On March 17, 2014, the United States, working in coordination with the European Union (“EU”), imposed new sanctions on prominent officials of the Russian Federation (“Russia”) in response to Russia’s policies toward the Ukrainian peninsula of Crimea, which opens the door to measures against Russian entities operating in the defense sector. The new Executive Order issued by President Obama, “Blocking Property of Additional Persons Contributing to the Situation in Ukraine” (the “EO”), expands the scope of the national emergency declared in Executive Order 13660 of March 6, 2014, the U.S.’s first installment of sanctions imposed against persons contributing to the current situation in Ukraine. Today’s announcement marks the first time that the United States has blocked any persons since the crisis began.
Specifically, the EO blocks the property and interests in property that are in the United States, that come within the United States, or that are or come within the possession or control of any U.S. person (including foreign branches) of the following Russian officials:
- Yelena Mizulina (State Duma Deputy);
- Leonid Slutsky (State Duma Deputy);
- Andrei Klishas (Chairman of the Russian Federation Council Committee on Constitutional Law, Judicial and Legal Affairs and the Development of Civil Society);
- Valentina Ivanovna Matviyenko (Federation Council Speaker);
Dmitry Olegovich Rogozin (Deputy Prime Minister of the Russian Federation);
- Vladislav Yurievich Surkov (Presidential Aide to the President of the Russian Federation); and
- Sergey Glazyev (Presidential Advisor to the President of the Russian Federation).
Additionally, the EO allows the Secretary of the Treasury, in consultation with the Secretary of State, to block the property and interests in property of any person or entity determined:
- to be an official of the Government of Russia;
- to operate in the arms or related materiel sector in Russia;
- to be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, a senior official of the Government of Russia or a person whose property and interests in property are blocked pursuant to the EO; or
- to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of a senior official of the Government of Russia or a person whose property and interests in property are blocked pursuant to the EO.
Property and interests in property blocked pursuant to the EO may not be transferred, paid, exported, withdrawn, or otherwise dealt in. Moreover, the EO precludes the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any person or entity whose property and interests in property are blocked pursuant to the EO, as well as the receipt of any contribution or provision of funds, goods, or services from any such person or entity.
Concurrently with the issuance of the EO, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) designated four individuals pursuant to Executive Order 13660, “Blocking Property of Certain Persons Contributing to the Situation in Ukraine.” EO 13660, issued on March 6, 2014, allows the Secretary of the Treasury, in consultation with the Secretary of State, to block the property and interests in property of any person or entity determined to be responsible for or complicit in actions or policies that undermine democratic processes or institutions in Ukraine or that threaten the peace, security, stability, sovereignty, or territorial integrity of Ukraine.
The individuals designated pursuant to EO 13660 include the following:
- Sergey Aksyonov (Crimea-based separatist leader);
- Vladimir Konstantinov (Crimea-based separatist leader);
- Viktor Medvedchuk (leader of Ukranian Choice); and
- Viktor Yanukovych (former President of Ukraine).
Notwithstanding the above measures, U.S. officials have stressed that, at the present time, they are focused only on blocking the private finances of the blocked persons and not their broader business interests or affiliations. U.S. officials have indicated that they are prepared to escalate sanctions further if the Russian government does not take steps to reverse course on Crimea.
EU Adoption of Restrictive Measures Against Actions Threatening Ukraine’s Territorial Integrity
On March 17, 2014, the EU also adopted restrictive measures against certain persons determined to be responsible for and organizing the referendum that took place in Crimea on March 16, 2014. These measures are in line with the “Statement of the Heads of State or Government on Ukraine” of March 6, 2014, which called for additional consequences for Russian relations in a broad range of economic areas if the EU were to determine that Russia has taken further steps to destabilize the situation in Ukraine.
Specifically, Council Decision 2014/145/CFSP (the “Decision”) and Council Regulation (EU) No 269/2014 (the “Regulation”) provide for the freezing of all funds and economic resources belonging to, owned, held, or controlled by natural persons responsible for actions which undermine or threaten the territorial integrity, sovereignty, and independence of Ukraine, as well as natural or legal persons, entities, or bodies associated with them. In this regard, the EU has identified and targeted 21 individuals, which are listed in the Annex to the Decision and Regulation. No funds or economic resources may be made available, directly or indirectly, to or for the benefit of these individuals. However, the Decision and Regulation do not prevent a listed person or entity from making a payment due under a contract entered into prior to the date of designation, provided that the Member State concerned has determined that the payment is not, directly or indirectly, received by a listed person or entity.
The Decision and Regulation follow a similar asset freeze imposed by the EU on March 5, 2014, against 18 persons identified as responsible for human rights violations in Ukraine and the misappropriation of Ukrainian state funds, pursuant to Council Decision 2014/119/CFSP and Council Regulation (EU) No 208/2014.