Primary Sanctions – Crimea Embargo

Executive Order 13685, 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

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.² 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.

Pursuant to Executive Order 14024, OFAC issued an additional directive which generally prohibits U.S. financial institutions from participating in the primary market for ruble- or non-ruble-denominated bonds issued after June 14, 2021 by the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation, and from lending ruble- or non-ruble-denominated funds to these three entities.  The directive expands upon existing restrictions on U.S. financial institutions dealing in the primary market for non-ruble-denominated Russian sovereign debt that have been in place since August 2019 in response to the poisoning of Sergei Skripal.  Notably, the directive does not prohibit U.S. financial institutions from dealing in Russian sovereign debt on the secondary market.

Recent amendments tightened the prohibitions for US persons engaging in certain transactions with SSIs.³  Companies should be aware that the expanding use of the SSI List requires scrutiny of payment terms with SSI entities.

Secondary Sanctions

The Countering America’s Adversaries Through Sanctions Act of 2017 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.⁴

CAATSA 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.⁵

Finally, CAATSA 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.⁶