In response to the ongoing crisis in the Ukraine, the United States has imposed various trade sanctions, export license restrictions, asset freezes and visa restrictions against designated persons and industry groups, including high ranking Russian and Ukrainian officials. Throughout the month of March the United States expanded trade restrictions and now essentially prohibits trade with Russia.
Since early March 2014, the United States has taken steps to list officials of the Russian Government or any individual entity in Russia that is 50% owned or controlled by, has acted on or behalf, or has provided material or other support to a senior Russian Government official on various sanctions lists maintained by the U.S. Government. A series of Executive Orders issued by the President, listed Russian and Ukrainian officials as well as a Russian Bank subjecting those identified individuals and entities to United States trade sanctions.
On March 20, 2014, Executive Order 13662 expanded the earlier orders and imposed sanctions on individuals and entities that operate in critical sectors of the Russian economy including, financial services, energy, metals and mining, engineering and defense related materials. The order authorizes all United States Government agencies to issue rules and regulations necessary to carry out the purpose of the March 20, 2014 order.
The Office of Foreign Assets Control (OFAC), an agency of the United States Treasury, has listed various individuals and Bank Rossiya (formally known as Aktsionerny Bank Russian Federation) on Specially Designated Nationals list (SDN list). This action blocks the assets of those listed and U.S. persons are generally prohibited from dealing with individuals and entities on the SDN list.
In late March the United States Department of Commerce posted a notice on the Bureau of Industry and Security (BIS) website that states “Since March 1, 2014 BIS has placed a hold on the issuance of licenses that would authorize the export or re-export of items to Russia. BIS will continue this practice until further notice.”
On March 27, 2014 the Department of State likewise posted a notice on the Directorate of Defense Trade Controls (DDTC) website that states, “The Department of State has placed a hold on the issuance of licenses that would authorize the export of defense articles and defense services to Russia. State will continue this practice until further notice.” The action taken by BIS effectively prohibits all trade and financial dealings with Russia that involves the export to Russia of Commerce Department controlled products. The Department of State’s “hold” on licenses effectively bans all trade in defense articles or services to Russia.
The Executive Order referencing the financial services industry poses a significant challenge to U.S. persons seeking to transact any business in Russia or with a Russian individual, or entity. U.S. Companies should expect Western Banks to carefully review all transactions by Russian Banks. This can delay or even prevent payments to U.S. companies by a Russian individual or entity due to the sanctions.
To keep current with the evolving nature of the U.S. sanctions, U.S. Companies must monitor events and based on the sanctions and trade restriction currently in place, plan how to conduct business, if at all, with Russia and Russian business. U. S. companies must also consider the real possibility that payments from Russian companies or individuals for outstanding invoices, may be delayed or even stopped due to restrictions and the blocking of the Russia financial industry.