Russian Rouble Collapse Exposes Deep Problems In The Country's Economy
7th December 2024
The Russian rouble dropped to 110 against the US dollar on November 27, its lowest level since the start of the war in Ukraine. It has since rallied slightly, but the rouble is still down by 8% against the dollar over the past month. This is not a one-off event; it is part of a developing crisis that is affecting Russia's economy.
Russia's currency has been highly volatile since its troops invaded Ukraine in February 2022. The initial collapse, which saw the rouble lose one-third of its value by March compared with the start of the year, was due to the exodus of capital from the country following the introduction of western sanctions. Capital flowing out of Russia made the rouble more readily available on the foreign exchange market, hence causing its value to depreciate.
In response, Russia's central bank implemented strict capital-control measures to stabilise its currency. The measures included mandating that exporters convert 80% of their foreign currency earnings into roubles, as well as limiting foreign currency withdrawals for individuals to US$10,000 (£7,900).
By the middle of 2022, when energy prices were rising, Russia had found ways to circumvent the sanctions and export much of its oil and gas to countries like China and India. Russia benefited from strong export revenues and the rouble temporarily recovered its value. The capital controls also artificially boosted demand for the rouble, making it one of the best-performing currencies of the year.
However, falling energy prices and tighter sanctions in 2023 caused a drop in Russia's export revenue. The G7 countries, the EU and Australia imposed a cap on the price of Russian oil, which led to decreased foreign currency inflows and thus a reduction in the value of the rouble.
The November 2024 slump is, at least in part, still the result of these factors. Key issues include the continued decline in export revenues due to sanctions and the G7 oil price cap, as well as the impending end of pipeline gas supplies to Europe via Ukraine in 2025.
But new US sanctions, which came into effect on November 21, have worsened the situation. Gazprombank, one of the few major Russian lenders that had yet to be targeted, as well as 50 small- to medium-sized Russian banks, 40 local Russian registrars and some Russian central bank officials have all now been cut off from doing business with the US and its allies.
This limits transaction gateways, so buyers of Russian oil and gas will again have to find new ways to do business, as they did in 2022. The market expects these sanctions to reduce the flow of foreign currency towards Russia, consequently making the rouble depreciate.
The Bank of Russia has intervened by suspending all foreign currency purchases in the domestic market until the end of the year. This will stabilise the exchange rate, albeit artificially. However, trading will continue on the black market.
More instability awaits
A volatile and weaker rouble will discourage domestic and foreign investment, as investors prefer to transact with a strong and predictable currency. It will also encourage people to move their capital out of the country, as it has since the war began, so the central bank will be forced to use its reserves to defend the rouble. But Russia is already constrained by limited foreign currency inflows and high spending demands - a vicious cycle that will further weaken its currency.
A weak rouble also raises the cost of importing goods or materials. The profit margins of import-dependent businesses will be reduced unless they pass the increased costs onto consumers - something that is relatively easy to do in Russia where there is minimal market competition.
This drives inflation for imported items like food, medical supplies, machinery and energy. Russia imported over US$81 million worth of electricity in 2022, primarily from Lithuania, Kazakhstan, Latvia, Azerbaijan and Mongolia. And it imports certain refined petroleum products, too. The annual rate of inflation in Russia was estimated at 8.4% in October - twice the central bank's target - and is not expected to fall before the end of the year.
Russia's president, Vladimir Putin, and his economy minister, Maxim Reshetnikov, claim there is no need for emergency steps to support the rouble. Reshetnikov has said the rouble's volatility is due to the global strength of the US dollar and predicted that market concerns following the latest sanctions would soon stabilise.
But failure to act decisively risks further depreciation, which will only reduce confidence in the rouble even more. Analysts expect the central bank's current interest rate of 21% to rise to stabilise the rouble and curb inflation. However, raising the rates will probably slow the economy.
There is plenty for Putin to be concerned about. Falling export revenues, inflation and strained reserves all weaken Russia's fiscal stability. And it looks as if western economic sanctions are now having a significant effect on Russia's ability to counter its economic difficulties.
The administrators of Putin’s regime will argue that a weaker rouble is more favourable to them during the war. Converting stronger foreign currencies from energy exports will give the Kremlin more domestic currency to plug the government’s widening deficit.
