The European Union (EU) and the United States (U.S.) have now both taken targeted action to address the evolving situation in Ukraine. These measures do not impose restrictions on Ukraine or Russia, either territorially as countries or on their governments as a whole. However, new designations imposed on 17 March by the U.S. and the EU are significant, as described below, and therefore companies should assess their current operations in Russia and Ukraine. A number of the EU and U.S. designations overlap — Victor Yanukovych, former President of Ukraine; Leonid Slutshki, Chairman of the Commonwealth of Independent States Committee of the State Duma of the Russian Federation; Andrei Klishas, Chairman of the Committee on Constitutional Law of the Federation Council of the Russian Federation; Sergei Aksyonov, elected “Prime Minister of Crimea” on 27 February 2014; and Vladimir Konstantinov, speaker of the Supreme Council of the Autonomous Republic of Crimea.
In addition to reviewing measures by the U.S. and the EU, companies operating in Russia will need to monitor if the Russian government adopts any measures in response to these actions. To date, no official sanctions have been issued by the Russian government but the response to the existing U.S. and EU sanctions is being considered.
Companies should review whether they are doing business directly or indirectly with these persons or any entities owned or controlled by these persons immediately. For companies with automated screening software solutions, these persons should be added by the vendor.
President Obama has issued two executive orders with respect to the situation in Ukraine. On 6 March 2014, Obama issued a formal statement and Executive Order 13660 giving the administration broad authority to also designate persons who are, among other things, engaging in activities undermining democratic processes or institutions in Ukraine; threatening the peace, security, stability, sovereignty, or territorial integrity of Ukraine; contributing to the misappropriation of state assets of Ukraine; or purporting to assert governmental authority over any part of Ukraine without authorization from the Ukrainian government in Kyiv. At that time, the president did not designate any persons or entities. On 17 March 2014, Obama issued a new Executive Order Blocking Property of Additional Persons Contributing to the Situation In Ukraine. This new authority expands upon Executive Order 13660 by providing the ability to target officials of the government of the Russian Federation, any individuals or entities that operate in the arms or related material sector in the Russian Federation, and any individual or entity that is owned or controlled by, or provides material or other support to any senior official of the government of the Russian Federation or any person designated pursuant to this order. President Obama has taken the additional step to designate a number of persons in Ukraine and Russia under the authority of these two executive orders. We have listed these persons below.
These executive orders require U.S. persons to block (freeze) property interests of designated persons when such property is within the possession or control of U.S. persons, or within the United States. They also provide legal basis for future designations of non-U.S. persons if they provide financial or material support, or goods/services, to designated persons, or if such non-U.S. persons engage in any of the other sanctionable activities that could result in a designation under either of the executive orders.
While we understand that, at this time, the U.S. government does not expect to impose a full territorial embargo against Russia that would affect U.S. corporate assets in Russia that are owned by U.S. companies, these designations are relevant to any companies doing business in Russia and Ukraine. To the extent that U.S. companies have operations, joint ventures or other transactions with companies in Russia and/or in Ukraine, it is important to assess the nature of those relationships and rights under those agreements. In particular, companies must assess whether such entities are owned or controlled by the designated parties.
The goal at this time is to influence Russian behavior but not impose sanctions that would adversely affect U.S. companies. The U.S. government is aware of the breadth and nature of U.S. investment in Russia, and they recognize that designations in Russia could impose “collateral damage” on U.S. companies.
At the same time, Congress is moving legislation that would provide support to Ukraine and impose sanctions on targeted Russian and Ukrainian officials. The U.S. House of Representatives has passed legislation authorizing US$1 billion in loan guarantees to Ukraine. Pending Senate legislation goes further. The Senate Foreign Relations Committee has passed legislation directing the President to impose asset freezes and visa restrictions against any Russians and Ukrainians responsible for violence and serious human rights abuses against anti-government protesters and those responsible for undermining the peace, security, stability, sovereignty or territorial integrity of Ukraine (certain waivers apply). The bill also would impose targeted, non-mandatory sanctions on Russian officials that have engaged in corruption. The Senate bill would also provide roughly US$1 billion in loan guarantees to Ukraine, provide additional funding to the International Monetary Fund to support Ukraine, and authorize US$50 million for the State Department to carry out technical and civil society assistance initiatives in Ukraine. The full Senate is likely to take up this Committee-passed bill next week when it returns from a recess. The content of the legislation in either House of Congress obviously could change, depending on developments in Ukraine.
