Ukraine crisis: updates to UK, EU and US sanctions in the second ‘phase’ of the international response

As at 6pm GMT on Monday, 28 February 2022, and in addition to those measures outlined in the "first phase" of the international community’s response to the situation in Ukraine, the UK, EU and US has announced the following sanctions measures:

United Kingdom

The UK Government has announced a wide-ranging package of new sanctions measures. A proportion of these measures have been implemented under existing legislative powers and, therefore, are now "live" and in force. Further measures are expected to be implemented under new regulations to be laid before Parliament on 1 March 2022. This FCDO press release contains useful detail.

Measures which have been implemented

In summary:

• On 24 February 2022, the UK imposed asset-freezing measures targeting:

• Six Russian entities, largely in the banking or defence sectors:

• Uralvagonzavod
• United Aircraft Corporation
• United Shipbuilding Corporation
• Rostec
• Tactical Missiles Corporation
• VTB Bank

• Five Russian individuals, largely connected to the entities designated above:

• Denis Aleksandrovich Bortnikov
  Petr Mikhailovich Fradkov
• Elena Alexandrovna Georgieva
• Kirill Nikolaevich Shamalov
• Yury Borisovich Slyusar

• On 25 February, this was extended to include:

• Vladimir Putin; and
• Sergei Lavrov.

• On 28 February, this was extended again to include:

• VEB.RF;
• Bank Otkritie; and
• Sovocombank.

These persons are now subject to a UK asset-freeze and individual travel bans.

Measures which have been announced but not yet implemented

• Asset-freezing measures on 571 members of the Russian State Duma.
• Asset-freezing measures on approximately 100 further entities and individuals. These names have not yet been released but are expected to include additional Russian banks and financial institutions. Beyond setting out the identity of those targeted, the legislation implementing these additional asset-freeze provisions will assist with the identification and scope of any grandfathering, pre-contract exemptions, wind-down provisions or general licences.
• Asset-freezing measures targeting all Russian banks.
• New legislation to include a power to prevent designated Russian banks from accessing Sterling payments or clearing payments through the UK – effectively preventing access to the UK financial system. Once this is implemented, it is understood it will apply to Sberbank amongst others. Again, sight of relevant implementing regulations will be important to understanding how broadly these restrictions will be applied and to which elements of the payment transfer chain.
• Further, and in addition to the already-announced ban on Russian sovereign debt, there will measures to prohibit all Russian entities – both state-owned and private – from raising finance on the UK’s money markets, including preventing the issuance of transferable securities and money market instruments in the UK.
• A GBP50,000 deposit limit on UK bank accounts held by Russian nationals.
• In terms of wider trade measures, the UK Government has announced:

• an extension of the financial and trade measures currently applying to Crimea to the Donetsk and Luhansk regions;
• an immediate suspension of all dual-use export licences to Russia. New legislation will be introduced to prohibit the export of dual-use items to Russia and high-end and critical technical equipment and components (such as microelectronics, marine and navigation equipment) suited to the electronics, telecommunications and aerospace sectors; and
• a ban on all Russian commercial and private jets, including Russian flag-carrier Aeroflot, from UK airspace.

• On the question of the SWIFT access prohibition – on 26 February 2022, the UK, EU, US and Canada released a joint statement committing to ensure that selected Russian banks are removed from the SWIFT system. The identity of the targeted banks is not yet known.
• The Prime Minister also announced that current measures targeting Belarus would be expanded.

On the morning of 28 February 2022, the Chancellor of the Exchequer, in coordination with the Governor of the Bank of England, announced measures to target the Central Bank of the Russian Federation and other economic state actors. The measures will align with the US and EU and are likely to prohibit UK persons from undertaking transactions involving the Central Bank of Russia, the Russian National Wealth Fund and the Russian Ministry of Finance.

The Department for Transport has also requested – and likely soon to mandate that – UK ports deny access to any ship which they believe is:

• Owned, controlled, chartered, or operated by any person connected with Russia;
• Owned, controlled, chartered or operated by Designated Persons;
• Flying the Russian flag; or
• Registered in Russia.

European Union

Measures which have been implemented

On 23 February 2022, the EU issued legislation implementing its ‘first phase’ measures. A summary of the detail is as follows:

• Asset-freezing measures have been imposed on:

• 22 people, including members of the Russian Government, senior military personnel, individuals working for "pro-Russian" media and businesspeople;
• four entities:

• Bank Rossiya
• Internet Research Agency
• Vnesheconombank (VEB) (aka VEB.RF)
• Promsvyazbank; and

• 336 members of the Russian State Duma who ratified the government’s decision to recognise the independence of the Donetsk and Luhansk regions.

