Here are five things that happened this week in the world of economic sanctions that I think you should know about.
This week’s briefing covers the weeks ending 18 and 25 February 2022.
- The US Treasury Department’s Office of Foreign Assets Control (OFAC) issued Directive 4 under Executive Order 14024 prohibiting US persons from transacting with Russia’s Central Bank, National Wealth Fund, and Ministry of Finance. The EU prohibited “transactions related to the management of reserves as well as of assets of the Central Bank of Russia” and persons acting on behalf of, or at the direction of, the bank. Canada also barred its banks from transacting with Russia’s Central Bank and Russian sovereign wealth funds. Other members of the G7 are expected to impose similar restrictions. Earlier, the European Commission, France, Germany, Italy, the United Kingdom, Canada, and the United States issued a joint statement announcing that “selected” Russian banks will lose access to the SWIFT payment network.
- President Biden issued Executive Order 14065 imposing comprehensive sanctions on the Donetsk People’s Republic (DNR) and the Luhansk People’s Republic (LNR) and any other areas in Ukraine that may be designated later. (Note: the DNR and the LNR are not coterminous with the Donetsk and Luhansk oblasts.) OFAC followed with a series of sanctions including: (i) blocking sanctions on several Russian financial institutions, individuals, and entities identified as Specially Designated Nationals (SDNs) (including Nord Stream 2 AG, Vladimir Putin, and Sergei Lavrov); (ii) sectoral-style sanctions under a new Directive 3 which prohibits US persons from dealing in new equity and new debt of longer than 14 days of listed entities; and (iii) correspondent and payable-through account sanctions on Sberbank and 25 subsidiaries. (Find the OFAC announcements here, here, here, here, and here.) Wind-down periods and general licenses apply to some activities. The US Commerce Department’s Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR) to impose broad new export controls on a wide range of items, including new restrictions on military end users in Russia.
- The EU issued several updates to its Russia/Ukraine-related regulations imposing asset freezes on hundreds of individuals and entities, sectoral sanctions, and trade restrictions on the DNR and the LNR. The EU also sanctioned several Russian banks, Vladimir Putin, Sergei Lavrov, and members of Russia’s National Security Council. New export controls will restrict transfers of certain goods and technology from the EU to Russia for use in strategic sectors, including energy and aviation, among others. (For a summary and list of EU regulations, see my colleagues’ blog posts here and here.) Switzerland announced it would also adopt the EU sanctions packages.
- The UK imposed asset freezes on numerous individuals (also including Putin and Lavrov), entities, and banks, and announced plans to adopt legislation to expand sanctions on dozens of targets and impose trade restrictions on the DNR and the LNR, among other tough measures. (For a summary of the first two tranches of UK sanctions and planned legislation, see my colleague’s blog posts here and here.)
- Canada joined other nations in imposing asset freezes on numerous individuals, banks, and entities and trade restrictions on the DNR and the LNR. Australia did the same. Both countries will sanction Putin and Lavrov, among other officials. Japan announced it will sanction three Russian banks and various officials. Singapore and South Korea announced sanctions.
To recap: three permanent members of the UN Security Council (the United States, the UK, and France) plus the EU and Switzerland, among others, are laying down punishing sanctions against another permanent member (Russia), with the fifth one (China) caught in the middle. I try to resist hyperbole, but this is the biggest moment for sanctions since the Megarian Decree. New rules are coming out in waves. Some are effective immediately, others will take time. There are differences between regimes. Sanctions practitioners will need to stay on top of them to guide their organizations. No doubt many of you reading this are sorting through a mountain of name screening alerts and making tough decisions. Some activities remain permissible; others will need to be wound down in short order. Hang in there, everyone.
The “Top-5” has always been about sharing information with the global community of practitioners who deal with these issues. Thanks to everyone who has reached out with tips and insights. No doubt I missed some important updates above. For more, see my team’s blog and Russia sanctions resource center. Feel free to post yours in the comments.
In other news, OFAC issued a new general license authorizing certain transactions with governing institutions in Afghanistan that would otherwise be prohibited by OFAC’s terrorism-related sanctions. The license, which has exceptions (including on luxury goods), is meant to clear up questions about transacting with the Government of Afghanistan, including government employees who are not members of the Taliban or the Haqqani Network. OFAC also issued several new FAQs here.