Despite this, Russia’s currency crisis has exposed deep problems in the economy. It relies heavily on energy exports, has limited economic diversification and has a weak financial sector. Over the longer term, sanctions will also isolate Russia further and limit its economic autonomy because Putin will have no choice but to rely on doing business with a few trading partners, such as China and India.
Author
Nasir Aminu
Senior Lecturer in Economics and Finance, Cardiff Metropolitan University
Note
This article is from The Conversation web site. To read it with links to more information go HERE
Further Note
Gazprom bank was not targeted previously as it was used for ensuring payments for energy to some European countries but now most have source their energy from other places it was open to block most of the final banks including Gazprom bank.
From the US Treasury
Treasury Sanctions Gazprombank and Takes Additional Steps to Curtail Russia’s Use of the International Financial System.
November 21, 2024
Treasury imposes sanctions on dozens of Russian banks, securities registrars, and finance officials; OFAC issues alert warning of risks of joining Russia’s System for Transfer of Financial Messages
WASHINGTON — Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) took another major step in implementing commitments made by G7 leaders to curtail Russia’s use of the international financial system to further its war against Ukraine. OFAC’s action includes the designation of Gazprombank, more than 50 internationally connected Russian banks, more than 40 Russian securities registrars, and 15 Russian finance officials. OFAC is also issuing an alert describing sanctions risks related to Russia’s System for Transfer of Financial Messages (SPFS), which the Kremlin created and uses to evade sanctions.
"Today’s sanctions targeting Russia’s largest remaining non-designated bank, as well as dozens of other financial institutions and officials in Russia, will further diminish and degrade Russia’s war machine. This sweeping action will make it harder for the Kremlin to evade U.S. sanctions and fund and equip its military," said Secretary of the Treasury Janet L. Yellen. “We will continue to take decisive steps against any financial channels Russia uses to support its illegal and unprovoked war in Ukraine.”
GAZPROMBANK
OFAC is designating Gazprombank Joint Stock Company (Gazprombank) alongside its six foreign subsidiaries. Gazprombank is a conduit for Russia to purchase military materiel for its war effort against Ukraine. The Russian government also uses Gazprombank to pay its soldiers, including for combat bonuses, and to compensate the families of Russian soldiers killed fighting Putin’s brutal war against Ukraine. Australia, Canada, New Zealand, and the United Kingdom have previously sanctioned Gazprombank.
Luxembourg-based bank GPB International SA, Hong Kong-based GPB Financial Services Hong Kong Limited, Cyprus-based GPB Financial Services Limited and GPB-DI Holdings Limited, Switzerland-based Gazprombank (Switzerland) Ltd, and South Africa-based GPB Africa and Middle East Pty Ltd are wholly owned subsidiaries of Gazprombank.
Gazprombank is being designated pursuant to Executive Order (E.O.) 14024 for operating or having operated in the financial services sector of the Russian Federation economy. GPB International SA, GPB Financial Services Hong Kong Limited, GPB Financial Services Limited, GPB-DI Holdings Limited, Gazprombank (Switzerland) Ltd, and GPB Africa and Middle East Pty Ltd are being designated pursuant to E.O. 14024 for being owned or controlled by, or for having acted or purported to act for or on behalf of, directly or indirectly, Gazprombank. All entities owned 50 percent or more, directly or indirectly, by Gazprombank or the six designated Gazprombank subsidiaries, are subject to blocking, even if not identified by OFAC.
Concurrently with this action, OFAC is issuing two new general licenses (GL) authorizing U.S. persons to wind down transactions involving Gazprombank, among other financial institutions, and to take the necessary steps to divest from debt or equity issued by Gazprombank. OFAC is also amending Russia-related GL 53 to ensure that diplomatic banking activities involving Gazprombank are not disrupted. OFAC continues to maintain a variety of authorizations, including GLs authorizing transactions related to agricultural commodities, medicine, medical devices, certain transactions in support of non-governmental organizations, the official business of third-country diplomatic missions located in the Russian Federation, and certain transactions and official business of certain international organizations and entities.