These persons are now subject to an EU asset-freeze and individual travel bans.

In a first for the EU’s asset-freezing regime, Council Regulation (EU) 2022/259¹  has implemented a licensing ground to support the winding down of any existing contracts – including correspondent banking relationships – with Bank Rossiya, VAB Bank or Promsvyazbank such that those relations be terminated by 24 August 2022.

• A lending/refinancing ban has been imposed against the Russian state or government, including a ban on:

• the provision of investment services for or assistance in the issuance of, or otherwise dealing with transferable securities and money-market instruments issued after 9 March 2022 by Russia and the Russian government; or the Central Bank of Russia; or a legal person, entity or body acting on behalf or at the direction of the same; or
• subject to limited exemptions and specific grandfathering provisions, the issuance of any new loans or credit to the same entities.

These measures build on existing sectoral sanctions targeting the Russian financial and defence sectors imposed in 2014 but, in a divergence from those 2014 measures, apply to new loans, debt, credit, transferable securities or money-market instruments of any maturity.

• The wider trade measures announced on 22 February 2022 are also now in force in respect of the Donetsk and Luhansk regions. They are similar to the EU’s existing measures targeting activity in Crimea, and include:

• an import ban on goods from Donetsk and Luhansk, including financing and insurance restrictions;
• a prohibition on certain investment in the Donetsk and Luhansk regions, including the purchase of real estate, the acquisition of ownership or control interests, the granting of new loans, credit or equity, creating a joint venture interest or providing any investment services;
• an export ban on certain listed goods and technologies suited to the transport, telecommunications, energy or oil, gas and mineral sectors to or for use in the Donetsk or Luhansk regions, including technical assistance and financing restrictions;
• a ban on the provision of technical assistance, brokering, construction or engineering services to infrastructure in the regions and within the above sectors, regardless of the goods’ origin; and
• a prohibition on supplying tourism services to the Donetsk and Luhansk regions.

Implementing legislation (Council Regulation (EU) 2022/263)² contains tailored grandfathering and wind-down provisions for a number of the sectoral measures. As a consequence, such prohibitions do not apply to the performance of an obligation arising from a pre-existing contract, provided that the competent authority has been informed – depending on the activity in question – at least five or 10 working days in advance.

On 24 February 2022, the EU announced a second package of measures. Many of these were implemented on 25 February via various Council regulations. In summary, the implemented measures contain:

Further asset-freezing measures targeting:

• President Vladimir Putin and Minister of Foreign Affairs Sergei Lavrov;
• Members of Russia’s National Security Council; and
• The remaining members of the Russian State Duma who ratified the government’s decision to recognise the independence of the Donetsk and Luhansk regions.³

Trade restrictions in respect of Russian activity…:⁴

• a restriction on selling, supplying, transferring or exporting dual-use goods and technology to any natural or legal person, entity or body in Russia or for use in Russia, together with connected technical assistance, brokering, financing and financial assistance prohibitions.

Where such trade is for non-military use or to a non-military end-user, this restriction is subject to limited exceptions, specified licensing and notification conditions and – until 1 May 2022 – express grandfathering provisions.

• a restriction on selling, supplying, transferring or exporting goods or technology which might contribute to Russia’s military and technological enhancement to any natural or legal person, entity or body in Russia or for use in Russia, together with connected technical assistance, brokering, financing and financial assistance prohibitions. These restricted goods will be listed in Annex VII to the amended regulation.

Again, where such trade is for non-military use or to a non-military end-user, this restriction is subject to limited exceptions, specified licensing conditions and – until 1 May 2022 – express grandfathering provisions.

• restrictions on selling, supplying, transferring or exporting goods or technology suited for use in oil refining to any natural or legal person, entity or body in Russia or for use in Russia, together with connected technical assistance, brokering, financing and financial assistance prohibitions. These restricted goods will be listed in Annex X to the amended regulation and include goods in HS headings 8419, 8421, 8456, 8479 and 8543.

These restrictions benefit from grandfathering provisions until 27 May 2022. In addition, a licence may be granted where such trade is, “necessary for the urgent prevention or mitigation of an event likely to have a serious and significant impact on human health and safety or the environment.” In cases of emergency, there are replacement notification requirements within five working days of an export.

