February 23, 2022

Russian Sanctions and Export Controls Update: The First Tranche

Less than 24 hours after issuing an Executive Order imposing new sanctions and export controls in response to Russia’s formal recognition of the so-called Donetsk People’s Republic (DNR) and Luhansk People’s Republic (LNR) regions of Ukraine, President Biden announced what he described as the “first tranche” of broader sanctions targeting Russian individuals and entities. 

The new sanctions are being implemented in coordination with the European Union, United Kingdom, Canada, Japan and Australia, all of whom announced similar measures.     

As detailed in a White House Fact Sheet and an OFAC press release following the announcement, the new U.S. sanctions are divided into two categories: Blocking or List-Based Sanctions and Sectoral or Transactions Based Sanctions.

Blocking or List-Based Sanctions

OFAC designated the following entities and individuals to its Specially Designated Nationals and Blocked Persons List (SDN List): 

  • Financial Institutions
    • Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank (VEB) and 25 of its subsidiaries. According to the White House, VEB is the fifth-largest Russian financial firm and holds more than $50 billion in assets.    
    • Promsvyazbank Public Joint Stock Company (PSB) and 17 of its subsidiaries. According to the White House, PSB holds roughly $35 billion in assets and finances the activities of the Russian military.
  • “Elites and Families Close to” Russian President Vladimir Putin
    • Aleksandr Vasilievich Bortnikov (Director of the Federal Security Service of Russia and a permanent member of the Security Council of the Russia) 
    • Denis Aleksandrovich Bortnikov (Deputy President of Russian state-owned financial institution VTB Bank Public Joint Stock Company and a Chairman of the VTB Bank Management Board)
    • Petr Mikhailovich Fradkov (Chairman and CEO of PSB) 
    • Sergei Vladilenovich Kiriyenko (First Deputy Chief of Staff of the Presidential Office) 
    • Vladimir Sergeevich Kiriyenko (CEO of VK Group, the parent company of Russian social media platform VKontakte)

Per the new blocking sanctions, all property and interests in property of all listed persons or entities that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC.

It is critical to note that, even if not identified on the SDN List, the new blocking sanctions also apply to entities owned 50% or more, directly or indirectly, by VEB, PSB or one of the individuals listed above. Identifying information on the listed individuals and entities can be found here

Sectoral or Transaction-Based Sanctions 

Aside from the blocking sanctions described above, OFAC also issued a directive that expands an existing directive (Directive 1 under E.O. 14024) that prohibits U.S. financial institutions from participating in the primary market for ruble or non-ruble denominated bonds (i.e., foreign sovereign debt) issued by, or the lending of ruble or non-ruble denominated 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 (Bond Entities). Specifically, the new directive extends existing prohibitions to cover participation in the secondary market for bonds issued after March 1, 2022 by the Bond Entities. According to Treasury, such measures are aimed at “further cutting Russia off from sources of revenue to fund its government or President Putin’s priorities, including his further invasion into Ukraine.”

In conjunction with the newly-announced sanctions, OFAC also issued general licenses authorizing certain affected transactions, including the winding down of investments involving VEB, as well as VEB’s servicing of sovereign debt.

Looking Ahead

While announcing these new measures, President Biden warned that “if Russia goes further with this invasion” the U.S. and its western allies “stand prepared to go further.” This message was underscored by a senior Biden administration official, who warned during a press call that if a Russian invasion of Ukraine proceeds, “[n]o Russian financial institution is safe[,]” adding that the U.S. stands “ready to press a button to take further action on the very largest Russian financial institutions, including Sperbank and VTB,” which, according to the White House, collectively hold nearly $750 billion in assets.

Please note that we’ll continue to closely monitor this situation and provide timely updates, as warranted. In the meantime, please do not hesitate to reach out to a member of the Faegre Drinker customs and international trade team if you have any questions.

Related Industries

The Faegre Baker Daniels website uses cookies to make your browsing experience as useful as possible. In order to have the full site experience, keep cookies enabled on your web browser. By browsing our site with cookies enabled, you are agreeing to their use. Review Faegre Baker Daniels' cookies information for more details.