President Biden Gets Tough on Russia with New Executive Order

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Holland & Hart - International Compliance Blog

President Biden issued yesterday an Executive Order imposing sweeping sanctions on Russia in response to Russia’s cyberespionage campaign against the United States, efforts to influence the 2020 presidential election, its ongoing occupation in Crimea, and other malign actions. The Executive Order (EO) by President Biden implementing additional Russian sanctions builds a foundation for comprehensive economic sanctions. Although the EO still follows a “designated persons/entities” approach rather than a country-wide embargo approach such as the Iranian sanctions, the breadth of categories of Russian conduct and transactions subject to sanction and “secondary sanction” is potentially immense. A wise and prudent U.S. business or investor may ponder and ponder again — at least in the short run — any new or expanded dealings with Russia, particularly (1) any dealings with Russian individuals and entities associated with the Russian government even if not owned or controlled by the Russian government and (2) any dealings without broadly worded contract termination provisions to allow immediate termination of contractual deliveries and obligations (including warranty coverage) in the event that sanctions preclude or may preclude contractual obligations.

Although some may argue that this EO and sanctions program is long overdue, there is no doubt in the language of this EO that President Biden has served notice that any prior “tepid responses” to Russian activities are at an end. In particular, the timing of this EO with the large buildup of military armaments and resources by Russia on the Ukrainian border suggests that a Russian military incursion into Ukrainian territory will see U.S. sanctions which, in effect, may resemble the Iranian, Syrian or Crimean embargoes. In summary, this Executive Order, on paper, reflects the most broadly worded “designated persons/entities” EO or OFAC sanctions program to date by a U.S. President.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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