• restrictions on selling, supplying, transferring or exporting goods or technology suited for use in aviation or the space industry to any natural or legal person, entity or body in Russia or for use in Russia. These goods are listed in Annex XI to the amended regulation and concern, “Aircraft, spacecraft, and parts thereof” (CN Code 88).

There are additional restrictions on the provision of insurance and reinsurance services and certain specified activities – including overhaul, repair, inspection or modification of an aircraft or component (excluding pre-flight checks). The usual restrictions on the provision of connected technical assistance, brokering, financing or financial assistance also apply.

Grandfathering provisions in respect of these restrictions apply only until 28 March 2022.

..and further financial restrictions:

 

• a restriction on providing public financing or financial assistance for trade with, or investment in, Russia.

This restriction is subject to grandfathering provisions and limited exemptions, including for finance, “up to the total value or 100 000 EUR per project to small and medium-sized enterprises established in the Union” or for financing or financial assistance supporting trade in food or for agricultural, medical or humanitarian purposes.

• in addition to existing restrictions on these products for certain Russian banks, a restriction on investment services for, assistance in the issuance of or otherwise dealing with transferable securities and money-market instruments issued:

• after 12 September 2014 to 12 April 2022 or after 12 April 2022 of any maturity by those banks and financial institutions listed in Annex III, or those owned, controlled or acting on behalf of the same. The identity of those Annex III institutions has not yet been released but is expected to include those with 50% or greater public ownership.

• after 12 September 2014 to 12 April 2022 or after 12 April 2022 of any maturity by:

• those entities listed in Annex V (i.e. predominantly engaged in the conception, production, sales or export of military equipment or services), or those owned, controlled or acting on behalf of the same;
• those entities listed in Annex VI (i.e. publicly owned or controlled with assets of over RUB 1 trillion and at least 50% of revenue deriving from the sale or transportation of crude oil or petroleum), or those owned, controlled or acting on behalf of the same.

• after 12 April 2022 of any maturity by those banks and financial institutions listed in Annex XII, or those owned, controlled or acting on behalf of the same. Annex XII currently lists Alfa Bank, Bank Otkritie, Bank Rossiya and Promsvyazbank.

• after 12 April 2022 of any maturity by those banks and financial institutions listed in Annex XIII, or those owned, controlled or acting on behalf of the same. Annex XIII currently lists Almaz-Antey (Aerospace & Defense), Kamaz (Automotive), Novorossiysk Commercial Sea Port (Shipping), Rostec (subsidiaries mainly in the military sector), Russian Railways (Infrastructure), Sevmash (Shipbuilding), Sovcomflot (Shipping) and United Shipbuilding Corporation (Shipbuilding).

• Further restrictions on any involvement in the provision of new loans or credit to the same entities listed above, with limited exemptions (including for export/import contracts or the provision of emergency funding for certain persons). This restriction benefits from grandfathering provisions, subject to certain terms and conditions.
• A blanket prohibition on listing or providing services as of 12 April 2022 on EU trading venues for the transferable securities of any Russian legal person, entity or body with over 50% public ownership.
• A blanket prohibition on Union central security depositaries providing defined services for transferable securities issued after 12 April 2022 to any Russian national or those residing in or established in Russia (unless an EU national or those with permanent EU residence).
• A blanket prohibition on selling EUR-denominated transferable securities (issued after 12 April 2022) to any Russian national or those residing in or established in Russia (unless an EU national or those with permanent EU residence).
• Restriction for banks or financial institutions on accepting deposits from Russian nationals or those residing or incorporated in Russia of funds exceeding EUR 100,000. This is subject to licensing conditions and limited exemptions, including for EU nationals or permanent residents or in respect of non-prohibited trade. By 27 May 2022, credit institutions must a list of such deposits to their competent authority, and update that list on an annual basis.

Notably – and to remove any doubt on this point – a definition of, “financing and financial assistance” has been added. It expressly includes:

“any action, irrespective of the particular means chosen, whereby the person, entity or body concerned, conditionally or unconditionally, disburses or commits to disburse its own funds or economic resources, including but not limited to grants, loans, guarantees, suretyships, bonds, letters of credit, supplier credits, buyer credits, import or export advances and all types of insurance and reinsurance, including export credit insurance” [emphasis added],

However:

“payment as well as terms and conditions of payment of the agreed price for a good or a service, made in line with normal business practice, do not constitute financing or financial assistance”.

