Update: OFAC Imposes Costs On Russia For Annexation Of Ukrainian Territory

On September 23, G7 Leaders issued a statement condemning Russia’s recent attempts to annex parts of Ukrainian territory. In support of the statement, the US Department of Treasury’s Office of Foreign Assets Control (“OFAC”) issued a Russia-related guidance that warns of the heighted sanctions risk that international actors outside of Russia would face for providing political or economic support to Russia “FAQ 1091.” The new guidance emphasizes OFAC’s willingness to target persons — inside or outside Russia — whose activities may constitute material assistance, sponsorship, or provision of financial, material, or technological support for, or goods or services (together “material support”) to or in support of persons sanctioned pursuant to Executive Orders 13660, 14024, and 14065.

In particular, OFAC will leverage existing authorities to target entities and individual jurisdictions outside Russia that provide political or economic support for Russia’s “sham” attempt to annex Ukrainian territory, including for (i) providing material support for the organization of Russia’s “sham” referenda or purported annexation, as well as economic or other activity that seeks to legitimize Russia’s “sham” referenda or purported annexation; (ii) providing material support to Russia’s military and defense industrial base, including transactions by persons in third countries that provide material support to Russia’s military, defense industrial base, and designated entities and persons operating or that have operated in Russia’s defense industrial base; (iii) attempting to circumvent or evade U.S. sanctions on Russia and Belarus; and (iv) providing material support to Russian entities or individuals that are subject to certain blocking sanctions.

FAQ 1091 notes, consistent with OFAC’s longstanding practice, that OFAC will generally not impose sanctions on non-U.S. persons that engage in transactions that would be authorized for U.S. persons, such as certain energy-related transactions.

In addition, OFAC updated its Specially Designated Nationals and Blocked Persons list to include 14 persons in Russia’s military-industrial complex, including two international suppliers, three key leaders of Russia’s financial infrastructure, immediate family members of some of senior Russian officials, and 278 members of Russia’s legislature for enabling Russia’s sham referenda and attempt to annex sovereign Ukrainian territory. As a result of OFAC’s designation, all property, and interests in property of the blocked persons located in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. In addition, any entities that are owned, directly or indirectly, 50 percent or more in the aggregate by one or more of such persons are also blocked. All transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of blocked or designated persons are prohibited, unless authorized by a general or specific license issued by OFAC, or otherwise exempt. These prohibitions include the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person and the receipt of any contribution or provision of funds, goods, or services from any such person.

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