U.S. Sanctions on Russia: Treasury Department Rolls Out Spectrum of New Sanctions

The Treasury Department announced today a broad spectrum of new sanctions against Russian companies and government officials. The U.S. sanctions announced today are reportedly a response to a series of actions by Russia that the Biden Administration views as escalatory and harmful to U.S. national interests. These include the Russian attributed SolarWinds cyber-compromise, Russian efforts to target U.S. military forces, and interference with the U.S. election process by a coordinated campaign of “multiple Russian officials, proxies, and intelligence agencies.”

The White House also announced new authorities under an Executive Order, which directs the Office of Foreign Assets Control (OFAC) to issue a directive to prohibit U.S. financial institutions from participating in the ruble or non-ruble market for bonds issued by the Russian Federation’s Central Bank and several other institutions (applicable to those issues after June 14, 2021).

All property and interests in property of any blocked persons who are subject to U.S. jurisdiction must be blocked, and U.S. persons are generally prohibited from engaging in transactions with blocked parties. Many of the sanctioned Russian companies operate in often murky corporate environments, a complicating factor when assessing whether other third parties may be tied to these new blocked entities.

The complete list of new blocked entities (Specially Designated Nationals or SDNs) is available on the Treasury Department website at https://home.treasury.gov/news/press-releases/jy0127.   The new designations in particular target a slew of technology companies that are connected to supporting the Russian intelligence services.

Complicating these requirements is the standard application of OFAC’s 50-percent rule, which acts to block any entities owned 50 percent or more by one of more SDNs. We recommend companies review their OFAC compliance policies periodically and do so with the overall objectives of OFAC’ Framework for OFAC Compliance available at https://home.treasury.gov/news/press-releases/sm680.

Ice Miller has extensive experience assisting companies to navigate and comply with U.S. export controls and OFAC sanctions. Guillermo Christensen, office managing partner of the Firm’s Washington DC office, regularly advises U.S. and international companies in complying with OFAC regulations, seeking licensing from OFAC, and dealing with regulatory and criminal matters. Guillermo is a former CIA officer with national security experience in the intelligence community including work in interagency teams involving OFAC, Defense Department, and State Department.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.