The EU has taken a number of measures to address the developments in Ukraine. On 6 March 2014, the EU implemented sanctions that target designated persons in Ukraine, but these EU measures do not currently affect overall trade with Ukraine. On 11 March 2014, the European Commission announced a proposal for temporarily removing customs duties on Ukrainian exports to the EU, which is expected to be adopted in the coming days.
On 17 March 2014, the Council of the European Union (Council) adopted Council Regulation N° 269/2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty, and independence of Ukraine (EU Russia Sanctions) imposing targeted economic sanctions on eight Crimean and 13 Russian persons. The EU Russia Sanctions provide for the freezing of funds and economic resources belonging to, owned, held or controlled by the persons identified as responsible for actions aimed to undermine or threaten the territorial integrity, sovereignty, and independence of Ukraine as well as persons and entities associated with them (listed persons). Furthermore, no funds or economic resources shall be made available, directly or indirectly, to or for the benefit of the listed persons.
The EU Russian Sanctions do not affect overall trade, including energy, between the EU and the Russian Federation. The EU is mindful of the significance of trade and investment with the Russian Federation, and that any measures against the Russian Federation could impose “collateral damage” on EU interests.
To ensure compliance with these sanctions, EU persons, entities, and bodies are required to supply immediately any information related to the funds and economic resources of the listed persons to the competent authorities. Failure to comply with these sanctions or to seek to circumvent them could amount to a criminal offence.
The UK has suspended with immediate effect all extant licenses and application processing for licenses for direct export to Russia for military and dual use items destined for units of the Russian armed forces or other state agencies which could be or are being deployed against Ukraine. In addition, the UK has suspended licenses for exports to third countries for incorporation into equipment for export to Russia where there is a clear risk that the end product will be used against Ukraine.
The listed persons include the prime minister of Crimea and seven other Crimean members of the new administration; the chairman of the Security and Defense Committee of the Federation Council of the Russian Federation as well as a number of key members of the Federation Council of the Russian Federation. The full list is reproduced below.
The EU has announced that additional and far-reaching measures may be adopted if the Russian Federation takes any further steps to destabilize the situation in Ukraine.
Under Russian law, Russia can impose "special economic measures," including blocking or imposing limitation on trade or financial operations, and has done so in the past in implementing various UN sanctions or issuing de facto "disguised" sanctions against Georgia and Moldova or imposing "asymmetrical" sanctions, such a prohibition on U.S. citizens to adopt Russian children following the U.S. sanctions under the Magnitsky Act. At this time, there has not been concrete action by the Russian parliament or government approving confiscation/freeze of foreign assets in Russia. Russian state officials have indicated that they will consider tit-for-tat measures if the overseas assets of Russian state companies/banks are frozen by the West. In light of recent actions by the U.S. government and the EU targeting specific Russian government officials, it remains to be seen how Russia will retaliate against U.S. and EU commercial interests in that country. No official sanctions have been issued so far but the response to the existing sanctions is being considered.
