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Sanctions against Russia continue to escalate

News & Insights 28 February 2022

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The US and UK announced further sanctions on 24 February 2022 in response to Russia’s invasion of Ukraine. The list of individuals and entities being added to sanctions lists has been steadily expanding. We strongly recommend that...

Sanctions against Russia continue to escalate

The US and UK announced further sanctions on 24 February 2022 in response to Russia’s invasion of Ukraine. The list of individuals and entities being added to sanctions lists has been steadily expanding. We strongly recommend that any members considering trading to Russia to closely monitor these lists and to seek legal advice where appropriate. The following is a summary of the sanctions announced on 24 February. Another alert will be published on the sanctions announced after 24 February by the US, UK, and EU.


As part of its Russian Harmful Foreign Activities Sanctions program, the US announced a new round of sanctions against Russia on the afternoon of 24 February 2022 pursuant to Executive Order 14024. (See the club’s prior alert here discussing EO 14024.) The sanctions continue to target mainly the Russian financial sector and Russian individuals tied to the Russian government. The US also sanctioned certain Belarusian parties because of Belarus’s support for and facilitation of Russia’s invasion of Ukraine.

The sanctions announced on 24 February do not directly target trade with Russia by non-US persons or inhibit vessels from calling Russian ports for non-sanctionable trade provided the involved parties are not sanctioned. However, it is not clear how US and foreign banks will react in response to these and other sanctions, and hence whether or to what extent trade with Russia will be impacted notwithstanding the absence of express sanctions against such trade. Further sanctions are anticipated as the hostilities continue. The sanctions position thus remains fluid.

The following is a summary of the sanctions that were issued on 24 February including guidance published by the US authorities for non-US persons. For more detail, you can access the press release issued by the US authorities here.

Sanctions Announced on 24 February

The US issued blocking sanctions against four Russian banks – Novikom, Otkritie, Sovcom, and VTB Bank – as well as their owned or controlled subsidiaries by designating them to the SDN list. Consequently, US persons, including US banks and their foreign branches, must block the property and property interests of these banks and subsidiaries and are unable to process US dollar transfers involving these entities, unless such transactions are otherwise authorized.

In addition to the blocking sanctions, two new directives were issued under EO 14024 to impose financial restrictions on transactions involving specified Russian financial institutions.

Directive 2 addresses Correspondent or Payable-Through Accounts and Processing of Transactions Involving Certain Foreign Financial Institutions (‘CAPTA’). Pursuant to this directive, as of 26 March 2022, US financial institutions are prohibited from the opening or maintaining of a correspondent account or payable-through account for or on behalf of Sberbank or from processing any transaction involving Sberbank. Such transactions must be rejected by US financial institutions as of 26 March.

Directive 3, the Russia-related Entities Directive, expands debt and equity restrictions against certain Russia-related entities. The directive prohibits transactions and new dealings by US persons (including US banks and their foreign branches) in new debt of longer than 14 days maturity and new equity of identified Russian entities, including Alfa Bank, Sberbank, Gazprombank, Gazprom, and Transneft, amongst others.

General Licenses

Concurrently with the above designations and directives, the US issued several Russia-related general licenses authorizing certain transactions including those related to ‘energy.’ The general licenses include the following:

  • GL 12 authorizes US persons to reject (as opposed to block) transactions involving Otkritie, Sovcom, or VTB Bank, or their subsidiaries, until 26 March. Novikom is not mentioned in GL 12.
  • GL 11 authorizes wind-down transactions involving Otkritie, Sovcom, or VTB Bank, or their subsidiaries until 26 March 2022. Novikom is not mentioned in GL 11 either.
  • GL 8 authorizes transactions ‘related to energy’ involving five of the sanctioned banks and their subsidiaries through 24 June 2022. ‘Related to energy’ is defined broadly in GL 8 as including the extraction, production, refinement, liquefaction, gasification, transport, or purchase of petroleum, including crude oil, lease condensates, unfinished oils, natural gas liquids, petroleum products, natural gas or other productions capable of producing energy, such as coal, wood, or agricultural products used to manufacture biofuels, or uranium in any form. The five banks are Otkritie, Sberbank, Sovcombank, VEB, and VTB Bank.
  • GL 6 is a standard humanitarian general license which authorizes transactions that are ordinarily incident and necessary to the export or re-export of agricultural commodities, medicine, medical devices, or software updates for medical devices to, from, or transiting Russia or the prevention, diagnosis, or treatment of Covid-19.

