State, Local Governments Employ Economic, Political Tools in Response to Ukraine Invasion

March 17, 2022

In the aftermath of the Russian invasion of Ukraine, federal, state and local officials are using the powers of their offices to sanction and cut ties with Russia. In Virginia, the governor, state lawmakers and local mayors have all announced swift action intended to economically harm Russia. 

On Feb. 26, 2022, Gov. Glenn Youngkin announced that Virginia would sever ties with “primarily Russian companies” in response to the Russian invasion of Ukraine. The Virginia Department of General Services, which oversees state contracts with private sector companies, began the review immediately. Youngkin also called on the governing bodies of the Virginia Retirement System (VRS) and the state’s public universities to end their investments in Russian companies. The VRS, totaling $107 billion in assets, estimates that investments tied to Russia approximate 0.1% of the total fund. 

This announcement received bipartisan praise. Sen. Mark Warner (D-Va.), chair of the U.S. Senate Select Committee on Intelligence, responded: “We do need to re-examine [state investments], whether it’s VRS or state agencies doing business with Russia. We are trying to economically boycott them … and make these sanctions hurt. I think the more we can do as a state and as a community, I support Governor Youngkin on it.”

Virginia Senate President Pro Tempore Louise Lucas (D-Portsmouth) urged the governor to remove vodka and other Russian products from the state’s ABC liquor stores. As of Feb. 27, seven Russian-sourced vodka brands have been removed

Also in his Feb. 26 press release, Youngkin urged Roanoke and Norfolk to end their “city partnerships with Russian cities.” Norfolk Mayor Kenny Alexander responded to the governor’s press release with the following statement: “Freedom and self-determination are engrained in Norfolk’s spirit, and we stand in support of a free and independent Ukraine. I am requesting the Norfolk Sister City Association to immediately end its relationship with Kaliningrad, Russia. We continue to be inspired by the resilience and courage of the Ukrainian people and their leadership. Norfolk is proud to join many throughout the world who are rallying behind Ukraine, while calling out Russian President Vladimir Putin for his senseless, inhumane, and tyrannical acts of violent aggression against a sovereign and democratic nation.”

These Virginia-based actions illustrate how state and local governments can respond to global events by deploying various economic and political tools. In the wake of voters’ fierce opposition to the invasion, Republican and Democratic politicians at all levels of government are creatively addressing this international crisis. The effect of the governor’s efforts outside state agencies remains to be seen; however, several Virginia businesses are publicizing steps to divest Russian interests well beyond what current federal sanctions require. In addition, municipalities and state entities following the administration’s directive may look for replacement investments with new foreign partners in the wake of the announcement.

Other states and municipalities across the country have taken similar, bipartisan measures in response to the Russian invasion. To the extent that your company engages with state or local authorities on issues that could be impacted by Virginia’s (or other states’) measures, please contact the authors of this article.