These measures are in force as of 26 February 2022.

In addition, the following measures were implemented on 28 February 2022 via Council Regulation (EU) 2022/334⁵  and Council Regulation (EU) 2022/336:⁶

• Asset-freezing measures targeting SOGAZ and a number of Russian oligarchs, business persons and political actors including:

• Gennady Timchenko;
• Igor Sechin (CEO of Rosneft and an adviser to President Putin);
• Nikolay Tokarev (CEO of Transeft); and
• Petr Aven (a shareholder of Alfa Group).

• In addition to the Annex XI restrictions, a prohibition on all Russian air carriers and Russian registered aircraft (or aircraft owned, chartered or controlled by a Russian person) from EU airspace. Limited exemptions apply for emergency landings and licensing conditions exist for humanitarian purposes; and
• A prohibition on the management of reserves as well as the assets of the Central Bank of Russia or any person acting on behalf or at the direction of the same. A licensing condition exists where the transaction is necessary to ensure the financial stability of the EU or any Member State.

The EU has also suspended visa-free travel for holders of Russian diplomatic passports and visa facilitation arrangements for holders of service passports, and implemented measures to limit the sale of citizenship (so called “Golden Passports”).

Measures which have been announced but not yet implemented

As with the UK, the EU is designating Belarussian individuals who have facilitated the Ukraine crisis.

United States

Measures which have been implemented

On 21 February 2022, President Biden issued Executive Order imposing sanctions on the Donetsk and Luhansk separatist regions of Ukraine

On 21 February 2022, President Biden issued an Executive Order (EO) imposing comprehensive sanctions on the Donetsk and Luhansk regions of Ukraine (collectively, the Separatist Regions) to prohibit US persons and entities from new investment, trade, and “approval, financing, facilitation, or guarantee” of transactions related to or involving the Separatist Regions. In addition, the EO allows for sanctions designations of members of entities operating in the Separatist Regions and anyone providing material assistance or support to a designated party. These designations can include persons and entities located outside of the Separatist Regions.

Building on prior sanctions issued on April 15, 2021 through Executive Order 14024 (as more fully discussed in a previous client alert), and prohibiting participation in the primary market for Central Bank of Russia (CBR), National Wealth Fund of Russia (NWF), or the Ministry of Finance (MOF) ruble or non-ruble denominated bonds (as of June 14, 2021), under Directive 1 of E.O. 14024, on February 22, 2022, OFAC issued a revised Directive 1A. Directive 1A prohibits U.S. financial institutions (a term broadly defined) from participating, as of March 1, 2022, in secondary market transactions of ruble or non-ruble denominated bonds issued after March 1, 2022 by the CBR, NWF, or MOF.

On 22 February 2022, Secretary of the Treasury issued a determination that authorises sanctions against persons that operate or have operated in the Russian financial services sector

While E.O. 14024 targeted the technology sector and defense and related materiel sector, on 22 February 2022, the Secretary of the Treasury, in consultation with the Secretary of State, also issued a determination pursuant to EO 14024 that authorizes sanctions against persons that operate or have operated in the financial services sector of Russia.

A sector determination pursuant to EO 14024 does not automatically impose sanctions on all persons who operate or have operated in the sector; persons must be specifically designated pursuant to EO 14024 by the Secretary of the Treasury or by the Secretary of State (in consultation with each other). In practical effect, the financial sector determination significantly increases the risk of doing business with anyone in the financial services sector of Russia. US persons and entities will need to assess the risks of counterparty relationships and advise on strategies to mitigate risks of doing business with entities or individuals in the financial services sector of Russia that have not yet been designated.

Also on 22 February 2022, OFAC announced designations of an initial group of Russian banks, their subsidiaries, and other entities and individuals and issued related General Licenses

On February 22, OFAC designated Vnesheconombank (VEB), Promsvyazbank (PSB), 42 of their subsidiaries, and five Russian vessels owned by a designated subsidiary of PSB. In addition, OFAC also individually listed:

• Petr Fradkov, the Chairman and CEO of PSB
• Denis Bortnikov, Deputy President of VTB Bank and chairman of its Management Board (and son of Alessandro Bortnikov, Director of the Federal Security Service and permanent member of the Security Council of the Russian Federation)
• Vladimir Kiriyenko, CEO of VK Group (and son of Sergei Kiriyenko, First Deputy Chief of Staff to Putin).

