On June 12, 2024, on the eve of the G7 summit, the U.S. Department of the Treasury imposed new sanctions against Russia and its partners who continue to bolster Russia's military capabilities. This decision is based on Executive Order No. 14114, which expanded the powers of the Office of Foreign Assets Control (OFAC), allowing for secondary sanctions against foreign banks and financial institutions working with Russian sectors in technology, defense, construction, the military-industrial complex (MIC), aerospace, and manufacturing industries. Sanctions can also be applied to those providing services or facilitating transactions with the Russian MIC.
Networks that circumvented sanctions through complex money movement schemes and supply routes have been identified. The new sanctions list includes 90 individuals and entities from Russia, Belarus, the British Virgin Islands, Bulgaria, Kazakhstan, Kyrgyzstan, China, Serbia, South Africa, Turkey, and the UAE. Among them:
Turkish companies supplying Russian I Machine with software and tools for CNC machines:
- SSGCTM CNC Takim Tezgahlari Makine Sanayi Ve Ticaret Limited Sirketi (SSGCTM CNC): Supplied goods worth over $6 million.
- Minyon Kesici Takimlar Makine Sanayi Ve Ticaret Limited Sirketi (Minyon Kesici): Shipped over 600 batches worth over $800,000.
Gepa Uluslararasi Ticaret Limited Sirketi (Gepa): Shipped goods worth over $4 million for the Russian company Alfa Machinery Group.
Taksan Makina Sanayi Ve Ticaret Anonim Sirketi (Taksan Makina) and Dener Ithalat Ihracat Ve Dis Ticaret Anonim Sirketi (Dener Ithalat): Sent metalworking centers and CNC machines to Russia’s Pumori Northwest worth nearly $1.5 million.
CPS Proses Kontrol Urunleri Sanayi Ve Ticaret Anonim Sirketi (CPS Proses): Acted as an intermediary for the purchase of machines and welding equipment made in Germany and the USA for the Russian technology company and defense contractor Ostec EC Ltd.
Sanctions on the Ostec Group were imposed back in May 2022 for supporting Russian missile systems and aviation bomb manufacturers. They established new ways to procure necessary technologies and equipment, particularly through the Russian construction company LLC "Fabcenter," which became the main recipient of goods for the Ostec Group.
Dmitry Vladimirovich Alikhanov, director of the Russian company "Newton-ITM," was subject to secondary sanctions for supplying metalworking equipment and high-precision parts for the aerospace industry. He collaborated with European machine tool manufacturers and illegally procured equipment for Russian end-users through the Kyrgyz company "Nova Project" LLC. Intermediaries included Safes Lojistik Ithalat Ihracat Sanayi Ticaret Limited from Turkey, Chongqing Fagima Electromechanical Equipment Co Ltd from China, and GBL International Logistics Co Ltd from Hong Kong.
Sanctions were also imposed on Russian financial institutions that act as intermediaries in dollar trades on the Russian foreign exchange market: Moscow Exchange, National Clearing Centre (NCC), and National Settlement Depository. This decision aims to reduce the Kremlin's ability to attract capital and invest in Russia's sovereign debt, corporations, and leading defense enterprises.
Olena Yurchenko, an advisor to the Economic Security Council of Ukraine (ESCU), considers the U.S. Department of the Treasury's decision a positive step in combating the supply schemes of CNC machines to the Russian Federation. She notes that the large number of major companies on the list is not the primary advantage of the package. The main point is that now Executive Order No. 14114 applies not only to Russia's military-industrial base but also to all sanctioned individuals. This means the scope of secondary sanctions has effectively increased fourfold. It is hoped that this expanded interpretation and scope of the order will enhance the fight against sanctions evasion and strengthen the existing sanctions regime.
According to Bloomberg, G7 countries and the European Union are also considering ways to pressure banks that help Moscow evade sanctions and obtain key technologies for weapons production.