SYSTEM FOR TRANSFER OF FINANCIAL MESSAGES
OFAC is also issuing an alert underscoring the sanctions risk for foreign financial institutions that join Russia’s System for Transfer of Financial Messages (commonly known by its Russian acronym, SPFS, short for Sistema Peredachi Finansovykh Soobshcheniy). SPFS is part of the financial services sector of the Russian Federation economy because of its role facilitating communication between financial institutions engaged in Russia’s financial system. This means that any foreign financial institution that joins or has already joined SPFS may be designated for operating or having operated in the financial services sector of the Russian Federation economy pursuant to E.O. 14024. Russia has used and promoted SPFS, designed as an alternative to Society for Worldwide Interbank Financial Telecommunication (SWIFT) network, to maintain international financial connectivity, evade sanctions, and fund its war effort. OFAC views joining SPFS after publication of this alert as a red flag and is prepared to more aggressively target foreign financial institutions that take such action. OFAC also urges stakeholders to review their exposure to institutions that have joined SPFS, as such banks may be conduits for Russian sanctions evasion.
DOZENS OF RUSSIAN BANKS
Further curtailing Russia’s connections to the international financial system, OFAC is designating more than 50 small-to-medium Russian banks to prevent Russia from abusing the international financial system to pay for the technology and equipment it needs to sustain its illegal and unjust war against Ukraine. Foreign financial institutions that maintain correspondent relationships with these banks should be aware that continuing to do so entails significant sanctions risk.
For more information about these targets, please see Annex 1 below.
RUSSIAN SECURITIES REGISTRARS
OFAC is aware that Russia has attempted to evade or avoid OFAC sanctions on the National Settlement Depository by requiring, via Presidential Decree 840, the transfer of certain securities to local Russian securities registrars. Today, OFAC is designating more than 40 such registrars. OFAC has also updated FAQ 1197 to provide further guidance on securities held at or otherwise involving these registrars.
For more information about these targets, please see Annex 2 below.
CBR OFFICIALS
In September 2022, OFAC designated Central Bank of the Russian Federation (CBR) Governor Elvira Naibullina and First Deputy Governor Olga Skorobogatova. At the time, Treasury noted that Russia’s financial technocrats have, directly and indirectly, supported the Kremlin’s unprovoked war against Ukraine. Today, OFAC is designating 11 additional CBR officials, including those involved in maintaining Russia’s international financial connectivity or promoting alternate financial pathways that Russia can exploit to pay for much-needed equipment and technology.
For more information about these targets, please see Annex 3 below.
VTB SHANGHAI AND SBERBANK NEW DELHI STAFF
Today’s action also includes designations of key Russian staff members at U.S.-designated VTB Bank Public Joint Stock Company’s branch in Shanghai, China (VTB Shanghai) and U.S.-designated Public Joint Stock Company Sberbank of Russia’s branch in New Delhi, India (Sberbank New Delhi).
The following Russian nationals are being designated pursuant to E.O. 14024 for operating or having operated in the financial services sector of the Russian Federation economy:
Andrei Anisimov is Sberbank New Delhi’s Deputy Managing Director.
Elena Fedkina is a VTB Shanghai Relationship Manager.
Ilya Lishenko is VTB Shanghai’s Senior Relationship Manager.
Roman Logov is VTB Shanghai’s Deputy General Manager.
Since February 2022, OFAC has designated dozens of Russia-based staff at Russian banks and continues to investigate Russian and third-country nationals working at foreign branches, representative offices, and subsidiaries of Russian banks for designation pursuant to E.O. 14024.
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ANNEX 1: DOZENS OF RUSSIAN BANKS
The following Russia-based financial institutions and individual are being designated pursuant to E.O. 14024 for operating or having operated in the financial services sector of the Russian Federation economy:
Aktsionernoe Obshchestvo Bank Agroros is a bank headquartered in Saratov, Russia.
Bank Iturup LLC is a bank headquartered in Yuzhno-Sakhalinsk, Russia.
BBR Bank Joint Stock Company is a bank headquartered in Moscow, Russia.
BCS Bank AO is a bank headquartered in Moscow, Russia.
Bratsky Narodny Bank JSC is a bank headquartered in Bratsk, Russia.
Centrocredit Bank is a bank headquartered in Moscow, Russia.
Commercial Bank Energotransbank Joint Stock Company is a bank headquartered in Kaliningrad, Russia.
