U.S. Intensifies Russia Sanctions in Response to Bucha Charges in Ukraine

April 7, 2022 - On April 6, 2022, in response to reports of atrocities by Russian forces against Ukrainian civilians in Bucha, the U.S. imposed additional sanctions on Russia, including full blocking sanctions on Russia’s largest public and private banks, sanctions on members of the family of Vladimir Putin and on other architects of the war, and a new Executive Order banning new investment in Russia, among other things.  On a background press call related to these actions, a senior White House administration official noted, “The sickening brutality in Bucha has made tragically clear the despicable nature of the Putin regime.  And today, in alignment with G7 allies and partners, we’re intensifying the most severe sanctions ever levied on a major economy.”

New U.S. Actions

Sberbank

On April 6, 2022, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) added Sberbank to the Specially Designated Nationals and Blocked Persons List (“SDN List”).  Sberbank is Russia’s largest state-owned bank (majority-owned by the Government of the Russian Federation (“GoR”) and the largest financial institution in Russia.  Sberbank holds the largest market share of savings deposits in the country and acts as the main creditor of the Russian economy.  While OFAC previously designated Sberbank as subject to the prohibitions on maintaining a U.S. correspondent bank account and on certain debt and equity transactions – described in Directives 2 and 3, respectively, under Executive Order (“E.O.”) 14024, which technically remain in effect – the April 6, 2022, full blocking sanctions on Sberbank are a significant escalation.  OFAC also designated 42 of Sberbank’s subsidiaries as being owned or controlled by Sberbank, although under OFAC’s 50% rule, all entities owned 50% or more by Sberbank, whether directly or indirectly, are also subject to the blocking sanctions, whether or not they are identified on the SDN List.

Alfa-Bank

As part of the same action, OFAC also designated Alfa-Bank, Russia’s largest private bank.  As with Sberbank, OFAC previously designated Alfa-Bank as subject to the debt and equity prohibitions described in Directive 3 under E.O. 14024.  In addition, OFAC designated six Alfa-Bank subsidiaries and five vessels for being owned or controlled by Alfa-Bank, as well as five vessels for being ultimately owned by Alfa-Bank:

• Lady Leila (IMO 9683740)
• Lady Rania (IMO 9784893)
• Lady Sevda (IMO 9683738)
• Sv Konstantin (IMO 9203710)
• Sv Nikolay (IMO 9482926)

Sanctions on Putin’s Family and other Facilitators of the War

OFAC designated President Putin’s daughters, Katerina Vladimirovna Tikhonova and Maria Vladimirovna Vorontsova, an indication that Putin is believed to place assets in the care of his daughters to evade his own existing designation.  OFAC further designated Russian Foreign Minister Sergey Lavrov’s wife Maria Aleksandrovna Lavrova and his daughter Sergeyevna Vinokurova on the same basis.

Russia's Security Council

OFAC also designated additional members of Russia’s Security Council, including former President and Prime Minister of Russia, Dmitry Medvedev.  The individuals were designated pursuant to E.O. 14024 for being or having been leaders and officials of the GoR.  OFAC noted that many of these individuals are also being sanctioned by U.S. international partners, including Canada, the European Union, Japan, New Zealand, Australia, and the United Kingdom.

New Executive Order

Also on April 6, 2022, President Biden issued a new E.O. entitled “Prohibiting New Investment in and Certain Services to the Russian Federation in Response to Continued Russian Federation Aggression.” The E.O. bans all new investment in the Russian Federation by U.S. persons, wherever located, as well as the exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of any category of services as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State, to any person located in the Russian Federation.  Notably, the prohibition on exports and reexports does not appear to be a comprehensive embargo, as the restrictions only apply to certain categories of services yet to be identified by the Treasury Department.  We anticipate covered categories of services will be defined in the near future.  We further note that the significant export controls against Russia imposed on February 24, 2022, which we described in an earlier client alert, remain in effect in addition to any restrictions under the April 6, 2022, order.

New and Amended General Licenses

Finally, OFAC issued three new Russia-related general licenses and amended three Russia-related general licenses.  Specifically, OFAC issued General License 21, which authorizes the winddown of Sberbank CIB USA, Inc., including “the processing and  payment of salaries, severance, and expenses; payments to vendors and landlords; and closing of accounts” until June 7, 2022; General License 22, which authorizes the winddown of transactions involving Sberbank of Russia until April 13, 2022; and General License 23, which authorizes the winddown of transactions involving Alfa-Bank until May 6, 2022. 

Additionally, OFAC amended several existing general licenses to authorize some transactions involving Alfa-Bank otherwise prohibited under the April 6, 2022, actions.  Specifically, OFAC issued amended General License 8B to authorize transactions related to energy with Alfa-Bank until June 24, 2022 (transactions with Sberbank were already authorized under the previous version of the license), General License 9B to authorize transactions related to dealings in certain debt or equity of Alfa-Bank until June 30, 2022 (transactions with Sberbank were previously authorized until May 25, 2022 , and General License 10B to authorize the wind down of existing derivative contracts with Alfa-Bank until June 30, 2022 (the wind-down of Sberbank derivative contracts was already authorized until May 25, 2022).