U.S. and EU Expand Sanctions on Russia

Posted on March 17, 2014 by Farhad Alavi — Leave a comment

Both the United States and the European Union took further steps today to sanction certain entities within the government of the Russian Federation following the incursion by Russian forces into the Crimea in Ukraine. This action dovetails yesterday’s vote in the Crimea, where over 90% voted to secede from Ukraine and become annexed to Russia. Today’s decision by the EU and President Obama represents a very bold step that very much widens the scope of U.S. sanctions against Russia. Furthermore, the European Union added 21 entities to its sanctions list.

A new U.S. Executive Order was announced, expanding on Executive Order 13360 (you may recall my law firm issued a Client Alert on that EO). Today’s Executive Order gives broader authorities to the President, enabling him to impose sanctions (and a visa ban) on certain individuals, and also to later impose them on certain persons who are officials of the Russian Federation, owned or controlled (or “purported” to act for or on behalf of) such officials, or those who materially assist such entities.

Among the people designated by the Treasury Department are former Ukraine Prime Minister Viktor Yanukovych, an aide to Russian President Vladimir Putin, the Head of the Federation Council, and the Deputy Head of the Russian Duma.

What This Means

Although these newly announced sanctions (and those imposed through Executive Order 13660 earlier this month) do not close the door to trade with Russia, they do limit many activities and heighten the requirement and expectation of U.S. persons doing business in or with Russia. More specifically, businesses should take care to:

(1) Evaluate all business relations with Russia; and

(2) Perform more due diligence on existing and potential Russian customers (as well as from/in other Commonwealth of Independent States (CIS) jurisdictions; and

(3) Keep an eye towards future developments, as the new Executive Order gives the President great discretion to expand the coverage of the sanctions.

It is not likely at this point that OFAC would impose wide-ranging sanctions against Russia, however, recent developments have limited and can further pave the way to limit trade with Russia and increase the compliance requirements for trade with that country.