On February 22 and 23, 2022, President Biden announced further sanctions in response to Russia’s invasion of Ukraine. These sanctions build upon the U.S. sanctions issued on February 21, 2022. Specifically, the additional sanctions include (a) blocking two Russian financial institutions and their subsidiaries, as well as five Russian individuals associated with the Putin regime; (b) expanded sanctions targeting Russian sovereign debt and persons who support such transactions; and (c) sanctions on Nord Stream AG and its CEO.
The United Kingdom, European Union, Canada, Australia, and Japan have also issued or announced sanctions in response to Russia’s invasion. Further sanctions are likely if the situation in Ukraine continues to escalate.
Further U.S. Sanctions
Russian Financial Institutions
In accordance with President Biden’s February 22 announcement, the Treasury Department’s Office of Foreign Assets Control (“OFAC”) sanctioned as Specially Designated Nationals (“SDNs”) two state-owned Russian financial institutions: State Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank (“VEB”) and Promsvyazbank Public Joint Stock Company (“PSB”), as well as 42 of their subsidiaries. OFAC also issued a general license authorizing transactions ordinarily incident and necessary to the wind down of transactions with VEB and its subsidiaries through March 24, 2022.
As a result of the SDN designations, all property and interests in property 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, individually or in the aggregate, 50 percent or more by one or more blocked persons are also blocked. Unless authorized by a general or specific license issued by OFAC, or exempt, all transactions with and services by U.S. persons or within (or transiting) the United States that involve any property or interests in property of blocked persons are generally prohibited.
Sovereign Debt Prohibitions
The February 22 announcement also provided for expanded sovereign debt prohibitions through the issuance of Directive 1A under Executive Order (E.O.) 14024. These restrictions expanded on the prohibitions in Directive 1 issued on April 15, 2021, which prohibited U.S. individuals and firms from participation in the primary markets for new Russian sovereign debt. As a result of Directive 1A, U.S. persons also are prohibited from participating in the secondary market for ruble or non-ruble denominated 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.
Targeting Russian Regime Leaders and their Adult Children
OFAC issued SDN designations for five Russian elites and their family members. This includes: Denis Bortnikov, son of the Director of the Federal Security Service of the Russian Federation, Aleksandr Bortnikov; the Direct Deputy Chief of Staff of the Presidential Office, Sergei Kiriyenko and his son, Vladimir Kiriyenko: and Promsvyazbank CEO Petr Fradkov.
Nord Stream 2
On February 23, 2022, OFAC added Nord Stream 2 AG, the project company constructing the Nord Stream 2 pipeline and an indirect Gazprom subsidiary, and Matthias Warnig, Nord Stream AG’s CEO, to the SDN list. Previously, President Biden had waived sanctions prescribed by U.S. legislation on both Nord Stream 2 AG and Warnig. OFAC also issued a general license authorizing transactions ordinarily incident to the wind down of activities involving Nord Stream AG and its blocked subsidiaries until March 2, 2022 at 12:01am Eastern Standard Time.
Global Coordination Continues
On February 22, 2022, Japan, Canada and Australia announced additional measures against Russia. These come on the heels of sanctions already issued by the United Kingdom and announced by the European Union on February 21 and 22, 2022.
The Japanese government announced sanctions that, when implemented, will include an asset freeze, travel restrictions, and an import/export ban on Russian officials associated with the areas. The Japanese government will also impose sanctions on the issuance and circulation of “sovereign bonds” such as Russian government bonds and government agency bonds. The Japanese government further announced that it is considering proposals for future sanctions to: (1) restrict exports of semiconductors and other advanced technologies, (2) suspend transactions with several major Russian banks, and (3) freeze assets and implement travel restrictions for key government officials.
The Canadian government also has announced that all Canadians would be banned from taking part in “financial dealings with the so-called independents states of Luhansk and Donetsk.” Canadians will also be banned from purchasing Russian sovereign debt. Finally, Canada will issue individual sanctions against members of Russia’s parliament who voted to recognize Luhansk and Donetsk as well as two state-backed Russian banks.
Finally, the Australian government has announced that it will impose travel bans and targeted financial sanctions on eight unspecified members of the Russian Federation’s security council. It will also amend its existing sanctions regulations to cover the breakaway regions of Donetsk and Luhansk, prohibiting trade in sectors including transport, energy, telecommunications, oil, gas and mineral reserves. Further, Australian individuals and entities will be banned from doing business with Rossiya Bank, Promsvyazbank, IS Bank, Genbank and the Black Sea Bank for Development and Reconstruction. These measures come in addition to existing sanctions on VEB.
Further sanctions are expected from these jurisdictions, as well as from other allies, in the coming days. For example, the British Foreign Secretary noted on February 22, 2022 that if Russia continues to escalate violence in the region, the U.K. will move forward with the blocking of Russian sovereign debt.