US Imposes Series of Additional Sanctions on Russia Amid Growing Tensions | Skadden, Arps, Slate, Meagher & Flom LLP

On April 15, 2021, President Joe Biden issued Executive Order 14024, titled “Decree on Freezing of Assets Regarding Specified Harmful Foreign Activities of the Government of the Russian Federation,” which authorized further sanctions against Russia for a variety of, “including interference in US elections, cyber attacks against the United States and violations of the territorial integrity of other countries. On the same day, the Biden administration imposed a series of blocking sanctions against Russian persons and entities – both under the newly issued decree and under some previous decrees – and issued a new directive banning financial institutions to engage in certain Russian government debt transactions.

These sanctions are the latest moves against Russia and build on the sanctions framework put in place under the Obama and Trump administrations. The April 15 sanctions come as political tensions continue to grow between Russia and the United States and their allies on several fronts.

New executive order

The ordinance, described by Treasury Secretary Janet Yellen as “a radical new authority to deal with Russia’s continued and growing malicious behavior,” authorizes sanctions to counter Russia’s “harmful foreign activities” that threaten security national and foreign policy of the United States Specifically, the ordinance authorizes the imposition of blocking sanctions (that is to say., an asset freeze and a trading ban) against individuals determined to engage in certain activities, including: (i) undermining the conduct of free and fair elections and democratic institutions in the United States and its allies ; (ii) engage in and facilitate malicious cyber activities against the United States and its allies that threaten the free flow of information; (iii) encourage and use foreign bribery to influence foreign governments; (iv) the pursuit of extraterritorial activities targeting dissidents or journalists; (v) endanger security in countries and regions important to the national security of the United States; and (vi) violate the territorial integrity of other countries.

The ordinance also authorizes the imposition of sanctions on persons determined to operate in the technology sector or the defense sector and the related materiel sector of the Russian economy, or any other sector determined by the Secretary of the Treasury, in consultation with the US Secretary of State. . The defense sector and certain other sectors of the Russian economy have already been subject to certain sanctions since the publication of Decree 13662 in 2014. Along with the publication of the decree of April 15, the Office of the Treasury’s Foreign Assets Control (OFAC) has appointed six technology companies that “provide support for the Russian intelligence services’ cybernetics program, ranging from expertise to the development of tools and infrastructure to the facilitation of malicious cyber activity.” .1

Sovereign Debt Restrictions

On April 15, OFAC also published a new directive (the 2021 directive) in application of the order prohibiting, as of June 14, 2021, American financial institutions from participating in the primary market for bonds denominated in rubles or not issued. after June 14. , 2021, by the Central Bank of the Russian Federation, the Russian National Wealth Fund or the Ministry of Finance of the Russian Federation. Directive 2021 also prohibits, also from June 14, 2021, US financial institutions from lending funds denominated in rubles or not to these three entities.

Directive 2021 expands existing restrictions imposed in accordance with a similar style directive issued in August 2019 under the Chemical and Biological Weapons Control and the Elimination of War Act 1991 (CBW Directive), which prohibited institutions financial institutions to participate in the primary Russian denominated sovereign debt market and lending non-ruble funds to the Russian sovereign. The 2021 directive is broader than the CBW directive in that it also extends to transactions in rubles, while the CBW directive is limited to non-ruble transactions only. With regard to the targeted Russian government entities, the 2021 guideline appears to be narrower than the CBW guideline in that it only applies to bonds issued by, or loans made to, the Russian National Wealth Fund, the Central bank or the Ministry of Finance, while the CBW directive uses the term “Russian sovereign”, which casts a wider net.2

Significantly, the 2021 Directive does not target SOEs. OFAC has issued guidance stating that its so-called “50% rule”, according to which sanctions generally apply to entities 50% or more owned by a sanctioned person, does not apply in the context of Directive 2021. In addition, OFAC has explicitly confirmed that Directive 2021 does not prohibit US financial institutions from participating in the secondary market for bonds issued by the Russian National Wealth Fund, the Central Bank and the Department of Finance.

Designations under previous authorities

In addition, on April 15, and in accordance with the authorization granted under certain previous executive decrees, OFAC designated 19 entities and 21 persons for Russian actions related to electoral interference, cyber attacks and the Crimean region. The other designations are aimed at those who, according to OFAC, attempted to influence the 2020 US presidential election under the leadership of the Russian government. These designations follow the intelligence community’s assessment of “Foreign Threats to the 2020 U.S. Federal Election,” which focused on the efforts of key foreign actors to influence or interfere with the U.S. election and undermine public confidence in the election. electoral process. Among the targets of these sanctions were several “means of disinformation” registered in Russia and in the Crimean region.

A look to the future

With Russia’s recent military build-up on its border with Ukraine and in the Crimea region, the possibility of further sanctions by the United States and its allies seems likely, as U.S. officials have sent strong signals that additional measures could follow. These signals included comments from Secretary Yellen, who described the April 15 sanctions as “the start of a new US campaign against Russia’s malicious behavior.”3 and National Security Advisor Jake Sullivan, who warned of the “consequences”4 if Alexei Navalny, the imprisoned Russian opposition activist whose health appears to be deteriorating, would die in prison.5 Additionally, in a press release dated April 19, 2021, the State Department expressed “deep concern” over “Russia’s plans to block warships and foreign state ships in parts of the country. Black Sea, including near occupied Crimea and the Kerch Strait ”.6 While the situation remains fluid, these statements and many more should serve as a reminder to companies doing business in Russia that additional sanctions may be considered and that they should remain aware of any relevant effect that future sanctions may have on their activities.

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1 For more details on the sanctions, see the White House press release “FACT SHEET: Imposing Costs for Harmful Foreign Activity by Russian Government. “

2 According to the CBW Directive, “Russian sovereign” is defined as “any ministry, agency or sovereign wealth fund of the Russian Federation, including the Central Bank of Russia, the National Wealth Fund and the Ministry of Finance of the Russian Federation. Russia”. However, the term does not include state-owned enterprises.

3 See the press release of the Ministry of the Treasury of April 15, 2021, “Treasury sanctions Russia with new sanctions authority. “

4 See USA todayarticle from April 18, 2021, “‘There will be consequences’: National security adviser Sullivan warns of US retaliation if Kremlin critic Navalny diesFor Mr. Sullivan’s comments.

5 On March 2, 2021, Secretary of State Antony Blinken concluded under the CBW that the Russian government had used a chemical weapon in the attempted assassination of Mr. Navalny in August 2020 in violation of the Weapons Convention chemicals, and imposed certain trade-related sanctions under the CBW. As was the case with the imposition of CBW sanctions in 2018 in response to the Skripal incident, if the Russian government does not meet certain conditions in relation to its obligations under the Chemical Weapons Convention, the US President will have to impose a second round. Sanctions. (See our customer alert of September 10, 2018 on these previous sanctions, “US imposes new sanctions in response to Skripal assassination attempt. ”)

6 See the Department of State press release of April 19, 2021, “Russia’s intention to restrict navigation in parts of the Black Sea. “

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