Client Alert 22 Feb. 2022

President Joseph Biden Issues Executive Order Imposing U.S. Sanctions Against Russia Backed Regions in Eastern Ukraine

The full alert is available for download with footnotes here.

On February 21, 2022, the U.S. President issued an Executive Order (“E.O.”) titled “Blocking Property of Certain Persons and Prohibiting Certain Transactions With Respect to Continued Russian Efforts to Undermine the Sovereignty and Territorial Integrity of Ukraine.” The E.O. is a swift response to a decree issued by the Kremlin on the same day recognizing the sovereignty of two Russia-backed regions in eastern Ukraine: the Donetsk and Luhansk People’s Republics. Russian President Vladimir Putin also ordered Russia’s defense minister to deploy troops in the two regions. The recent events represent a significant escalation of Ukraine-Russia tensions.

a. The Executive Order

The E.O. was issued following Russia’s recognition of the Donetsk People’s Republic (“DNR”) and Luhansk People’s Republic (“LPR”) regions of Ukraine (together, the “Covered Regions”) as sovereign territories. The E.O. notes that Russia’s recognition contradicts its commitments under existing agreements, and further threatens the peace, stability, sovereignty, and territorial integrity of Ukraine, and thereby constitutes an “unusual and extraordinary threat to the national security and foreign policy of the United States.”

The E.O. prohibits investment and trade by U.S. persons to, from, or in the Covered Regions. These sanctions are very similar to the sanctions imposed on Crimea in 2014.

The E.O. blocks all property and interests in property that are in the United States or that come within the possession or control of a U.S. person where that property belongs to any person or entity designated by the U.S. Secretary of Treasury, in consultation with the Secretary of State:

  • to operate or have operated in the Covered Regions since the date of the E.O.;
  • to be or to have been since the date of E.O. a leader, official, senior executive officer or member of the board of directors of an entity operating in the Covered Regions;
  • to be owned or controlled by, or to 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 E.O.;
  • to have materially assisted, sponsored or provided financial, material or technological support for, or goods and services to or in support of, any person whose property and interests in property has been blocked pursuant to the E.O.

In addition, the E.O. prohibits any “approval, financing, facilitation, or guarantee” by a U.S. person of a transaction performed by a foreign person, if that transaction would be prohibited to a U.S. person.

The E.O. further prohibits any transaction that evades or avoids the prohibitions of the E.O., as well as any conspiracy formed to violate any such prohibition. Moreover, the E.O. imposes a ban on entry into the United States of persons designated under the E.O.

In a statement issued by White House Press Secretary Jen Psaki on February 21, 2022, the White House announced that “these measures are separate from and would be in addition to the swift and severe economic measures we have been preparing in coordination with Allies and partners should Russia further invade Ukraine.” The statement went on to note that “[w]e are continuing to closely consult with Allies and partners, including Ukraine, on next steps and on Russia’s ongoing escalation along the border with Ukraine.”

b. General Licenses

In parallel with the E.O., the U.S. Department of Treasury's Office of Foreign Assets Control (“OFAC”) issued five General Licenses under its Ukraine program. A general license authorizes a particular type of transaction for a class of persons without the need to apply for a license from OFAC.

  • General License 17 authorizes “all transactions that are ordinarily incident and necessary to the wind down of transactions” involving the Covered Regions, “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 Covered Regions, and “the winding down of operations, contracts or other agreements in effect prior to February 21, 2022 involving the exportation, reexportation, sale, or supply of goods, services, or technology to, or importation of any goods, services, or technology from,” the Covered Regions, through 12:01 a.m. eastern daylight time, March 23, 2022.
  • General License 18 authorizes the exportation or reexportation of agricultural commodities, including fertilizers, medicine, medical devices, replacement parts and components for medical devices, and software updates for medical devices to the Covered Regions.
  • General License 19 authorizes transactions related to telecommunications and mail in the Covered Regions, but does not authorize the provision, sale, or lease of telecommunications equipment or technology or telecommunications transmission facilities (such as satellite or terrestrial network activity).
  • General License 20 authorizes the official business of certain international organizations in the Covered Regions, including the United Nations (UN); the International Centre for Settlement of Investment Disputes (ICSID); the Multilateral Investment Guarantee Agency (MIGA); the African Development Bank Group; the Asian Development Bank; the European Bank for Reconstruction and Development; the Inter-American Development Bank Group (IDB Group); the International Committee of the Red Cross; and the Organization for Security and Cooperation in Europe.
  • General License 21 authorizes noncommercial, personal remittances, and the operation of accounts in the Covered Regions. The General License does not authorize charitable donations of funds to or for the benefit of an entity, or funds transfers for use in supporting or operating a business, including a family-owned business.
  • General License 22 authorizes services ordinarily incident and necessary to the exchange of personal communications over the internet, such as instant messaging, chat and email, social networking, sharing of photos and movies, web browsing, and blogging in the Covered Regions.

We expect further developments in U.S. sanctions.

Attorney advertising. The material contained in this Client Alert is only a general review of the subjects covered and does not constitute legal advice. No legal or business decision should be based on its contents.

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