U.S. Announces Sanctions in Response to Putin's Action in Ukraine
Russian President Orders Troops into the Ukrainian Provinces of Donetsk and Luhansk
- The White House imposed new sanctions on Feb. 21, 2022, as a direct response to Russian President Vladmir Putin's breach of the Minsk agreements and threats to the stability, peace and territorial integrity of Ukraine.
- President Joe Biden previewed additional sanctions on Feb. 22, 2022, that may come into effect as soon as today or tomorrow.
In response to Russian President Vladimir Putin's decision to formally recognize the independence of, and send troops into, the Donbas region of Ukraine, in direct contravention of the Minsk agreements, the White House imposed new sanctions late Monday, Feb. 21, 2022, targeting certain activities and blocking property of persons and enterprises located in the two breakaway provinces, the so-called Donetsk People's Republic (DNR) and Luhansk People's Republic (LNR).1
As of Feb. 21, 2022, the following sanctions are in effect after being imposed through an Executive Order (EO) that prohibits:
- new investment in DNR or LNR by a U.S. person, wherever located
- the importation into the United States – directly or indirectly – of any goods, services or technology from DNR or LNR
- 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 DNR or LNR
- any approval, financing, facilitating or guarantee by a U.S. person, wherever located, of a transaction by a foreign (i.e., non-U.S.) person, if such a transaction would be prohibited if performed by a U.S. person or within the United States
Additionally, the EO blocks property of persons who led or were otherwise involved in the breakaway operations in DNR and LNR. Six general licenses were also issued to ensure humanitarian activities can continue2 and to provide a 30-day wind-down period through March 23, 2022, for U.S. persons to suspend sanctioned activities in DNR and LNR.3 Importantly, under the terms of the EO, the U.S. Department of the Treasury also has the authority to extend the prohibitions to additional jurisdictions as the situation in Ukraine further escalates.
Additional Sanctions Expected
President Joe Biden previewed additional sanctions on Feb. 22, 2022, that may come into effect as soon as today or tomorrow, including:
- full blocking sanctions against state development corporation VEB.RF and an unnamed military bank, suspected to be Promsvyazbank, which was sanctioned by the United Kingdom (U.K.) and appears in Sen. Bob Menendez's (D-N.J.) proposed Defending Ukraine Sovereignty Act of 2022
- prohibiting transactions involving the sovereign debt of the government of the Russian Federation
- sanctioning "Russian elites and [their] family members," a move likely intended to hamstring Putin's ability to access resources of Russian oligarchs living abroad, particularly in the U.K.
Biden's address made clear that the United States will continue to act defensively, militarily defend North Atlantic Treaty Organization (NATO) members' territory and stand in solidarity with the Ukrainian people. The president's remarks, however, clearly left room for a diplomatic solution.
So far, Putin has not been personally sanctioned, an option telegraphed by the White House and the U.S. Senate in recent weeks. It remains to be seen whether any forthcoming sanction by the U.S. would block his property.
The EO and anticipated sanctions are in unison with a U.S. Senate resolution that passed with overwhelming bipartisan support on Feb. 17, 2022. The resolution reaffirms the U.S. government's unwavering support and commitment to preserving Ukrainian sovereignty and geographical integrity and denounced the Russian Federation's continuous troop build-up, the annexation of Crimea and the ongoing proxy war in eastern Ukraine, which has resulted in at least 14,000 Ukrainian deaths and millions of Ukrainians being displaced.
Separately on Feb. 22, 2022, the European Union (EU) unveiled its sanctions package, targeting members of the Russian Duma as well as other individuals and entities associated with or otherwise linked to Russian action in the separatist regions. In parallel, Germany announced it is suspending authorization of the Nord Stream 2 pipeline, and the U.K. unveiled its sanctions package, targeting five Russian banks (Rossiya, IS Bank, GENBANK, Promsvyazbank and the Black Sea Bank) and Gennady Timchenko and two other Russian oligarchs.
For companies operating in the region, it will be important to review existing compliance policies and procedures to ensure business practices align with the new restrictions. A key focus will be winding-down any prohibited activities by March 23, 2022, and designing internal controls to ensure U.S. persons are not engaging in or facilitating any prohibited activities associated with DNR or LNR, or dealing with persons whose property has already been or will be blocked as a result of the new sanctions.
Holland & Knight continues to closely follow developments in this area and assess impact on U.S. and non-U.S. businesses operating in Eastern Europe generally and the Russian Federation and Ukraine specifically. Reach out to the authors or another member of the firm's International Trade Group to understand impact on your business.
1 U.S. Department of the Treasury, 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.
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