It has been almost three weeks since the U.S. and its allies began imposing serious new sanctions and export control restrictions on Russia and Belarus in response to Russia’s invasion of Ukraine. This post summarizes the state of affairs as of Friday, March 11, 2022.
Please reach out to our team if you have any questions about these or future developments.
Current Status & What’s New
The current sanctions measures still do not amount to a full embargo on Russia, and Russia has not been cut off fully from the global financial system. As a result, certain types of international trade with Russia remain permissible for U.S., EU, and other western companies. Cross-border payments also remain possible for certain types of transactions.
That said, the United States, European Union, and other G7 countries have imposed unprecedented sanctions on Russia to-date, with much of the economy subject to direct sanctions or suffering from the secondary effects of those sanctions. Western companies continued to withdrawal or curtail operations in Russia this week in response to the new measures and public pressure. As noted last week, Western companies should continue to expect disruptions to legally permissible Russia-related business, as banks, logistics providers, and companies review the new restrictions and impose additional compliance measures.
This week, the United States imposed a ban on imports of energy from Russia and prohibited new investment in the Russian energy sector, imposed a ban on imports of certain Russian goods, banned the export of certain luxury items to the Russian market, and banned the supply of U.S. dollar banknotes to Russia and its government. President Biden also provided the Treasury Department with legal authority to ban new U.S. investments in other sectors of the Russian economy, suggesting further measures of this type may be coming. The U.S. and its allies are working to revoke Most-Favored Nation status for Russia, which will increase import duties on Russian goods, in some cases substantially. The EU and United Kingdom committed to reducing their reliance on Russian energy, imposed asset freeze sanctions on additional Russian oligarchs, and significantly expanded sanctions and export controls on Belarus, among other measures. FinCEN and OFAC also issued warnings about sanctions evasion, particularly related to the use of virtual or crypto currencies.
Banks subject to blocking or asset freeze restrictions
Western countries have implemented blocking sanctions or asset freeze restrictions on a number of large Russian financial institutions over the last two weeks. In the United States, banks were added to the List of Specially Designated Nationals (SDN List). Russian banks subject to blocking or asset freeze sanctions in at least one Western jurisdiction include: VEB, PSB, VTB Bank, Bank Otkritie, Sovcombank, Novikombank, Bank Rossiya, Black Sea Bank For Development And Reconstruction, Genbank, and IS Bank.
The sanctions generally prohibit any direct or indirect dealings with these banks, unless authorized pursuant to a “wind down” or other type of general license or OFAC Directive. We cover these sanctions in several posts, including here, here, here, here, and here.
The United States imposed correspondent and payable-through sanctions on Sberbank, which will limit Sberbank’s ability to conduct U.S. dollar transactions. The sanctions also require U.S. financial institutions to reject future transactions involving Sberbank and its subsidiaries. The U.K. imposed similar measures last week. You can read more about sanctions on Sberbank here and here.
The United States imposed financing restrictions on large Russian state-owned enterprises that prohibit U.S. persons from dealing in new debt of those companies with a maturity of more than 14 days or in new equity of those companies. The sanctions are very similar to existing U.S. sectoral sanctions that have been imposed on Russian companies pursuant to E.O. 13662 since 2014. As noted below, the EU expanded similar debt sanctions. More information is available here.
Embargo and Trading Ban on Separatist Regions
The United States and allies imposed embargoes or trading bans on the separatist Donetsk People’s Republic (DNR) and Luhansk People’s Republic (LNR) regions of Ukraine. We cover the U.S. and EU bans here and here, and provide initial thoughts on how to comply with the embargo here.
New SDNs and Asset Freezes
The United States and allies imposed blocking sanctions and asset freezes on a number of Russian elites, their family members, and Russian companies. Nord Stream 2 AG and the Russian Direct Investment Fund (RDIF) were also subject to sanctions. Blocking and asset freeze sanctions generally prohibit all business with the sanctioned parties and their majority-owned entities. We covered these sanctions in several of our posts.
