Home Consumer debt New US Sanctions Targeting Russia’s “Harmful Foreign Activities”, Including Restrictions on Russian Sovereign Debt Transactions – International Law

New US Sanctions Targeting Russia’s “Harmful Foreign Activities”, Including Restrictions on Russian Sovereign Debt Transactions – International Law



On April 15, 2021, President Biden signed a new Executive Decree on “Blocking property with respect to specified harmful foreign activities of the Government of the Russian Federation” (OE), declaring a new national emergency and authorizing sweeping sanctions in response to recent “harmful foreign activities” undertaken by the Russian Federation (Russia). On the same day, the US Department of the Treasury (Treasury) took a number of sanctioning measures aimed at further protecting the national security interests of the United States. These actions include:

  • Important news directive prohibiting certain operations on Russian sovereign debt.
  • New punishments Actions designating 22 entities and 16 individuals as Specially Designated Nationals (SDNs) in efforts to undermine U.S. national security, including involvement in the related Kremlin Solar winds cyberattack and Russia efforts influence the 2020 US presidential election.
  • New sanction designations of five persons and three entities concerning the continued occupation by Russia of the Crimean region in Ukraine.

The sanctions package published on April 15 did not notinclude new sanctions (which are permitted by law) on all activities related to the controversial Nord Stream 2 pipeline, but those sanctions were reportedly prepared and then withdrawn amid the ongoing debate within the Biden administration.

These sanctions measures reflect the latest escalation in US-Russian tensions and create serious compliance issues for both American and non-American people doing business with Russia.1 We give below a brief overview of the related actions of the OE and the Treasury.

The OE

The IB largely allows the Treasury’s Office of Foreign Assets Control (OFAC) to impose sanctions on individuals and entities involved in Russia’s “specified harmful foreign activities”.2 Namely, the OE authorizes sanctions against individuals and entities that the US government determines to have, directly or indirectly, supported any of the following activities undertaken by Russia:

  1. Malicious cyber activity;
  2. Interference with a US election or other foreign government;
  3. Actions or policies that undermine democratic processes or institutions in the United States or abroad;
  4. Transnational corruption;
  5. Murder, murder or other unlawful homicide or causing other bodily harm to a person of the United States or to a citizen or national of a United States ally or partner;
  6. Activities that undermine the peace, security, political stability or territorial integrity of the United States, its allies or partners; Where
  7. Deceptive or structured transactions or transactions to circumvent any US sanction, including through the use of currencies or digital assets or the use of physical assets.

The OE also gives the US government broad authority to issue new sanction measures against Russian individuals and entities involved in the “shutdown or disruption of gas or energy supplies” in Europe, Asia. or in the Caucasus region, and against any individual or entity in general that operates or have operated in Russia’s technology sector, defense and related materials sector, or any other economic sector such as determined by the Treasury.

The Sovereign Debt Directive

As of June 16, 2021, U.S. financial institutions are generally prohibited from purchasing ruble-denominated bonds directly from Russia. Specifically, in an effort to stem the mobilization of international capital from Russia, OFAC issued a new directive under the OE on April 15, 2021 (Directive 1) prohibiting US financial institutions from engaging in the following activities:

  1. Participation in the primary market of bonds denominated in rubles or not in rubles issued after June 14, 2021 by the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation or the Ministry of Finance of the Russian Federation;
  2. Lending funds denominated in rubles or not to the Central Bank of the Russian Federation, the National Heritage Fund of the Russian Federation or the Ministry of Finance of the Russian Federation; Where
  3. Any transaction that circumvents, avoids, violates or attempts to violate the prohibitions on sovereign debt set out in Guideline 1, as well as any conspiracy to do the same.

In accordance with other sanctions regimes, Directive 1 defines “US financial institutions” as including any US entity (including its foreign branches) whose business consists of accepting deposits, making, granting, transferring, holding or to negotiate loans or other credit extensions, or to buy or sell currencies, securities, commodity futures or options, or to recruit buyers and sellers thereof, as principal or agent, as well as branches, offices and agencies of foreign financial institutions located in the United States.