Guidance Issued by the US Authorities

To provide further guidance on the 24 February sanctions and general licenses, the Office of Foreign Assets Control (OFAC) issued public guidance in the form of Frequently Asked Questions (FAQs). The FAQs are available here. Among those FAQs is the following pertaining to non-US persons:

980. Do non-U.S. persons risk being sanctioned for engaging in activity with persons sanctioned pursuant to Executive Order (E.O.) 14024? 

OFAC evaluates a range of factors when developing sanctions targets, consistent with foreign policy and national security goals.  In the context of blocking sanctions, non-U.S. persons may be exposed to sanctions risk in relation to activities with persons subject to blocking sanctions pursuant to E.O. 14024.  Under E.O. 14024, non-U.S. persons may be designated if they have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, certain activities, a person whose property and interests in property are blocked pursuant to E.O. 14024, or (in certain circumstances) a blocked government.  Please see sections 1(a)(vi) and 1(b) of E.O. 14024. 

Non-U.S. persons generally do not risk exposure to U.S. blocking sanctions under E.O. 14024 for engaging in transactions with persons subject to the prohibitions of the directives under E.O. 14024.  Moreover, non-U.S. persons generally do not risk exposure to U.S. blocking sanctions under E.O. 14024 for engaging in transactions with blocked persons, where those transactions would not require a specific license if engaged in by a U.S. person.  Note, however, that E.O. 14024 and the directives under E.O. 14024 prohibit any transaction that evades or avoids, has the purpose of evading or avoiding, causes a violation of, or attempts to violate any of the prohibitions of those directives, as well as any conspiracy formed to violate any of the prohibitions of those directives.  OFAC will not view as “evading or avoiding” efforts by non-U.S. persons to comply with U.S. sanctions by replacing sanctioned suppliers or service providers (including financial institutions) with non-sanctioned persons.

Released on 02/24/2022

FAQ 980 is consistent with prior guidance provided by OFAC to non-US persons in relation to other sanction programs. It confirms non-US persons face a risk of secondary sanctions if they provide material assistance to any of the blocked entities. FAQ 980 further confirms that non-US persons do not risk sanctions if they engage in activity which, if engaged in by US persons, would be authorized under a general license.

Neither the FAQ nor other published guidance to date has confirmed whether non-US persons also face a risk of sanctions under the Countering America’s Adversaries Through Sanctions Act (‘CAATSA’) for dealings with entities/persons blocked under EO 14024. Section 228 of CAATSA requires sanctions against non-US persons which are determined to have knowingly facilitated a ‘significant’ transaction for or on behalf of any person subject to sanctions imposed by the US with respect to Russia. It is not clear whether the sanctions announced in the wake of the hostilities in Ukraine fall within the scope of ‘sanctions imposed by the US with respect to Russia’ as described in section 228.


On 24 February the UK announced its second tranche of sanctions, which includes:

  • Designating a number of Russian banks, including the state-owned bank VTB, to the UK sanctions list. This means that their assets are frozen and they will be unable to clear payments through the UK financial system.
  • Designating 100 individuals and Russian entities to the UK sanctions list. This includes five major defence companies: Rostec, Uralvagonzavod, Tactile Missile Corporation, United Aircraft Corporation and United Shipbuilding Corporation.
  • Introducing legislation to stop Russian companies and the Russian state from raising finance or borrowing money on UK markets.
  • Banning Aeroflot aircraft from landing in the UK.
  • Suspending dual-use export licences to Russia which cover components which can be used for military purposes with immediate effect. 
  • Prohibiting the export of high-tech equipment used in the electronics, telecommunications and aerospace sectors, and oil refinery equipment.
  • Imposing a limit of £50,000 on deposits that Russian nationals can make in UK bank accounts.
  • Imposing financial sanctions on Belarus for its role in Russia’s invasion of Ukraine.

The club continues to closely monitor the situation and will update members about further developments. If you have any queries, please contact your usual club contact.

Categories: Sanctions, Ukraine / Russia

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