United States - Specially Designated Nationals list update
The following individuals have been added to OFAC's SDN List:
- AKSYONOV, Sergey Valeryevich (a.k.a. AKSENOV, Sergei; a.k.a. AKSYONOV, Sergei; a.k.a. AKSYONOV, Sergey; a.k.a. AKSYONOV, Sergiy; a.k.a. AKSYONOV, Serhiy Valeryevich); DOB 26 Nov 1972; POB Balti, Moldova (individual) [UKRAINE]
- GLAZYEV, Sergey (a.k.a. GLAZYEV, Sergei); DOB 01 Jan 1961; POB Zaporozhye, Ukraine; Presidential Advisor (individual) [UKRAINE2]
- KLISHAS, Andrei (a.k.a. KLISHAS, Andrey); DOB 09 Nov 1972; POB Yekaterinburg, Sverdlovsk, Russia; Chairman of the Russian Federation Council Committee on Constitutional Law, Judicial and Legal Affairs and the Development of Civil Society (individual) [UKRAINE2]
- KONSTANTINOV, Vladimir Andreyevich, Crimea, Ukraine; DOB 19 Nov 1956 (individual) [UKRAINE]
- MATVIYENKO, Valentina Ivanovna; DOB 07 Apr 1949; POB Shepetovka, Khmelnitsky, Ukraine; Federation Council Speaker; Chairman of the Russian Federation Council (individual) [UKRAINE2]
- MEDVEDCHUK, Viktor; DOB 07 Aug 1954; POB Pochyot, Krasnoyarsk Krai, Russia (individual) [UKRAINE]
- MIZULINA, Yelena (a.k.a. MIZULINA, Elena; a.k.a. MIZULINA, Elena Borisovna; a.k.a. MIZULINA, Yelena Borisovna); DOB 09 Dec 1954; POB Bui, Kostroma, Russia; State Duma Deputy; Chairman of the State Duma Committee on Family, Women and Children (individual) [UKRAINE2]
- ROGOZIN, Dmitry Olegovich (a.k.a. ROGOZIN, Dmitriy; a.k.a. ROGOZIN, Dmitry); DOB 21 Dec 1963; POB Moscow, Russia; Deputy Prime Minister of the Russian Federation (individual) [UKRAINE2]
- SLUTSKY, Leonid (a.k.a. SLUTSKIY, Leonid; a.k.a. SLUTSKY, Leonid E.; a.k.a. SLUTSKY, Leonid Eduardovich); DOB 04 Jan 1968; State Duma Deputy; Chairman of the Committee on Affairs of the Commonwealth of Independent States (CIS); First Deputy Chairman of the Committee on International Affairs; Chairman of the Russian World Fund Administration (individual) [UKRAINE2]
- SURKOV, Vladislav Yurievich; DOB 21 Sep 1964; POB Solntsevo, Lipetsk, Russia; Presidential Aide (individual) [UKRAINE2]
- YANUKOVYCH, Viktor Fedorovych; DOB 09 Jul 1950; POB Yenakiyeve, Donetsk Region, Ukraine; alt. POB Makiivka, Donbas, Ukraine; Former President of Ukraine (individual) [UKRAINE]
European Union – Designations
- AKSYONOV, Sergey Valeryevich, new Prime Minister of Crimea
- BEREZOVSKIY, Deniz Valentinovich, Former Commander of the Ukrainian Navy.
- BUSHMIN, Evgeni Viktorovich, Deputy Speaker of the Federation Council of the Russian Federation
- CHALIY, Aleksei Mikhailovich, Mayor of Sevastopol
- DZHABAROV, Vladimir Michailovich, First Deputy-Chairman of the International Affairs Committee of the Federation Council of the Russian Federation
- GALKIN, Aleksandr, Russia's Southern Military District, forces of which are in Crimea
- KLISHAS, Andrei Aleksandrovich, Chairman of the Committee on Constitutional Law of the Federation Council of the Russian Federation
- KONSTANTINOV, Vladimir Andreevich, Speaker of the Supreme Council of the Autonomous Republic of Crimea.
- MIRONOV, Sergei Mikhailovich, Member of the Council of the State Duma
- OZEROV, Viktor Alekseevich, Chairman of the Security and Defense Committee of the Federation Council of the Russian Federation
- PANTELEEV, Oleg Evgenevich, First Deputy Chairman of the Committee on Parliamentary Issues
- RYZHKOV, Nikolai Ivanovich, Member of the Committee for Federal Issues, Regional Politics and the North of the Federation Council of the Russian Federation
- SIDOROV, Anatoliy Alekseevich, Commander, Russia's Western Military District, units of which are deployed in Crimea
- SLUTSKI, Leonid Eduardovich, Chairman of the Commonwealth of Independent States Committee of the State Duma of the Russian Federation
- TEMIRGALIEV, Rustam Ilmirovich, Deputy Chairman of the Council of Minister of Crimea
- TOTOONOV, Aleksandr Borisovich, Member of the Committee on Culture, Science, and Information of the Federation Council of the Russian Federation
- TSEKOV, Sergey Pavlovych, Vice Speaker of the Verkhovna Rada
- VITKO, Aleksandr Viktorovich, Commander of the Black Sea Fleet
- ZHELEZNYAK, Sergei Vladimirovich, Deputy Speaker of the State Duma of the Russian Federation
- ZHEREBTSOV, Yuriy, Speaker of the Verkhovna Rada of Crimea
- ZIMA, Pyotr Anatoliyovych, Head of the Crimean Security Service