Developments in U.S. and EU Sanctions Relating to Ukraine

On March 20, 2014, the United States designated a number of individuals and one entity for sanctions in connection with events in Ukraine, and President Obama issued a new Executive Order further expanding authority for U.S. sanctions. The attached memorandum provides further detail on these developments, and a brief summary follows:

• On March 20, the United States designated an additional 20 Russian individuals for sanctions, and one entity, Bank Rossiya of St. Petersburg. Unlike the designations of March 17, 2014, the individuals designated today are not restricted to Russian government officials and include a number of prominent Russian business leaders. Bank Rossiya is the first entity to be sanctioned.
• These sanctions do not affect the Russian Government more broadly, although they do affect direct dealings with the sanctioned officials.
• Any entity in which a sanctioned person or entity owns a 50% or greater interest is also sanctioned by operation of law. According to press reports, three additional Russian banks fall in this category and, if the reports are correct, are also sanctioned: SMP Bank, Sobinbank, and Investcapitalbank. Entities in which a sanctioned person owns a significant stake under 50% may face difficulties in U.S.-linked dealings but are not unambiguously blocked.
• An Executive Order also issued on March 20 authorizes, but does not impose, broader sanctions targeting entities in as-yet unspecified sectors of the Russian economy. Any such sanctions would not necessarily affect the entire sector; rather, a sector would be designated as a potential sanctions target but only individually named companies within that sector would in fact be sanctioned.
• The U.S. approach to sanctions appears unchanged, with relatively limited sanctions against individuals and entities imposed as a first step with the threat of broader sanctions held in reserve against further developments.

We will continue to monitor these developments closely. Please feel free to raise any concerns you may have with any of your regular contacts at the Firm, or with Paul Marquardt in our Washington office regarding U.S. sanctions, or with Till Müller-Ibold in our Brussels office or Sunil Gadhia in our London office regarding European sanctions.