US Imposes New Sanctions on Russia Targeting Banks, Investments, Services and Officials; EU announces fifth round of sanctions – International Law


Global: US Imposes New Sanctions on Russia Targeting Banks, Investments, Services and Officials; EU announces fifth round of sanctions

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Today, the United States imposed new comprehensive sanctions on Russia in response to the continuing conflict in Ukraine. The new measures include full blocking sanctions on Sberbank and Alfa-Bank, two of Russia’s largest banks, a ban on new investment in any sector of the Russian economy, and blocking sanctions on other Russian elites. A new executive order issued by President Biden authorizes the US Office of Foreign Assets Control (OFAC) to prohibit the provision of certain services to Russia in the future, and the White House has announced that OFAC will impose blocking sanctions additional on a Russian SOE raft tomorrow.

The European Union announced yesterday that it would impose a fifth round of sanctions on Russia in response to the ongoing war and attacks on Ukraine’s civilian population. The package will contain six elements, including a ban on coal imports, additional sanctions on Russian banks, port and transport sanctions, export bans on sensitive items, import bans on wood, cement, seafood and alcohol, among others, and a government supply ban. We will prepare a more detailed summary once the EU publishes the full measures.

Sanctions against Sberbank and Alfa-Bank

Today, OFAC imposed full blocking sanctions on Sberbank and Alfa-Bank by adding the banks to its list of Specially Designated Nationals (SDN List), thereby prohibiting US persons from doing business, directly or indirectly, with the banks. Previously, Sberbank was subject to targeted sanctions that prohibited US financial institutions from maintaining correspondent accounts for Sberbank or processing transactions involving the bank, while Alfa-Bank was subject to more limited debt and equity. The move constitutes a significant escalation of US financial sanctions against Russia, completely blocking the country’s largest public and private banks.

OFAC issued three new blanket licenses and updated three existing blanket licenses authorizing limited transactions with banks for temporary periods. The new general licenses authorize transactions that are usually incidental and necessary to the liquidation of Sberbank CIB USA, Inc. until June 7, 2022; transactions usually incidental and necessary for the liquidation of transactions involving Sberbank until April 13, 2022, other than those prohibited by Directive 2 to EO 14024; and transactions usually incidental and necessary to the liquidation of transactions involving Alfa-Bank until May 6, 2022. Existing general licenses authorizing energy-related transactions, the liquidation of certain debts and shares, and certain derivative contracts have been updates to include Bank.

In a statement accompanying the new sanctions, OFAC clarified that Alfa-Bank (Ukraine) is a separate entity from Alfa-Bank and that Alfa-Bank (Ukraine) is not subject to US sanctions.

Investment prohibition

President Biden’s new executive order prohibits any new investment in the Russian Federation by any American person, anywhere. The EO does not define the scope of what constitutes a “new investment” in Russia, but earlier OFAC guidance on the recently imposed energy investment ban interpreted the term broadly as “a commitment or contribution of funds or other assets for, or a loan or other extension of credit to new activities in the energy sector (excluding maintenance or repair)” in Russia. We expect OFAC to issue additional guidance on the intended scope of the investment ban under the new EO

Authorization to prohibit the export of services to Russia

Today’s EO also gives OFAC the authority to impose new restrictions on the export, re-export, sale, or supply of services from the United States or by United States persons to Russia in the future. While the provision does not immediately impose new trade restrictions, it does allow OFAC to identify categories of services that will be prohibited or restricted in the future. OFAC and the Commerce Department have imposed bans on the import and export of goods to and from Russia, but have not yet specifically targeted service categories.

Russian officials and family members

OFAC has sanctioned 25 Russian officials and their family members, including President Putin’s daughters, former Russian President and Prime Minister Dmitry Medvedev and members of the Russian Security Council by adding the individuals to the SDN list today today.

Humanitarian transactions

The White House reiterated its position today that the sanctions are not intended to apply to essential humanitarian activities, including the supply of food, agricultural products, medicine and medical devices, telecommunications and l Internet access, and ordered agencies to issue appropriate exemptions and to carve out exits to ensure that these activities can continue. Businesses providing these essential goods and services may find that practical difficulties, including obtaining the cooperation of banks and logistics providers, remain difficult for legally permitted activities, even when exemptions or licenses are granted.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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