In response to President Putin’s televised recognition of Donetsk and Luhansk People’s Republics (“DNR” and “LNR”) of Ukraine as “independent” nations, and reports of Russian troops being ordered into Ukrainian territory, the United States has imposed Crimea-style comprehensive sanctions on the DNR and LNR prohibiting new U.S. investment as well as imports and exports to and from the regions. The EU and the UK have sanctioned banks and oligarchs, and Germany has suspended certifications on the NordStream2 pipeline project.
The Donbas region of Eastern Ukraine has been divided since 2014 into separate territories, respectively controlled by the Ukrainian government and Russian-backed separatists. According to the Ukrainian government, armed conflict in the region has claimed over 14,000 lives and displaced more than 1.5 million people. The Minsk Agreements, negotiated by France and Germany in 2015 and signed by Russia and Ukraine, implemented a ceasefire but failed to entirely control the violence. As of February 2022, there have been increasing tensions on the Ukraine-Russia border and the movement of Russian military troops into the region.
U.S. Executive Order
On February 21, 2022, President Biden issued an “Executive Order on Blocking Property of Certain Persons and Prohibiting Certain Transactions With Respect to Continued Russian Efforts to Undermine the Sovereignty and Territorial Integrity of Ukraine.” Specifically, the EO imposes broad sanctions on the DNR and LNR similar to sanctions for the Crimea territory. It prohibits the following:
- New investment in the so-called DNR or LNR regions of Ukraine by a United States person, wherever located;
- The importation into the United States, directly or indirectly, of any goods, services, or technology from the so-called DNR or LNR regions of Ukraine;
- The exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of any goods, services, or technology to the so-called DNR or LNR regions of Ukraine;
- And any approval, financing, facilitation, or guarantee by a United States person, wherever located, of a transaction by a foreign person where the transaction by that foreign person would be covered by these prohibitions if performed by a United States person or within the United States.
The EO also provides authority to impose sanctions on persons determined:
- To operate or have operated since the date of the order in the so-called DNR or LNR regions of Ukraine;
- To be or have been since the date of the order a leader, official, senior executive officer, or member of the board of directors of an entity operating in the so-called DNR or LNR regions of Ukraine;
- To be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to this order;
- Or to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, any person whose property and interests in property are blocked pursuant to this order.
The Department of Treasury also has issued six General Licenses, including authorization for a “wind down” until March 23, 2022, of operations, contracts and other agreements in effect prior to February 21, 2022. General licenses also provide for certain (a) exports to the regions of food, medicine and medical devices, (b) telecommunications and internet services to remain operational, and mail services to continue, (c) exports of services and software incident to personal communication over the internet, (d) aid activities by international organizations, and (d) foreign remittances.
A Coordinated Response with Europe
The U.S. Government has been coordinating pressure on the Russian regime with its international partners, including the European Union, the United Kingdom and Canada.
On February 22, 2022, the UK Office of Financial Sanctions Implementation (OFSI) issued a Financial Sanctions Notice and updated the OFSI consolidated list, designating eight new persons as subject to Russia Sanctions made under the UK Sanctions and Anti-Money Laundering Act 2018. Those designated include five Russian banks and three prominent oligarchs, namely:
- Gennadiy Nikolayevich Timchenko;
- Boris Romanovich Rotenberg;
- Igor Arkadyevich Rotenberg;
- Bank Rossiya;
- Black Sea Bank for Development And Reconstruction;
- Joint Stock Company Genbank;
- IS Bank; and
- Public Joint Stock Company Promsvyazbank.
With the exception of the Public Joint Stock Company Promsvyazbank, the above individuals and entities above already were blocked under U.S. law, and are now subject to an asset freeze (and the individuals subject to a travel ban in the UK).
On February 21, 2022, the European Council imposed restrictive measures on an additional five individuals for actively supporting actions and implementing policies that undermine or threaten the territorial integrity, sovereignty and independence of Ukraine. Those designated include members of the State Duma of the Russian Federation, who were elected to represent the illegally annexed Crimean peninsula and the City of Sevastopol on September 19, 2021, as well as the head and deputy head of the Sevastopol electoral commission, namely: Aleksei Yurievich Cherniak, Leonid Ivanovic Babashov, Tatiana Georgievna Lobach, Nina Sergeevna Faustova and Aleksandr Evgenevich Chmyhalov. It is reported that the EU is “close to agreeing” on further sanctions targeting Russian banks and individuals.
Germany also has announced that it will halt certifications for the Nord Stream 2 Baltic Sea gas pipeline project, designed to double the flow of Russian gas direct to Germany.
The conflict on the Ukrainian border is rapidly evolving, and it is possible that further sanctions will be issued in the coming days. Per White House Press Secretary Jen Psaki, the February 21, 2022, Executive Order is “separate from and … in addition to the swift and severe economic measures we have been preparing in coordination with Allies and partners should Russia further invade Ukraine.” This is echoed by comments from the UK Prime Minister Boris Johnson, who has referred to the above UK sanctions as the “first tranche, the first barrage of what we are prepared to do, and we hold further sanctions at readiness to be deployed alongside the U.S. and EU if the situation escalates still further.”