Commercial Bank Khlynov Joint Stock Company is a bank headquartered in Kirov, Russia.
Commercial Bank Kremlyovskiy is a bank headquartered in Moscow, Russia.
Commercial Joint Stock Bank Viking is a bank headquartered in Saint Petersburg, Russia.
Corporate Finance Bank LLC is a bank headquartered in Moscow, Russia.
Evrofinance Mosnarbank is a bank headquartered in Moscow, Russia. Evrofinance Mosnarbank was previously designated pursuant to E.O. 13850.
Fora Bank Joint Stock Commercial Bank is a bank headquartered in Moscow, Russia.
Garant Invest Bank Joint Stock is a bank headquartered in Moscow, Russia.
Interstate Bank is a bank headquartered in Moscow, Russia.
Joint Stock Commercial Bank National Reserve Bank Joint Stock Company (NRB)is a bank headquartered in Moscow, Russia. Daniel Haindl (Haindl) is the Senior Vice President of NRB. In his role at NRB, Haindl has been involved in a sanctions evasion scheme.
Joint Stock Commercial Bank Slavia Joint Stock Company is a bank headquartered in Moscow, Russia.
Joint Stock Commercial Mortgage Bank Akibank Public Joint Stock Company is a bank headquartered in Naberezhnye Chelny, Russia.
Joint Stock Company Auto Finance Bank is a bank headquartered in Moscow, Russia.
Joint Stock Company Bank Accept is a bank headquartered in Novosibirsk, Russia.
Joint Stock Company Bank Dom RF is a bank headquartered in Moscow, Russia.
Joint Stock Company Bank Finservice is a bank headquartered in Moscow, Russia.
Joint Stock Company Bank United Capital is a bank headquartered in Saint Petersburg, Russia.
Joint Stock Company Coalmetbank is a bank headquartered in Chelyabinsk, Russia.
Joint Stock Company Commercial Bank Ural FD is a bank headquartered in Perm, Russia.
Joint Stock Company Guta Bank is a bank headquartered in Moscow, Russia.
Joint Stock Company NS Bank is a bank headquartered in Moscow, Russia.
Joint Stock Company Public Trust Bank is a bank headquartered in Moscow, Russia.
Joint Stock Company Royal Credit Bank is a bank headquartered in Vladivostok, Russia.
Joint Stock Company Severgazbank is a bank headquartered in Vologda, Russia.
Joint Stock Investment Commercial Bank Eniseisk United Bank is a bank headquartered in Krasnoyarsk, Russia.
JSC Exi Bank is a bank headquartered in Saint Petersburg, Russia.
JSCB Energobank is a bank headquartered in Kazan, Russia.
Kamsky Commercial Bank is a bank headquartered in Naberezhnye Chelny, Russia.
Limited Liability Company Bank Orange is a bank headquartered in Saint Petersburg, Russia.
Limited Liability Company Bank Round is a bank headquartered in Moscow, Russia.
Limited Liability Company Krona Bank is a bank headquartered in Irkutsk, Russia.
MB Bank is a bank headquartered in Moscow, Russia.MB Bank, also known as Mir Business Bank, is the Russia-based wholly-owned subsidiary of Iran’s Bank Melli Iran. MB Bank was previously designated previously designated pursuant to E.O. 13224 and E.O. 13582.
National Standard Bank Joint Stock Company is a bank headquartered in Moscow, Russia.
New Moscow Bank is a bank headquartered in Moscow, Russia.
NK Bank Joint Stock Company is a bank headquartered in Moscow, Russia.
Primorsky Territorial Commercial Bank Society with Limited Liability is a bank headquartered in Vladivostok, Russia.
Public Joint Stock Commercial Bank Derzhava is a bank headquartered in Moscow, Russia.
Public Joint Stock Company Bank Alexandrovsky is a bank headquartered in Saint Petersburg, Russia.
Public Joint Stock Company Bank Sinara is a bank headquartered in Yekaterinburg, Russia.
Public Joint Stock Company Finstar Bank is a bank headquartered in Saint Petersburg, Russia.
Public Joint Stock Company Metkombank is a bank headquartered in Kamensk-Uralskiy, Russia.
Public Joint Stock Company National Bank Trust is a bank headquartered in Moscow, Russia.
