19274.pdf