As part of its implementation of this new round of sanctions, the Treasury Department also issued eight related General Licenses (GLs):

1. GL 2 permits certain transactions with VEB, or any entity VEB owns, ordinarily incident and necessary to the servicing of bonds issued before March 1, 2022 by the CBR, NWF, or MOF.
2. GL 3 permits a short 30-day wind-down for transaction ordinarily incident and necessary to the wind down of transactions involving VEB, or any entity it owns.
3. GL 4 provides for a short wind-down period for transactions with Nord Stream 2 AG.
4. GL 17 allows for a short-term 30-day wind-down of certain business activities in the Separatist Regions.
5. GL 18 allows for the export of certain food, medicine, medical devices, and other items related to the COVID-19 pandemic to the Separatist Regions.
6. GL 19 allows for transactions incident and necessary to a) the receipt or transmission of telecommunications (but not the provision, sale or lease of telecommunications equipment, technology, or transmission facilities) and b) the receipt or transmission of mail.
7. GL 20 allows for the conduct of official business of certain international organizations.
8. GL 21 allows for certain transactions ordinarily incident and necessary to the transfer of non-commercial personal remittances.
9. GL 22 allows for certain transactions ordinarily incident and necessary to the exportation or re-exportation to the Separatist Regions of services incident to certain personal communications over the Internet and exportation of certain software necessary to enable such permitted services.

On 24 February 2022, President Biden announced additional sanctions on the Russian financial and energy sectors, full sanctions on Belarusian elites, and dramatically expanded export controls on Russia and Russian state-owned companies

President Biden announced a new round of sanctions on 24 February 2022. The sanctions target Russia’s financial sector, energy sector, state-owned enterprises, associates of President Putin and their families, and Belarus. These actions affect Russia’s ten largest financial institutions, which hold nearly 80% of Russian banking sector assets, with varying sanctions, including full blocking sanctions, correspondent and payable-through account sanctions, and debt and equity restrictions.

The US also issued significant export restrictions of US technologies to Russia. However, several General Licenses were issued that at least currently permit certain activity by US persons, including some with Russia’s largest bank, Sberbank.

Financial and energy sector sanctions

The US targeted five major Russian banks and their subsidiaries with measures intended to sever these institutions from the US financial system and from access to and use of the US dollar.

• VTB Bank, Russia’s second largest, as well as Bank Otkritie, Sovcombank, and Novikombank have been added to OFAC’s Specially Designated Nationals List, prohibiting US persons from engaging in transactions or conducting business with these institutions and freezing their assets in the US.
• Directive 2 under Executive Order 14024 applies to Sberbank, Russia’s largest financial institution, and its subsidiaries as of the publication of this alert, but other institutions can be added. Effective 12:01 a.m. eastern daylight time on 26 March 2022, US financial institutions are prohibited from opening or maintaining a correspondent account or payable-through account, or processing transactions involving Sberbank and its 50% or more owned subsidiaries. If other Russian banks are designated under Directive 2, US financial institutions have a 30-day wind-down period from the date of the determination to cease opening or maintaining correspondent accounts or payable-through accounts or processing transactions for such institutions.

The US also issued General License 8 which authorizes through 12:01 a.m. Eastern Daylight Time, 24 June 2022, all transactions “related to energy” with Vnesheconombank, Otkritie, Sovcombank, Sberbank, and VTB Bank, and their subsidiaries. “Related to energy” is defined very broadly. This General License does not allow for the opening or maintaining of a correspondent account or payable-through account for or on behalf of any entity subject to Directive 2.

The US has also targeted Russia’s energy sector by designating Nord Stream 2 AG and its German CEO Matthias Warnig. General License 4, provides for a wind-down period for transactions involving Nord Stream AG that expires at 12:01 am Eastern Daylight Time, 2 March 2022.

Restrictions on new debt and equity of Russian state-owned enterprises

Directive 3 under Executive Order 14024 prohibits US persons from engaging in transactions for new debt of longer than 14 days maturity or new equity, issued on or after 12:01 a.m. eastern daylight time on 26 March 2022. As of the publication of this alert, 13 Russian entities have been designated under Directive 3 and added to the Non-SDN Menu-Based Sanctions List (NS-MBS List):

• Sberbank
• Alfa Bank
• Credit Bank of Moscow
• Gazprom
• Gazprombank
• Gazpromneft
• Transneft
• Rostelcom
• Rushydro
• Alrosa
• Sovcomflot
• Russian Railways
• Russian Agricultural Bank

The prohibitions in Directive 3 also apply to any designated entity’s 50% or more owned subsidiaries.