Public Joint Stock Social Commercial Bank of Primorye Primsotsbank is a bank headquartered in Vladivostok, Russia.
Rossita Bank is a bank headquartered in Moscow, Russia.
Russian Public Joint Stock Commercial Roads Bank is a bank headquartered in Moscow, Russia.
Russian Universal Bank is a bank located in Moscow, Russia.
Vitabank PJSC is a bank headquartered in Podolsk, Russia.
Waybank JSC is a bank headquartered in Moscow, Russia.
ANNEX 2: RUSSIAN SECURITIES REGISTRARS
The following Russia-based financial institutions function as registrars and are being designated pursuant to E.O. 14024 for operating or having operated in the financial services sector of the Russian Federation economy:
Aktsionernoe Obshchestvo Agentstvo Regionalnyi Nezavisimyi Registrator is a registrar based in Tula, Russia, and Lipetsk, Russia.
Aktsionernoe Obshchestvo Mezhregionalnyi Registratorskii Tsentr is a registrar based in Moscow, Russia.
Aktsionernoe Obshchestvo Natsionalnaya Spetsializirovannaya Finansovaya Kompaniya is a registrar based in Novosibirsk, Russia.
Aktsionernoe Obshchestvo Nezavisimaya Registratorskaya Kompaniya R.O.S.T. is a registrar based in Moscow, Russia.
Aktsionernoe Obshchestvo Professionalnyi Registratsionnyi Tsentr is a registrar based in Moscow, Russia.
Aktsionernoe Obshchestvo Registrator Kapital is a registrar based in Yekaterinburg, Russia.
Aktsionernoe Obshchestvo Spetsializirovannyi Registrator Kompas is a registrar based in Novokuznetsk, Russia.
Aktsionernoe Obshchestvo Surgutinvestneft is a registrar based in Surgut, Russia.
Aktsionernoe Obshchestvo Vedenie Reestrov Kompanii is a registrar based in Yekaterinburg, Russia.
Aktsionernoe Obshchestvo Independent Specialized Depository is a registrar based in Moscow, Russia.
AO Reestr is a registrar based in Moscow, Russia.
Aktsionernoe Obshchestvo Registratsionnaya Kompaniya Tsentr Invest is a registrar based in Irkutsk, Russia, and Moscow, Russia.
Aktsionernoe Obshchestvo Depozitarnaya Kompaniya Region is a registrar based in Moscow, Russia.
Evroaziatskii Registrator is a registrar based in Kazan, Russia.
AO Spetsializirovannyi Depozitarii Infinitum is a registrar based in Moscow, Russia.
Joint Stock Company Aktiv is a registrar based in Saint Petersburg, Russia.
Joint Stock Company Industria Reestr is a registrar based in Moscow, Russia.
Joint Stock Company RDC Paritet is a registrar based in Moscow, Russia.
Joint Stock Company Registrator Intraco is a registrar based in Perm, Russia.
Joint Stock Company Registry Society Status is a registrar based in Moscow, Russia.
JSC DRAGA is a registrar based in Moscow, Russia, and Saint Petersburg, Russia.
JSC Republican Specialregistrar Yakut Fund Center is a registrar based in Yakutsk, Russia.
JSC RT Registrar is a registrar based in Moscow, Russia.
JSC Service Reestr is a registrar based in Moscow, Russia.
JSC Noviy Registrator is a registrar based in Moscow, Russia.
Korporativnaya Registratorskaya Kompaniya is a registrar based in Moscow, Russia.
Limited Liability Company Depositary and Corporate Technologies is a registrar based in Moscow, Russia.
Limited Liability Company Special Depository Partner is a registrar based in Moscow, Russia.
Limited Liability Company Specialized Depository Company Garant is a registrar based in Moscow, Russia.
Moskovskii Fondovyi Tsentr is a registrar based in Moscow, Russia.
National Custodial Company Stock Closed Corporation is a registrar based in Moscow, Russia.
Obshchestvo S Ogranichennoy Otvetsvennostyu Oboronregistr is a registrar based in Moscow, Russia.
OOO Partner is a registrar based in Cherepovets, Russia.
OOO Reestr RN is a registrar based in Moscow, Russia.
OOO Registrator Garant is a registrar based in Moscow, Russia.
