Tightening Sanctions on Russia
The White House has announced it is imposing a new round of “severe and immediate sanctions” on Russia. The announcement states the United States is taking this action together with its partners in the G7 and the European Union. Following this announcement, US President Joseph Biden signed an executive order on April 6, expanding the sanctions regime on Russia in two key ways:
- Prohibiting any new investment in the Russian Federation by a United States person.
- Prohibiting the “exportation, re-exportation, sale, or supply, directly or indirectly,” of any category of services and products, as may be determined by the Secretary of the Treasury, to any person in Russia.
Carrying out this executive order requires the Department of the Treasury to issue implementation instructions. One can assume these instructions will be issued within the coming days. The instructions will clarify the definition of the term “new investments”. (The executive order already clarifies that companies may honor contracts that came into effect prior to the executive order’s publication.) Additionally, the categories of products and services to be banned for export to Russia have not yet been defined. We will update you upon the release of the precise implementation instructions.
Nevertheless, we recommend that clients subject to these sanctions already start to make preparations, and that they be particularly careful about new engagements with Russia.
Furthermore, although the executive order applies only to US legal entities at the moment, we call your attention to the following:
a. The EU, the UK, and additional countries can be expected to impose similar bans on investments in Russia and on exports to it in the near future.
b. The executive order prohibits US entities from providing assistance in any way whatsoever (including through loans, financing, insurance, guarantees, etc.) to investments in Russia or to prohibited export transactions, even by non-US entities.
c. Many investment contracts with investors from the US contain an undertaking to honor the US sanctions, even if the company is not formally subject to them.
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We are happy to advise you on this matter and on any other relevant issue arising from the subject.