Ukraine Related Sanctions Hit Firearms Market

Concern Kalashnikov/Izhmash Added to Sanctions List – No More Imports… For Now

IzhmashThe US Office of Foreign Assets Control (OFAC) last week released a list of Ukraine-related sanctions as part of Executive Order 13662—Blocking Property of Additional Persons Contributing to the Situation in Ukraine.  To the dismay of AK-type rifles and shotguns, that list included Concern Kalashnikov.

The relevant portion of the sanctions list reads:

The following entities have been added to OFAC’s SDN List:
KALASHNIKOV CONCERN (a.k.a. CONCERN KALASHNIKOV; a.k.a. IZHEVSKIY MASHINOSTROITEL’NYI ZAVOD OAO; f.k.a. IZHMASH R&D CENTER; f.k.a. JSC NPO IZHMASH; f.k.a. NPO IZHMASH OAO; a.k.a. OJSC CONCERN KALASHNIKOV; f.k.a. OJSC IZHMASH; f.k.a. SCIENTIFIC PRODUCTION ASSOCIATION IZHMASH JOINT STOCK COMPANY), 3, Derjabin Pr., Izhevsk, Udmurt Republic 426006, Russia; Registration ID 1111832003018 [UKRAINE2].

AK47The Treasury Department’s OFAC publishes a list of individuals and companies owned or controlled by, or acting for or on behalf of, countries targeted for sanctions.  It also lists individuals, groups, and entities, such as terrorists and narcotics traffickers designated under programs that are not country-specific.  Collectively, these entities are called “Specially Designated Nationals” or “SDNs.” Their assets are blocked and U.S. persons are generally prohibited from dealing with them.

What does all this mean?  It means that US importers will be blocked from bringing in products from Concern Kalashnikov (to include Izhmash, Molot products), including their AK type rifles, Saiga shotguns, SKS rifles, Mosin Nagant rifles, SVD rifles, SV-98 rifle and others.  Many current owners of these types of firearms are concerned about what this means for them personally.  The Treasury Department answers several frequently asked questions on their website:

If I own a Kalashnikov product, is that product blocked by sanctions? Am I able to resell a Kalashnikov product at a gun show or other secondary market?
If a U.S. person is in possession of a Kalashnikov Concern product that was bought and fully paid for prior to the date of designation (i.e., no payment remains due to Kalashnikov Concern), then that product is not blocked and OFAC sanctions would not prohibit the U.S. person from keeping or selling the product in the secondary market, so long as Kalashnikov Concern has no interest in the transaction. New transactions by U.S. persons with Kalashnikov Concern are prohibited, however, and any property in which Kalashnikov Concern has an interest is blocked pursuant to OFAC’s designation of Kalashnikov Concern on July 16, 2014. If a U.S. person has an inventory of Kalashnikov Concern products in which Kalashnikov Concern has an interest (for example, the products are not fully paid for or are being sold on consignment), we advise that U.S. person to contact OFAC for further guidance on handling of the inventory. [7-16-2014]

Izhmash Sanctions

If I have Kalashnikov products in my inventory, can I sell them?
If a U.S. person has an inventory of Kalashnikov Concern products in which Kalashnikov Concern has an interest (for example, the products are not fully paid for or are being sold on consignment), we advise that U.S. person to contact OFAC for further guidance on handling of the inventory. [7-16-2014]

A 2012 NYT article notes that “[a]bout 70 percent of the factory’s output is now civilian rifles, up from 50 percent two years ago. Of the civilian arms, about 40 percent are exported to the United States,” calling US exports “integral to the enterprise’s evolving business model,” making this a potentially devastating blow to the company as well as the domestic supply of such firearms – a point sure to drive prices upward.

Concern Kalashnikov made the following comments about the sanctions on their website:

For the group “Kalashnikov”, which is part of the Rosteha, the United States is an important market for civilian weapons. It should be noted that the products of the Kalashnikov is in the United States in great demand, a pre-order for products for civil use is three times the annual throughput. Thus, for Kalashnikov United States Government sanctions run counter to the interests of American consumers.

Discuss the addition of Concern Kalashnikov to the SDN list on the GunLink Forums.

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