Registrator KRTS is a registrar based in Krasnodar, Russia.
Spetsializirovannyi Depozitarii Depo Plaza is a registrar based in Moscow, Russia.
Spetsializirovannyi Registrator Rekom is a registrar based in Staryy Oskol, Russia.
Tsentr Ucheta i Registratsii is a registrar based in Saint Petersburg, Russia.
Yuzhno Regionalnyi Registrator is a registrar based in Rostov-na-Donu, Russia.
Zakrytoe Aktsionernoe Obshchestvo Pervyi Spetsializirovannyi Depozitarii is a registrar based in Moscow, Russia.
ANNEX 3: CBR OFFICIALS
The following Russian nationals are officials at the Central Bank of the Russian Federation (CBR), which is subject to Directives 1 and 4 of E.O. 14024, and are being designated pursuant to E.O. 14024 for operating or having operated in the financial services sector of the Russian Federation economy:
Alla Bakina (Bakina) is the Director of the National Payment System Department of the CBR and is responsible for modernizing CBR payment systems. Bakina is involved in expanding the reach of Russia’s System for Transfer of Financial Messages (SPFS) and Faster Payments System (SBP).
Vladimir Chistyukhin has been a First Deputy Governor of the CBR since 2022 and a Member of the Board of Directors of the CBR since 2023.
Elizaveta Danilova is Director of the Financial Stability Department at the CBR and has been a Member of the Board of Directors of the CBR since 2023.
Gulnara Khaidarshina is the Director of the Department for Cooperation with International Organizations at the CBR.
Mikhail Anatolyevich Kovrigin is the Director of the International Settlements Department at the CBR.
Ekaterina Lozgacheva has been the Director of the Financial Market Strategy Department of the CBR since 2023 and previously served in other positions at the CBR dating back to 2011.
Alexandr Morozov has been the Director of the Research and Forecasting Department at the CBR since 2015.
Olga Vasilyevna Polyakova has been a Deputy Governor of the CBR since 2016 and a Member of the Board of Directors of the CBR since 2021.
Kirill Pronin (Pronin) is the Director of the Financial Market Infrastructure at the CBR. Pronin was previously Director of the CBR’s Department of Financial Technologies.
Bogdan Shablya is head of the CBR’s Financial Monitoring and Currency Control Department and has worked at the CBR for more than 25 years.
Dmitry Tulin is a First Deputy Governor of the CBR and has been a Member of the Board of Directors of the CBR since 2020.
SANCTIONS IMPLICATIONS
As a result of today’s action, all property and interests in property of the persons above that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. In addition, any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked. All transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or blocked persons are prohibited unless authorized by a general or specific license issued by OFAC, or exempt. These prohibitions include the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person and the receipt of any contribution or provision of funds, goods, or services from any such person. Non-U.S. persons are also prohibited from causing or conspiring to cause U.S. persons to wittingly or unwittingly violate U.S. sanctions, as well as from engaging in conduct that evades U.S. sanctions. OFAC’s Economic Sanctions Enforcement Guidelines provide more information regarding OFAC’s enforcement of U.S. sanctions, including the factors that OFAC generally considers when determining an appropriate response to an apparent violation.
In addition, foreign financial institutions that conduct or facilitate significant transactions or provide any service involving Russia’s military-industrial base run the risk of being sanctioned by OFAC. For additional guidance, please see the updated OFAC advisory, “Updated Guidance for Foreign Financial Institutions on OFAC Sanctions Authorities Targeting Support to Russia’s Military-Industrial Base,” as well as OFAC Frequently Asked Questions (FAQs) 1146-1157.
The power and integrity of OFAC sanctions derive not only from OFAC’s ability to designate and add persons to the SDN List, but also from its willingness to remove persons from the SDN List consistent with the law. The ultimate goal of sanctions is not to punish, but to bring about a positive change in behavior. For information concerning the process for seeking removal from an OFAC list, including the SDN List, please refer to OFAC’s Frequently Asked Question 897 here. For detailed information on the process to submit a request for removal from an OFAC sanctions list, please click here.
Any persons included on the SDN List pursuant to E.O. 14024 may be subject to additional export restrictions administered by the Department of Commerce, Bureau of Industry and Security (BIS).