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Biden Administration Imposes Sanctions on Russian Federation's picture
Commentary by James Treanor

President Joseph R. Biden signed an Executive Order ("EO") blocking all property and interests in property of any person determined to have engaged in "specified harmful foreign activities" on behalf of the Government of the Russian Federation.

The EO provides that the Secretary of the Treasury, in consultation with the Secretary of State, may sanction, among others, the following persons:

  • any person operating in the technology or defense sectors of the Russian Federation;
  • a current or former official of the Government of the Russian Federation;
  • a political subdivision, agency or instrumentality of the Government of the Russian Federation;
  • a spouse or adult child of any person whose property and interests in property are blocked pursuant to this EO; and
  • a person responsible for, or complicit in:
    • malicious cyber-enabled activities;
    • interference in a U.S. or other foreign government election;
    • actions that undermine democratic processes;
    • transnational corruption;
    • assassination or infliction of other bodily harm against a U.S. person or a national of a U.S. ally; or
    • deceptive transactions to circumvent U.S. sanctions, including through the use of digital currencies.

Under this EO, OFAC issued Directive 1 specifying that, as of June 14, 2021, U.S. financial institutions will be prohibited from engaging with the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation and the Ministry of Finance of the Russian Federation through (i) participation in the primary market for ruble or non-ruble denominated bonds issued after June 14, 2021, and (ii) lending ruble or non-ruble denominated funds.

OFAC also added individuals and entities to its Specially Designated Nationals List and published new related FAQs 886, 887, 888, 889, 890 and 891.


With the issuance of Directive 1, the latest round of Russia sanctions - much like the recent sanctions on the securities of Communist Chinese Military Companies ("CCMCs") under EO 13959 - will have a direct impact on financial markets. And like the CCMC sanctions, Directive 1 comes with a two-month delay, postponing the effective date until June 14, 2021. Unlike the CCMC sanctions, however, OFAC clarified in FAQ 891 that its 50-percent rule does not apply to Directive 1, and therefore the bond and loan prohibitions do not apply to entities owned 50 percent or more, directly or indirectly, by one or more of the three targeted Russian government agencies. Also unlike the CCMC sanctions, Directive 1 does not prohibit U.S. financial institutions from participating in the secondary market for bonds issued by these entities (see FAQ 889).

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Ukraine and Russia Sanctions
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