Since Russia’s 2022 invasion of Ukraine, the United States has imposed significant sanctions targeting Russia, though it only imposed comprehensive sanctions on areas of Ukraine occupied by Russia

Comprehensive Sanctions – Russian-Occupied Ukraine

Since December 2014, the United States has imposed an embargo on the Crimea region of Ukraine through Executive Order 13685, which prohibits, among other things:

• the export, reexport, sale or supply, directly or indirectly, from the US or by a US person, wherever located, of any goods, technology, or services to the Crimea region of Ukraine; and
• the facilitation by a US person of transactions by a foreign person that the US person would otherwise be prohibited from engaging in under the Executive Order.¹

In February 2022, the United States expanded its embargo to include the so-called Donetsk People’s Republic (the “DNR”) and the so-called Luhansk People’s Republic (the “LNR”).  Executive Order 14065 prohibits, among other things:

• new investment in the DNR or LNR;
• the importation of goods, services, or technology into the US from the DNR or LNR; and
• the export, reexport, sale or supply, directly or indirectly, from the US or by a US person, wherever located, of any goods, technology, or services to the DNR or LNR.²

Sectoral Sanctions

Pursuant to Executive Order 13662, OFAC issued Directives 1, 2, 3, and 4 implementing sectoral sanctions against entities identified on the Sectoral Sanctions Identification List (SSI List) operating in certain sectors of the Russian economy such as financial services, energy, metals and mining, engineering and defense and related material.³ The SSI List is available here.

• Directives 1, 2, and 3 contain prohibitions on dealing in new debt with a maturity longer than that defined in the directive or new equity on behalf of designated Russian entities operating in Russia’s financial, energy, and defense sectors.
• Directive 4 prohibits the exportation or reexportation, directly or indirectly, by a US person of goods, services, or technology in support of deepwater, Arctic offshore, or shale projects, including new projects outside of Russia where an entity subject to Directive 4 has an ownership interest of 33% or more.

Recent amendments tightened the prohibitions for US persons engaging in certain transactions with SSIs.⁴  Companies should be aware that the expanding use of the SSI List requires scrutiny of payment terms with SSI entities.

Russian Crude Oil and Petroleum Product Price Cap

The United States, in coordination with the G7 and its partners, has implemented a “price cap” on Russian crude oil and petroleum products by prohibiting member nation service providers, such as insurers and shippers, from providing such services unless the Russian crude oil or petroleum products involved were sold below the relevant price cap.

New Investment Restrictions

On March 8, 2022, the United States prohibited new investment in the energy sector of Russia through Executive Order 14066.  Less than a month later, on April 6, Executive Order 14071 expanded this restriction by prohibiting US persons from making any new investments in Russia.  OFAC has issued guidance clarifying which activities constitute new investment in Russia, including:

• the acquisition of real estate for commercial purposes;

• entering into an agreement requiring the commitment of capital, including the formation of joint ventures; and

• the acquisition of rights to natural resources or exploration thereof.

Export and Import Restrictions

The United States has imposed restrictions on the export of certain US-origin goods and services to Russia and the import of certain Russia-origin goods.

Export Bans.  Executive Order 14068 prohibits the exportation from the United States or by a US person of luxury goods and US dollar banknotes to Russia.  Executive Order 14071 authorizes the Secretary of the Treasury to identify categories of services that may be prohibited to export to Russia; OFAC has identified 13 such categories, including accounting and engineering services.  The Russian oil price cap, discussed separately, was implemented in the United States as a ban on the export of relevant services.

Import Bans.  Executive Order 14066 prohibits the importation into the United States of certain Russia-origin energy products, including crude oil, LNG, and coal.  Executive Order 14068 prohibits the importation into the United States of Russian-origin fish and seafood, alcohol, and diamonds, among other things.

Debt, Equity, and other Financial Restrictions

The United States has issued several Directives pursuant to Executive Order 14024 restricting the Government of Russia, key Russian banks, and key Russian companies’ access to US markets and the US financial system.

• Directive 1 (as amended) prohibits US financial institutions from participating in the primary or secondary markets for bonds issued by, or lending funds to, the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation.

• Directive 2 prohibits US financial institutions from opening or maintaining correspondent or payable-through accounts, or processing transactions involving, key Russian financial institutions, including Sberbank.

• Directive 3 prohibits US persons from engaging in transactions involving new debt or equity of major Russian companies, including Gazprom, Sovcomflot, and Alrosa.

• Directive 4 (as amended) prohibits US person from engaging in any transactions involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation.

Secondary Sanctions

US law mandates the imposition of sanctions against persons that the President determines have knowingly facilitated a “significant transaction” for or on behalf of any person subject to sanctions imposed by the United States with respect to the Russian Federation, including for or on behalf of a Russian SDN.⁵  Further, Executive Order 14114 authorizes OFAC to impose secondary sanctions on foreign financial institutions that conduct or facilitate significant transactions for or on behalf of any person designated pursuant to Executive Order 14024.⁶

US law further mandates that the President impose sanctions on persons whom the President determines to have knowingly engaged in a significant transaction with a person involved in the intelligence or defense sectors of the Russian government.  The US Department of State published the List Regarding the Defense Sector of the Government of the Russian Federation, available here, of persons determined to be part of, or operating for or on behalf of, the defense or intelligence sectors of the Government of the Russian Federation.⁷

Finally, US law mandates that the President impose sanctions on persons the President determines to have knowingly made a significant investment that has a fair market value of $1,000,000 or more, or a series of investments that have an aggregate fair market value of $5,000,000 or more over 12 months, and that (1) directly and significantly contribute to Russia’s ability to construct energy export pipeline projects initiated on or before August 2, 2017, or that (2) provide significant goods, services, technology, information or support to directly and significantly facilitate the maintenance or expansion of the construction, modernization, or repair of such energy export pipelines.⁸