Legal Alert

U.S. Department of Treasury Adopts New Sanctions Against Russia

May 1, 2014

On Monday, 28 April, 2014, the U.S. Department of the Treasury adopted sanctions against seven additional Russian government officials, as well as 17 companies linked to these government officials. The new list of sanctions was a response to what U.S. officials said was Russia’s failure to adhere to an April 17 agreement in Geneva on ways to resolve the situation. Amongst the persons targeted by the measures are Igor I. Sechin, president of the state-owned Rosneft Oil Company and a longtime Putin adviser; Dmitri N. Kozak, a deputy prime minister; Vyacheslav V. Volodin, a deputy chief of staff to Mr. Putin; and Aleksei Pushkov, the chairman of the international affairs committee of the State Duma, the lower house of Parliament. The companies targeted included several banks, including Sobinbank, and energy companies like the Stroytransgaz Group and various related entities. All of the companies targeted on Monday were related to Russian businessmen targeted in previous rounds of sanctions.

As it was announced by the White House, the U.S. Department of Commerce introduced additional restrictions on 13 of those companies by imposing a license requirement with a presumption of denial for the export, re-export or other foreign transfer of U.S.-originating items to the companies. The departments of commerce and state also announced a tightening of policies to deny export license applications for any high-technology items that could contribute to Russia’s military capabilities. Those departments also will revoke any existing export licenses that meet these conditions.

Russia is a major energy supplier and trading partner for the European Union. Therefore, the EU has substantially greater economic exposure to Russia’s retaliation against sanctions than the U.S. has. Despite that fact, on Tuesday, 29 April, the EU also announced new penalties after member governments reached an agreement imposing asset freezes and visa bans on 15 more people as part of expanded sanctions on Russia’s actions in Ukraine.

The EU decision brings the total number of Russians or pro-Russian individuals in Ukraine targeted by the EU's sanctions to 48. The EU decided not to include the heads of Russian energy giants such as Rosneft's Igor Sechin, who was included on a new U.S. sanctions list on Monday.

The same day, on Monday, 28 April, the Prime Minister of Canada announced further sanctions against Russia.

Among the nine individuals facing Canadian sanctions are Boris Rotenberg and his older brother Arkady, the co-owners of SMP Bank andSGM Group, a major supplier of construction services to Russia's gas giant Gazprom. Others facing similar sanctions include Vladimir Volfovich Zhirinovsky, the founder and leader of the Liberal Democratic Party of Russia; and Oleg Evgenyevich Belaventsev, the Russian presidential envoy to the Crimean District and a member of the Russian Security Council. Canada also is imposing economic sanctions against ExpoBank and RosEnergoBank.

A copy of the full list can be found at www.international.gc.ca and www.international.gc.ca

Russia’s Deputy Minister of Foreign Affairs, Sergei Ryabkov, commented on the newly imposed U.S. sanctions that Russia could not leave this situation without reaction and would need to respond.

Previously, Russia issued retaliatory sanctions against nine U.S. officials on 17 March, 2014, and against 13 Canadian officials on 24 March, 2014. The lists included lawmakers and public activists.

There is an expectation that the diplomatic crisis will remain volatile and many commentators expect it to continue to escalate with additional measures to be taken in the near future that may affect businesses and business professionals from Russia and Ukraine, as well as those having business activities related to Russia and Ukraine.

It is our strong recommendation that organizations engaged in significant business activity in Russia or Ukraine, or with multinational Russian or Ukrainian businesses, monitor the multinational sanction developments closely.