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New Sanctions Arising from Ukrainian Crisis Are Limited to Certain Individuals

March 18, 2014

 

In a new step toward making threatened economic sanctions concrete, President Obama has responded to the unfolding crisis in Ukraine by issuing an Executive Order freezing the assets within U.S. jurisdiction and barring entry into the United States of seven named senior Russian government officials. “Blocking Property of Additional Persons Contributing to the Situation in Ukraine” (March 17, 2014). The order builds upon Executive Order 13660, “Blocking Property of Certain Persons Contributing to the Situation in Ukraine,” which was issued on March 6, 2014. The Department of the Treasury previously named four Ukrainian individuals, including former President of Ukraine Viktor Yanukovych, as Specially Designated Nationals (SDNs) under that Order. The European Union and Canada also announced similar actions, with 21 Russian and Ukrainian individuals now subject to the EU’s asset freeze.

In addition to targeting specific officials, the Executive Order establishes a framework for imposing an asset freeze and travel sanctions against other persons who may be subsequently designated as SDNs. Persons potentially subject to such designations include Russian government officials, as well as those of Russia’s central bank, and individuals who operate in the Russian defense industry. In addition, SDNs may include entities owned or controlled by such persons, and others who materially assist, sponsor, or provide financial, material, or technological support for, or goods or services to, such persons.

The Implications

U.S. companies may continue to pursue their business interests in Russia and Ukraine. U.S. persons are prohibited from engaging in dealings with blocked persons, however, and so for U.S. companies operating in Russia and Ukraine, enhanced counterparty due diligence would be prudent. So far, the Obama Administration is taking a highly targeted approach to the use of economic sanctions, one coordinated with allies and focusing on senior officials and their supporters, as well as on military aid for separatists. The sanctions do not impose broad restrictions on doing business in Russia or Ukraine, and there appears to be little immediate prospect that the President will pursue a broader sanctions program targeting the Government of Russia or trade in the region. In its press release accompanying the Executive Order, the White House stated that the current purpose of the Order is to identify and target the personal assets of non-governmental individuals “who use their resources or influence to support or act on behalf of senior Russian officials,” not the companies that those individuals “may manage on behalf of the Russian state.” This distinction is doubtless of particular importance to customers of Gazprom in Europe and other state-owned enterprises, but it is a distinction that may become less reassuring if the Treasury Department begins to name influential Russian business executives to the SDN list, potentially bringing entities in which they have an interest and transactions with enterprises they control within the broad sweep of the U.S. blocking order.

For questions or additional information, please contact Ted Kassinger at (202) 383-5170 or tkassinger@omm.com, Greta Lichtenbaum at (202) 383-5249 or glichtenbaum@omm.com, and Lauren Sun at (202) 383-5294 or lsun@omm.com.


This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Theodore Kassinger, an O'Melveny partner licensed to practice law in the District of Columbia and Georgia, Greta Lichtenbaum, an O'Melveny partner licensed to practice law in the District of Columbia, and Lauren Sun, an O'Melveny counsel licensed to practice law in California and the District of Columbia, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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