Guideline 1 follows a similar 2019 model linked to Russia directive issued under the Chemical and Biological Weapons Control and the Elimination of War Act, 1991, as amended, 22 USC 5601 et seq. (the CBW Directive), prohibiting “American banks” from engaging in activities related to the direct purchase of no ruble dominated bonds and the loan of no ruble funds denominated at Russian sovereign entities (including those identified under Directive 1). Significantly, Directive 1 separately expands the prohibitions in the CBW Directive to include ruble-denominated transactions involving the Russian central bank, the sovereign wealth fund and the finance ministry.

However, in the Frequently Asked Questions (FAQ) published with Directive 1, the Treasury clarified that directive 1 does not notapply to US financial institutions participating in the secondary market for bonds issued by the Russian central bank, sovereign wealth fund and the Ministry of Finance. In addition, the Treasury Explain that OFAC’s 50% ownership rule (described below) also does not apply to these prohibitions. Therefore, the prohibitions in Directive 1 are limited to direct transactions with the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation or the Ministry of Finance of the Russian Federation.

Targeted sanctions

On April 15, 2021, OFAC imposed sanctions on 16 individuals and 22 entities in connection with Russia’s malicious cyber activity, designating each as an SDN. First, in accordance with the OE, OFAC has designated six entities “operating in the technological sector of the economy of the Russian Federation that support the Russian intelligence services”, including the Federal Security Service (FSB), Russia’s Main Intelligence Directorate (GRU) and the Foreign Intelligence Service (SVR), which was the Russian agency allegedly responsible for the 2020 SolarWinds cyberattack on US government and private systems. Second, OFAC separately named 16 individuals and 16 companies as SDNs for attempting “to influence the 2020 US presidential election under the leadership of the Russian government,” including several community-associated disinformation outlets. Russian intelligence.

OFAC has also designated five individuals and three entities as SDNs as part of Russia’s ongoing activities in the Crimean region of Ukraine. These designations impose sanctions on persons who, according to OFAC, asserted government authority over the Crimean region in Ukraine, persons and entities involved in the construction of a bridge over the Kerch Strait and the detention center. of Simferopol located in the Crimea region of Ukraine. These Crimea-related designations reflect similar sanctions measures taken by countries allied to the United States, including the European Union, the United Kingdom, Canada and Australia.

U.S. persons, including U.S. financial institutions, are generally not permitted to transact with SDNs and are required to block (that is, freeze) any property or interest in property owned by corporate entities. SDN. Under OFAC’s 50% ownership rule, entities 50% or more owned, directly or indirectly, by one or more SDNs as a whole are also subject to OFAC sanctions, even if the ‘OFAC does not publicly list these entities as SDNs. American people must therefore do due diligence with their foreign counterparties to ensure that they are not 50% or more owned by SDNs.


Given the massive efforts to curb U.S. investment in Russian sovereign debt and to punish malicious Russian cyber actors, the OE should serve as a clear signal that the Biden administration intends to take a firm stance on them. Russia’s extraterritorial activities, and we expect US and Russian tensions to continue to escalate. Therefore, any commercial, financial or other enterprise engaged in the region must carefully review its operations in light of these new restrictions. The US government, moreover, is likely to take additional sanctions under the OE, the severity of which will depend on Russia’s continued efforts at foreign intelligence and influence.


1. Within the framework of the OE, the US State Department also expelled 10 Russian diplomats, including several representatives of the Russian intelligence services.

2. According to the OE, Russia’s harmful foreign activities include, but are not limited to, efforts: “to undermine the conduct of free and fair democratic elections and democratic institutions in the United States and its allies and partners; engage in and facilitate cyber-activated malicious activity against the United States and its allies and partners; promote and use foreign bribery to influence foreign governments; pursue extraterritorial activities targeting dissidents or journalists; undermine security in countries and regions important to the national security of the United States; and violate well-established principles of international law, including respect for the territorial integrity of States.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.