U.S. issues new sanctions in response to the Russian Federation’s formal recognition of two new independent states in Eastern Ukraine

The U.S. is indicating that “these measures are separate from and would be in addition to” further sanctions that are being prepared and could be deployed as early as later today if the situation escalates.

Similar in nature to the territory-wide sanctions previously imposed targeting Crimea, the Feb 21 EO imposes territory-wide sanctions targeting the DNR and LNR regions of Ukraine. Specifically, the EO prohibits:

i. new investment in the DNR or LNR regions of Ukraine by a U.S. person, which is defined to mean any U.S. citizen, lawful permanent resident, entity organized under the laws of the U.S. or any jurisdiction within the U.S. (including foreign branches), or any person in the U.S.;

ii. the importation, directly or indirectly, into the U.S., of any goods, services, or technology from the DNR or LNR regions of Ukraine;

iii. the exportation, re-exportation, sale, or supply, directly or indirectly, from the U.S. or by a U.S. person, of any goods, services, or technology to the DNR or LNR regions of Ukraine; and

iv. any approval, financing, facilitation, or guarantee by a U.S. person of a transaction by a non-U.S. person that would be prohibited by the EO if performed by a U.S. person or within the U.S..

As a result, steps should be taken to add the DNR and LNR regions to sanctions screening filters.

The Feb 21 EO also authorizes the Secretary of the Treasury, in consultation with the Secretary of State, to impose blocking sanctions on any person determined to:

i. operate or have operated in the DNR or LNR regions of Ukraine;

ii. be a leader, official, senior executive officer, or member of the board of directors of an entity operating in the DNR or LNR regions of Ukraine;

iii. be owned or controlled by, or have acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to the EO; or

iv. have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, any person whose property and interests in property are blocked pursuant to the EO.

Market participants should remain alert for potential sanctions imposition in the coming weeks and months of parties that continue to operate in the DNR or LNR regions of Ukraine following the expiration of the wind-down license (detailed below).

In connection with the Feb 21 EO, the Treasury Department issued six General Licenses: a 30-day wind-down license, and five additional licenses designed to ensure that humanitarian and other related activity in the DNR and LNR regions of Ukraine can continue.

• General License 17—a 30-day wind-down license authorizing all transactions prohibited by the Feb 21 EO that are ordinarily incident and necessary to the wind down of transactions involving the DNR or LNR regions of Ukraine, including the divestiture or transfer to a non-U.S. person of a U.S. person’s share of ownership in any pre-February 21, 2022 investment located in the DNR or LNR regions of Ukraine, and the winding down of operations, contracts, or other agreements in effect prior to February 21, 2022 involving the exportation, re-exportation, sale, or supply of goods, services, or technology to, or importation of any goods, services, or technology from, the DNR or LNR regions of Ukraine through 12:01a.m. Eastern Daylight Time, March 23, 2022. General License 17 does not authorize any transactions involving any person blocked pursuant to the Feb 21 EO unless separately authorized;
• General License 18—authorizing the exportation or re-exportation of food, medicine, and medical devices;
• General License 19—authorizing transactions related to telecommunications and mail;
• General License 20—authorizing the official business of certain international humanitarian organizations;
• General License 21—authorizing noncommercial, personal remittances and the operation of accounts;
• General License 22—authorizing the exportation of certain services and software incident to internet-based communications.

The various General Licenses should be reviewed carefully to assess the specific scopes of each license. In particular, efforts should be taken to accomplish all necessary activities that would be prohibited by the Feb 21 EO before the expiration of General License 17 on March 23, 2022.

A&O’s Global Sanctions Group is tracking these developments closely. We will provide further updates on related developments, including those in and actions by the EU, the UK, the Russian Federation and other key players as this situation evolves.

For more information please contact the authors (related people) or your usual contact within our Global Sanctions Group.