US Imposes Sanctions on Important Russian and Chinese Aerospace Entities

The first two weeks of August gave us new US sanctions on two relatively important, or at least notable, entities in the aerospace field:

• Sukoy (also spelled Sukoi) in Russia, and any successor, sub-unit or subsidiary; and
• Great Wall Airlines Company Limited (a.k.a Great Wall Airlines; a.k.a. Changcheng Hangkong), 1600 Century Road, Shanghai 200122, China; C.R. No. 001144 (China) Issued 20 Oct 2005 expires 19 Oct 2035

What does all of this actually mean? For starters, there is a big different between the minor sanctions imposed on Sukoy and the significant sanctions imposed on Great Wall Airlines Company.

Sukoy:

Specifically, the thrust of the sanctions on Sukoy do not prohibit all exports and reexports to Sukoy and are not an across the board ban on US persons doing business with Sukoy. The most significant sanction is that the US Government may not issue any new export/reexport licenses for Sukoy and any existing ITAR approvals for Sukoy are terminated. The remainder of the US sanctions applies to US Government procurement from Sukoy and US Government assistance to Sukoy.

Specifically, the sanctions announced in the August 4 Federal Register on Sukoy are:

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 these foreign persons;
2. No department or agency of the United States Government may provide any assistance to the foreign persons, and these persons shall not be eligible to participate in any assistance program of the United States Government;
3. No United States Government sales to the foreign persons of any item on the United States Munitions List (as in effect on August 8, 1995) are permitted, and all sales to these persons 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 these foreign persons 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.

So, if you want to export 9A991 civil aircraft parts to Sukoy, you may go full speed ahead. If you want to export to Sukoy something that requires a license for Russia, your license will not be approved.

The official basis for US sanctions on Sukoy are “…for the transfer to Iran since January 1, 1999, of equipment and technology controlled under multilateral export control lists (Missile Technology Control Regime, Australia Group, Chemical Weapons Convention, Nuclear Suppliers Group, Wassenaar Arrangement) or otherwise having the potential to make a material contribution to the development of weapons of mass destruction (WMD) or cruise or ballistic missile systems.” Sukoy claims it has not recently sold weapons to Iran, but it has been reported that the sanctions may be in response to a deal to repair and upgrade 30 Su-24 ‘Fencer’ long-range strike aircraft. The SU-24 strongly resembles the earlier American F-111, whose FB-111 variant the US Strategic Air Command used as a nuclear strike platform.

Great Wall Airlines Company:

On August 15, 2006, the Office of Foreign Assets Control (OFAC) announced that it added Great Wall Airlines Company to its list for “Blocking Property of Weapons of Mass Destruction Proliferators and Their Supporters.” These sanctions block all property and interests in property that come into the United States or into the possession/control of US persons. What does that mean? It means that if a US company exports to Great Wall and then payment comes from Great Wall to the United States, US regulations block the payment, which means the US company may not have the money. So, for starters, these sanctions effectively prevent US companies from dealing with Great Wall.

On the other hand, the sanctions do not apply if a non-US company, for example, a South Korean company, reexports US origin 9A991 civil aircraft parts from South Korea to Great Wall—as long as no US person receives Property/money from Great Wall. If, however, a US company has foreign customers or partners dealing with Great Wall, it should make sure that there is an impenetrable wall (perhaps even a Great Wall) between the foreign parties’ activities and the US company.

Great Wall Airlines Company operates a small number of Boeing 747-400 freighters for cargo purposes. The US acted against Great Wall Airlines because claims that its parent company, Great Wall Industry Corp. (which is already subject to US Sanctions), provided assistance to Iran’s missile program. Apparently Great Wall Airlines suspended operations on August 18, three days after the US announced its sanctions. I guess these sanctions worked.