Earlier this year, the US Treasury Department revealed it had imposed economic sanctions on close to 2,800 rogue individuals, entities and vessels since Donald Trump became president in January 2017.
Trump’s bellicosity has been reflected in tightened restrictions on Iran – following the US’s withdrawal from the nuclear deal in 2017 – as well as North Korea and Syria. More recently, Washington has also cracked the whip on Cuba, in response to its support of Nicolas Maduro’s government in Venezuela.
Despite reports of mutual admiration between Trump and his Russian counterpart, Vladimir Putin, sanctions on Russia have remained ongoing since first enforced by President Obama in 2014 in response to its illegal annexation of Crimea from Ukraine.
Fresh rounds of restrictions have since been slapped on Russia for its alleged meddling in the 2016 US election and 2018 midterms. In the past year, sanctions have also been imposed in connection to the purported assassination attempt of a former Russian spy in the UK, as well as state oil company Rosneft’s trading of Venezuelan crude.
Have Russian airports managed to skirt the rules?
But what of the impact these measures have had on the Russian aviation industry? Several of Russia’s airports are believe to be owned by entities featured on the US’s sanctions blacklist. For instance, both airports in the Black Sea resorts of Sochi and Gelendzhik are owned by a company belonging to targeted oligarch Oleg Deripaska.
This threatened to cause a headache in 2018, the year in which Russia hosted football’s World Cup, with several of the competition’s participating teams scheduled to fly into blacklisted airports located close to their training camps. According to US rules, through the payment of landing and service fees, airlines are effectively doing business with airports. Hence, using a sanctioned hub is regarded as a violation.
Yet, everything went off without a hitch, and Russia 2018 was even lauded by the New York Times as “the greatest of all World Cups”, with organisers praised for the efficient running of the tournament across the month. No reports emerged of teams unable to touch down on Russian soil.
This raises the question of just how Russian-managed airports were able to circumvent penalties and carry out business as usual.
“It’s highly probable that the Russian airports managed by specially designated nationals [sanctioned persons] have identified workarounds so that the sanctions on the airport managers are more of an inconvenience than an economic penalty,” suspects Cari Stinebower, a sanctions expert and partner at law firm Winston & Strawn.
“Where we do see the impact is on US businesses in the aviation sector where those businesses have declined direct interactions with the SDN-managed airports. The US businesses have entered contracts with specific contractual language with counterparties requiring compliance with sanctions targeting those airports.”
The implications of flying into and out of a troubled region
Restrictions dictated by the Office of Foreign Assets Control (OFAC) – the Treasury Department agency responsible for administering and enforcing sanctions – do not extend to Russia’s commercial airlines. However, different rules apply to private aircraft, as highlighted by OFAC’s targeting of three private jets belonging to businessman Yevgeniy Prigozhin, who is implicated in meddling in the 2018 midterm elections.
As part of its crackdown on oligarchs, entities that are owned 50% or more by an individual on OFAC’s SN list are liable to be blocked, which has led to a number of private aircraft being caught up in sanctions. This means said aircraft cannot be sold where the transaction is in US dollars, as US insurers and reinsurers cannot provide cover for the craft. Similarly, such aircraft are prohibited from landing in the US or use of services such as bunkering and fuelling by US persons.
Since sanctions came into force in 2014 in response to the Ukraine Crisis, there have also been implications for airlines flying in and out of the Crimea region. US persons are presently prohibited from importing or exporting goods, services and technology in and out of the region.
“This would include, for example, booking services, payment for tickets, provision of insurance, fuelling – or other bunkering services for such aircraft – financing for the aircraft or maintenance services,” says Stinebower. “OFAC has not imposed any enforcement cases to date but we do understand that a significant multi-million-dollar penalty is likely to be announced soon.”
Pressure on Cuba: Trump’s revival of the Helms-Burton Act
Back in Cuba, as part of Trump’s new sanctions, US carriers are restricted to flying to and from Havana; airports in other locations are blacklisted. As of January, Secretary of State Mike Pompeo also announced restrictions on public charter flights to the capital, while removing authorisation to fly through nine other airports.
“The moves are designed to limit unauthorised tourist travel to Cuba and were rolled back due to the Government of Cuba’s support for the Maduro regime in Venezuela,” explains Stinebower.
Other repercussions for airline travel to Cuba could also be felt through the Trump administration’s resurrection last year of Title III of the Helms-Burton Act – a bill passed by Bill Clinton in 1996 to sanction the Cuban government for shooting down two US planes.
Having been waived by his predecessors, George W Bush and Barack Obama, Title III allows people whose property was confiscated by the Cuban government during the 1959 revolution to pursue those “trafficking” in that property. In September, plaintiffs brought cases in the US District Court for Southern Florida against carriers, including American Airlines and LATAM Airlines Group.
“Trafficking is broadly defined,” says Stinebower. “While there is a carve-out from the definition for licensed travel, these cases have not been fully litigated and are being watched closely.”