Full blocking sanctions imposed on Russian elites

In addition to targeting major Russian financial institutions and enterprises, the US also imposed full blocking sanctions against Russian elites, including the following individuals:

• Sergei Sergeevich Ivanov (son of Sergei Borisovich Ivanov)
• Andrey Patrushev (son of Nikolai Platonovich Patrushev)
• Andrey Sergevich Puchkov
• Ivan Igorevich Sechin (son of Igor Ivanovich Sechin)
• Yuriy Alekseyevich Soloviev
• Galina Olegovna Ulyutina
• Alexander Aleksandrovich Vedyakhin

Full blocking sanctions against Belarusian elites and enterprises

The US also imposed sanctions on significant elites and enterprises of Russian ally Belarus pursuant to Executive Order 14038. The targets of these full blocking sanctions include:

• Nine defense firms
• Two state-owned banks

• Belinvestbank
• Bank Dabrabyt

• Seven regime-connected individuals

A complete list of the individuals sanctioned in connection with these new Belarus sanctions is available on the OFAC website. In connection with these new Belarus sanctions, OFAC also issued General License 6, which pertains to official business of the United States Government, and General License 7, which addresses official business of international organizations, including the United Nations, World Bank Group, and others.

Dramatically expanded export controls on Russia and Russian state-owned companies

The Department of Commerce’s Bureau of Industry and Security (BIS) has expanded export controls to significantly restrict most exports, reexports, and transfers of US goods, software, and technology (collectively, “Items”) to Russia. The full text of the BIS rule is available here.

These changes became effective immediately upon their publication on 24 February 2022 with no provision for a sunset or wind-down period. Among the most important changes announced by BIS are:

• Greatly expanded export license requirements for exports, reexports, and transfers to Russia and Russian companies of a broad cross-section of Items subject to the Export Administration Regulations (EAR), including Items described under Categories 3 through 9 of the Commerce Control List (CCL) – a list of Items that includes products for the semiconductor, IT, data processing, telecommunications, healthcare, motor vehicle, marine, and aviation sectors. BIS will apply a licensing policy of denial to such license applications except in limited cases involving safety of flight, maritime safety, humanitarian needs, government space cooperation, civil telecommunications infrastructure, government-to-government activities and to support limited operations of partner companies in Russia.
• Additional restrictions on transactions with “military end users” and state-owned enterprises in Russia.
• Elimination of most license exceptions for exports and retransfers of Items subject to the EAR to Russia.
• New restrictions on key Russian state-owned enterprises and aerospace and defense companies that have been added to the EAR’s Entity List. Licenses are now required to export, reexport, or transfer virtually all Items subject to US export controls to such Entity List entities.
• Application of the EAR’s Foreign Direct Product Rule (FDPR) to Russia and Russian military end users inside and outside Russia. This change – which mirrors FDPR restrictions previously imposed only on specific companies – is highly significant because it means that the products of R&D facilities and factories in third countries may now require a license to send to customers in Russia if the products are based on or made with US technology, software, or equipment. In most cases, a license will also be required to sell or transfer such foreign-made items to Russian military end-users inside or outside Russia.
• A near-total ban on exports to the Donetsk People’s Republic and Luhansk People’s Republic except for food and medicine designated as EAR99 or software necessary to enable the exchange of personal communications over the Internet.

The new EAR requirements also signal that US allies will shortly be implementing similar controls on exports from their own jurisdictions. This is evident from the new rule’s exemption of export licensing requirements for exports from a list of US allies that are expected to impose equivalent controls.

The specific countries identified by BIS as eligible for such an exemption are Australia, Austria, Belgium, Bulgaria, Canada, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, New Zealand, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom. This list introduces a “Western bloc” group of countries somewhat reminiscent of the Cold-War era Coordinating Committee for Multilateral Export Controls (CoCom) group of countries that cooperated on export control policy vis-à-vis the Soviet Union.

