While the Biden Administration desires a “stable and predictable” relationship with Russia, it has now made it clear that it will take “actions to impose costs on Russia for actions by its government and intelligence services against US sovereignty and interests.”1 Thus, on April 15, 2021, the United States announced a series of sanctions actions against the Russian government and businesses on the basis of its finding that Russia had engaged in a series of “harmful foreign activities,” including, among others, interference in US elections and engagement in broad-scope malicious cyber activities against the United States and its allies.
As detailed below, the April 15, 2021 US actions are as follows:
In addition to expelling US diplomats, Russia has also retaliated against the US actions by adding eight (8) US officials to its sanctions list (including Attorney General Merrick Garland, FBI Director Christopher Wray, Director of National Intelligence Avril Haines, and Domestic Policy Adviser Susan Rice) and restricting US NGO activity in Russia. Meanwhile, it is anticipated that a US-Russian summit will be held, given President Biden’s initial offer and press reports suggesting a positive response to the US offer from Russia.
Sanctions imposed based on "Pernicious Activities"
The Executive Order authorizes Treasury, in consultation with the Secretary of State (State) and the Attorney General, to impose blocking sanctions against persons determined to:
(A) “malicious cyber-enabled activities”
(B) election interference in the US or other foreign governments
(C) the undermining of democratic processes or institutions in the US or abroad
(D) “transnational corruption”
(E) assassination of or harm to US persons or nationals of US allies
(F) the undermining of peace and stability of the US and its allies and partners
(G) circumvention of US sanctions, including through digital currencies
The Executive Order also identifies a wide range of persons affiliated with the Russian government or entities designated for engaging in covered malicious activities, including:
(B) an entity that has, or whose members have engaged in any of the above described malign activities (e.g., malicious cyber-enabled activities, election interference, transnational corruption, etc.) or
(C) an entity that is blocked under the Executive Order
Sanctions may also be imposed against other individuals who have provided “material assistance” or otherwise acted in support of the objectionable conduct listed in the Executive Order, including by providing financial or technical support, or supplying goods and services to individuals designated under the Executive Order. Factors that may indicate sanctionable support include the nature, size, number, and frequency of the transaction(s); the impact of the transaction(s) on statutory objectives; whether the transaction(s) involve deceptive practices; and other factors considered on a case-by-case basis.
In addition to the named persons and entities, entities that are 50% or more owned – in the aggregate and directly or indirectly – by designated persons, are also considered to be blocked to the same extent as the designated persons. It is the responsibility of US persons to identify entities that are subject to 50% rule “auto-blocking,” aka sanctions “flow-down.”
Designation of Russian companies in the technology sector
Six Russian companies were designated for supporting the Russian Intelligence Service’s dangerous and disruptive cyber-attacks:
Additional restrictions targeting Russian sovereign debt
In a separate action, Directive 1 to the Executive Order expands on restrictions previously put in place by the Chemical and Biological Weapons Control and Warfare Elimination Act Directive (the CBW Directive), issued on August 2, 2019 under Executive Order 13883. The CBW Directive already prohibited US financial institutions from participating in the primary market for ruble-denominated bonds issued by, and the lending of ruble-denominated finds to, the Russian Sovereign Debt Entities. Directive 1 goes beyond that by now restricting US financial institutions from non-ruble-denominated bonds and loans involving the Russian Sovereign Debt Entities.
Directive 1 does not, however, prohibit US financial institutions from participating in the secondary market for bonds issued by the Russian Sovereign Debt Entities.2 Note that the traditional OFAC 50% Rule does not apply under Directive 1, and, as such, only bonds issued by, or loans made directly to, the Russian Sovereign Debt Entities are subject to its prohibitions, not including bonds issued by state-owned enterprises3
Designation of additional individuals and entities in connection with the Russian government’s attempt to influence US elections
In addition, OFAC designated 16 entities and 16 individuals under various Russia-related executive orders for attempting to influence the 2020 US presidential election, including media outlets used by the Russian government to spread disinformation as well as financial backers of such media outlets. The designated media outlets include:
OFAC also targeted persons and entities that are part of the network of Yevgeniy Prigozhin, the already-designated Russian financier behind Internet Research Agency, the Russian troll farm designated in 2018 for interfering in the 2016 US presidential election.
Designation of Russian persons in Crimea Region
Further, OFAC designated five (5) individuals and three (3) entities related to Russia’s ongoing presence in the Crimea Region. These designations, pursuant to Executive Order 13660 and Executive Order 13685, impose sanctions on individuals who have asserted governmental authority over the Crimea Region as well as target individuals and entities for operating in the Crimea Region. Among the eight (8) designated persons are:
These persons were designated in response to their alleged involvement in the construction of the Kerch Strait Bridge that now links Russia directly to the Crimea Region.
Also designated is Simferopol SIZO-1, a pre-trial detention center in Simferopol, in the Crimea Region, which the US Government views as emblematic of the widespread human rights abuses perpetrated by the Russian government.
Recommendations and looking ahead
These new sanctions convey a message from the Biden Administration that Russian conduct in the areas described will entail costs on a sustained basis. In addition to the specific designation it includes, the Executive Order provides a framework for further actions in the months to come. Further actions will largely depend on the Russian response. As highlighted above, Russia immediately retaliated against the US measures by expelling US diplomats, sanctioning top US officials, and restricting US NGO operations. But President Biden’s proposed summit – a show of carrot and stick diplomacy – might lead to US-Russia negotiations. US and non-US companies alike therefore should continue to stay apprised of their obligations and potential risks in dealing in Russia’s financial, technology, and defense-related markets and sectors.
1 “FACT SHEET: Imposing Costs for Harmful Foreign Activities by the Russian Government,” (Apr.
15, 2021), https://www.whitehouse.gov/briefing-room/statements-releases/2021/04/15/fact-sheet-
2 See OFAC FAQ 889.
3 See OFAC FAQ 891.