In response to the Russian Federation’s recognition of certain regions of Ukraine as independent states which followed an expansion of nearly 200,000 troops on the Ukrainian border, US President Joseph Biden authorized the imposition of additional sanctions against Russia and indicated that further sanctions were under consideration. This LawFlash summarizes these newly issued sanctions.
In March 2014, the United States declared a national emergency to address certain actions taken by the government of the Russian Federation in relation to Ukraine. Then-President Obama authorized sectoral and blocking sanctions against persons in Russia, as well as a comprehensive embargo on the Crimea region, cutting it off from most US trade.
Since then, US sanctions against Russia have steadily increased with the most dramatic change occurring in February 2022. The newly issued sanctions include the following:
Each of these measures are discussed in turn below.
On February 21, 2022, President Biden issued an Executive Order (EO) in response to Russia’s recognition of the DNR and LNR regions of Ukraine as independent states. The EO tracks the original sanctions against the Crimea region in all respects, and accordingly prohibits:
The EO also authorizes the imposition of blocking sanctions by the Office of Foreign Assets Control (OFAC) against any person determined:
In conjunction with the issuance of the EO, OFAC also issued six General Licenses that authorize certain activities by US persons that would otherwise violate the prohibitions of the EO. Currently, these General Licenses permit the following activities:
On February 22, 2022, OFAC also added several Russian individuals and entities to its Specially Designated Nationals and Blocked Persons (SDN) List, including the Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank (VEB) and Promsvyazbank Public Joint Stock Company (PSB), along with 42 of their subsidiaries. OFAC also designated five vessels that are owned by PSB Lizing OOO, a designated subsidiary of PSB. These designations were made pursuant to Executive Order 14024, “Blocking Property With Respect to Specified Harmful Foreign Activities of the Government of the Russian Federation,” which was issued in April 2021.
Separately, OFAC designated five Russian “elites” close to Russian President Vladimir Putin, two of whom were previously on the list and redesignated under the current authority. As SDNs, these individuals and entities can no longer do business in the United States, or with US persons, and are cut off from the US financial system. All assets under US jurisdiction are frozen (“blocked” in the parlance of the EO), US persons are prohibited from doing business with them, and the US financial system cannot be used by any person to transact with them, unless authorized by OFAC. Additionally, non-US persons may risk sanctions if they engage in certain transactions with these SDNs. As is the case with most of OFAC’s sanctions programs, entities owned 50% or more by one or more SDNs will be subject to the same sanctions.
In conjunction with the new prohibitions, OFAC issued two General Licenses to authorize (1) servicing of bonds issued before March 1, 2022 by VEB or its subsidiaries, and (2) wind-down of transactions involving VEB or its subsidiaries through March 24, 2022.
On February 23, President Biden issued a statement directing the administration to impose sanctions on Nord Stream 2 AG and its corporate officers.
In conjunction with those designations, OFAC issued Directive 1A Under Executive Order 14024 (Directive) The new Directive increases US restrictions on dealings in Russia’s sovereign debt by US financial institutions to cover participation in the secondary market for bonds issued after March 1, 2022 by the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation.
The following activities by US financial institutions continue to be prohibited:
Unlike the blocking and sectoral sanctions, the prohibitions issued in respect of Russian sovereign debt do not apply to entities owned 50% or more by them.
The situation remains fluid and evolving. As such, these sanctions, as well as potential future sanctions, will likely shift to address the geopolitical circumstances between Russia and Ukraine. Compliance measures to manage the EO, the SDN designations, the use of general licenses and the financial restrictions under the Directive are subject to change as the United States and allied governments determine how to proceed.
In that light, the European Union and Australia have also announced sanctions, as well as individual countries such as Germany. The interest and engagement of US partners and allies in addressing the Russian-Ukrainian situation reflects a more multilateral approach to Russia’s behavior and indicates the potential for more impactful restrictions that could affect a broad array of business operations.
Morgan Lewis will address anticipated additional sanctions as they issue.
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If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
Ukraine Task Force
Giovanna M. Cinelli
Kenneth J. Nunnenkamp
Carl A. Valenstein
Jiazhen (Ivon) Guo
Katelyn M. Hilferty
 US persons include any US citizen, lawful permanent resident (green card holder), entity organized under US law or jurisdiction (including foreign branches), and persons in the United States.
 The legal implications of blocking sanctions are discussed in the section titled “OFAC Blocking Sanctions.”
 A General License authorizes the performance of certain categories of transactions that would otherwise be prohibited without the need to apply for a specific license from OFAC.
 This Directive replaces and supersedes a previous version that was issued on April 15, 2021.