Central Bank Sanctions
As noted above, G7 countries imposed broad sanctions on transactions involving Russia’s Central Bank, National Wealth Fund, and Ministry of Finance. These sanctions include a sweeping prohibition on direct or indirect transactions or other business dealings involving the sanctioned entities without authorization. The U.S. Office of Foreign Assets Control (OFAC) issued two new general licenses and expanded two existing general licenses this week that authorize limited interactions with the sanctioned entities. OFAC also issued important guidance explaining the intended scope of the U.S. sanctions.
You can read more here and here.
EU Banking, Financial, & SWIFT Restrictions on Russia & Belarus
The EU imposed a series of financial sanctions on Russia and Belarus, including limits on deposits in the European Union, sanctions on the sale of euro-denominated securities, limits on the listing of shares in the EU, sanctions on the provision of investment services, limits on supplying euro-denominated banknotes, and the expansion of existing securities and debt sanctions. The EU also imposed a ban on the provision of specialized financial messaging services on listed Russian and Belarusian banks, a move that will effectively cut off those banks from the SWIFT interbank messaging system. We cover these developments here, here, and here.
Expanded Russia Dual-Use Licensing Requirements
The United States, European Union, and other countries amended export control regulations to impose license requirements on exports of a broad array of goods, software, and related technical knowhow to Russia and Belarus. The U.S. restrictions apply to all items listed in Categories 3 through 9 of the Commerce Control List, including a number of less sensitive items. Subject to a limited number of exceptions, the U.S. government will review license applications related to these exports under a presumption of denial, which means that licenses will rarely be granted. The EU and UK imposed corresponding broad-based dual use export bans on Russia and Belarus, subject to limited exceptions.
The United States extended prohibitions on the export of specified items to Military End Users and Uses and added a significant number of Russian and Belarusian companies to the Entity List, broadly prohibiting the transfer of items subject to the EAR to the listed parties. The United States also expanded existing controls on the transfer of certain items in support of oil refining in Russia and imposed a heightened license review policy. The EU imposed license requirements on the transfer of enumerated items that could contribute to Russia’s military or technological enhancement and on transfers of specified goods and technology suited for use in oil refining, aviation, and space industries.
The United States also extended its “Foreign Direct Product Rule” (FDPR) to apply to exports of goods made outside the U.S. using certain U.S. equipment and know how to Russia and to Russian Military End Users (including supporters of Military End Users or the Russian military). The FDPR operates differently depending on whether military end users are involved. The complex changes to the FDPR significantly increase the scope of non-U.S. origin items that are now subject to the EAR’s Russia-related license requirements.
For more on the new U.S., EU, and U.K. export control measures, see our posts here, here, here, and here.
Energy Bans: Imports & Investment
The United States imposed new sanctions that banned the import of Russian-origin crude oil; petroleum; petroleum fuels, oils, and products of their distillation; liquefied natural gas; coal; and coal products into the United States. The measures also prohibit new investment in the Russian energy sector. The EU and UK announced corresponding measures designed to reduce their reliance on Russian energy supplies. We cover these developments here.
Other U.S. Import Bans, Luxury Goods Export Ban, U.S. Dollar Ban
The United States also adopted new measures today to ban the import of certain Russian-origin seafood, vodka and spirits, and diamonds, the export of luxury goods to Russia and Belarus, and the provision of U.S. dollar bank notes to Russia or the Russian government without prior authorization. We cover these developments here.
Trade Controls & Sanctions on Belarus
Western countries imposed additional sanctions, export controls, and import restrictions on Belarus in response to the country’s growing involvement in the conflict in Ukraine. The measures imposed additional asset freeze restrictions on Belarusian companies and officials, extended the new Russia dual-use export controls to Belarus, and limited imports of certain wood, cement, iron, steel, rubbery, and machinery products to the EU. The U.S. and EU have taken steps to subject Belarus to restrictions that are similar to those imposed on Russia.
We cover Belarus-related developments here, here, here, and here.
The United States, EU, and other jurisdictions closed their airspace to Russian aircraft last week. You can read more about these measures here and here.
While the United States, EU, and other allies are closely coordinating new sanctions measures, there are meaningful differences between the measures imposed by different jurisdictions. To ensure compliance with applicable law, it is important to review the new sanctions measures in all of the jurisdictions in which you operate.