On 25 February 2022, OFAC announced sanctions against Vladimir Putin and other senior Russian officials

On February 25, 2022, OFAC added the following Russian senior officials to its Specially Designated Nationals List, which prohibits US persons, including financial institutions, from engaging in transactions or conducting business with them and freezing their assets in the US:

• Vladimir Putin, President of the Russian Federation
• Sergei Lavrov, Foreign Minister
• Sergei Shoigu, Minister of Defense
• Valery Gerasimov, Chief of the General Staff of the Armed Forces

On 26 February 2022, the White House issued a Joint Statement on further restrictive economic measures concerning further anticipated measures, including related to the SWIFT system

As set out above, the US and its allies, including the United Kingdom, Canada, the European Union, and Japan, issued a Joint Statement on Further Restrictive Economic Measures on 26 February 2022 in which they announced that additional measures were forthcoming, including measures intended to cut off the Central Bank of Russia and other Russian financial institutions from the SWIFT system. At the time of publication of this alert, these measures have not yet been announced, but additional countries, including South Korea, have announced that they will join.

On 28 February 2022, OFAC announced further non-blocking restrictions on the Central Bank of Russia, Ministry of Finance and National Wealth Fund and the National Direct Investment Fund blocked

As the conflict in Ukraine entered its second week, the Department of State and Department of the Treasury announced new sanctions targeting the Russian financial sector under Executive Order 14024.

Secretary of State Anthony Blinken stated that these most recent measures are intended to “impair Russia’s ability to use its international reserves in ways that undermine the impact of our sanctions, as well as to prevent Russia from accessing its wealth fund for use in its ongoing war against Ukraine.”

These sanctions represent a significant escalation of the sanctions imposed on Russian financial institutions, which we described in prior client alerts published on 23 February and 25 February. They also follow additional sanctions, described below, announced late last week against senior officials of the Russian Federation, including Vladimir Putin.

Non-blocking restrictions of transactions with Russian government entities

OFAC imposed non-blocking restrictions of transactions with the following three Russian entities:

• the Central Bank of Russia
• the Ministry of Finance
• the National Wealth Fund

These entities were added to the Non-SDN Menu-Based Sanctions (NS-MBS) List pursuant to Directive 4 under Executive Order 14024, as a result of which US persons are prohibited from engaging in any transactions involving those entities, including any transfer of assets or any foreign exchange transaction for or on behalf of those entities.

New blocking sanctions announced against RDIF, its CEO, and management companies

OFAC imposed blocking sanctions on RDIF, a Russian sovereign wealth fund, which the Department of State characterized as “a known slush fund for President Putin and his inner circle.” The Treasury Department stated that RDIF has exposure to the US financial system and has been used “to raise funds abroad, including in the United States.”

Together with RDIF, OFAC also blocked two RDIF subsidiaries, Joint Stock Company Management Company of the Russian Direct Investments Fund and Limited Liability Company RVC Management Company, as well as RDIF’s CEO, Kirill Aleksandrovich Dmitriev.

Energy-related transactions

Blocked transactions with Russian financial institutions remain subject to an exception for “transactions related to energy,” pursuant to the newly issued General License 8A, which supersedes the previously issued General License 8, and limits such transactions to the following six Russian financial institutions:

• VEB Bank
• Bank Otkritie
• Sovcombank
• Sberbank
• VTB Bank; and
• the Central Bank of Russia.

Entities owned more than 50% or more by VEB Bank, Bank Otkritie, Sovcombank, Sberbank, and VTB Bank are also subject to General License 8A. As with General License 8, General License 8A expressly limits the time for this authorisation until 24 June 2022.

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¹ COUNCIL REGULATION (EU) 2022/259 of 23 February 2022 amending Regulation (EU) No 269/2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine.
² COUNCIL REGULATION (EU) 2022/263 of 23 February 2022 concerning restrictive measures in response to the recognition of the non-government controlled areas of the Donetsk and Luhansk oblasts of Ukraine and the ordering of Russian armed forces into those areas.
³ COUNCIL IMPLEMENTING REGULATIONS (EU) 2022/332 of 25 February 2022 implementing Regulation (EU) No 269/2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine.
⁴ COUNCIL REGULATION (EU) 2022/328 of 25 February 2022 amending Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia's actions destabilising the situation in Ukraine.
⁵ COUNCIL REGULATION (EU) 2022/334 of 28 February 2022 amending Council Regulation (EU) No. 833/2014 concerning restrictive measures in view of Russia’s actions destabilising the situation in Ukraine.
⁶ COUNCIL REGULATION (EU) 2022/336 of 28 February 2022 implementing Regulation (EU) No 269/2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine.