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Russian Harmful Foreign Activities Sanctions

886. What does Executive order (E.O.) of April 15, 2021, “Blocking Property with Respect to Specified Harmful Foreign Activities of the Government of the Russian Federation” do?

The E.O. of April 15, 2021 establishes a new national emergency under which sanctions may be imposed against individuals and entities furthering specified harmful foreign activities of the Russian Federation.  This national emergency is separate from the national emergency relating to the crisis in Ukraine, declared in E.O. 13660 and further addressed in E.O.s 13661, 13662, and 13685.  The new E.O. addresses national security threats posed by specified harmful foreign activities of the Russian Federation, including:  its efforts to undermine the conduct of free and fair democratic elections and democratic institutions in the United States and its allies and partners; engaging in and facilitating malicious cyber-enabled activities against the United States and its allies and partners; fostering and using transnational corruption to influence foreign governments; pursuing extraterritorial activities targeting dissidents or journalists; undermining security in countries and regions important to United States national security; and violating well-established principles of international law, including respect for the territorial integrity of states. 

As a result of the E.O. of April 15, 2021, all property and interests in property of persons designated pursuant to this E.O. that are or come within the United States or the possession or control of U.S. persons are blocked, and U.S. persons are generally prohibited from engaging in transactions with them.  Additionally, any entities 50 percent or more owned, directly or indirectly, by one or more blocked persons are also blocked. 

887. Are persons identified pursuant to Executive order (E.O.) 13662 as subject to Directive 3 for operating in the defense and related materiel sector of the Russian Federation economy blocked pursuant to the E.O. of April 15, 2021?

Persons identified pursuant to E.O. 13662 as subject to Directive 3 for operating in the defense and related materiel sector of the Russian Federation economy are not subject to prohibitions under the E.O. of April 15, 2021 unless those persons are also sanctioned pursuant to the E.O. of April 15, 2021.  For more information regarding Directive 3, please review applicable OFAC public guidance, such as FAQ 411.

The E.O. of April 15, 2021 provides for blocking sanctions on persons operating in the technology sector or the defense and related materiel sector of the Russian Federation economy, or any other sectors determined by the Secretary of the Treasury, in consultation with the Secretary of State.  The identification of a sector pursuant to the E.O. of April 15, 2021 provides notice that persons operating in the identified sector are exposed to sanctions risk; however, such identification does not automatically block all persons operating in the sector.  Only persons designated pursuant to the E.O. of April 15, 2021 for operating in the defense and related materiel sector of the Russian economy (or any other sector identified under the E.O.) are subject to blocking sanctions and will appear on the SDN List.

888. What does Directive 1 under Executive order (E.O.) of April 15, 2021 do?

Pursuant to Directive 1 under E.O. of April 15, 2021, “Blocking Property with Respect to Specified Harmful Foreign Activities of the Government of the Russian Federation,” the following activities by a U.S. financial institution are prohibited as of June 14, 2021: 

  1. Participation in the primary market for ruble or non-ruble denominated bonds 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; and 
  2. Lending ruble or non-ruble denominated funds to the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation.

Further, except to the extent otherwise provided by law or unless licensed or otherwise authorized by OFAC, the following are also prohibited pursuant to Directive 1: (1) any transaction that evades or avoids, has the purpose of evading or avoiding, causes a violation of, or attempts to violate any of the prohibitions contained in Directive 1; and (2) any conspiracy formed to violate any of the prohibitions in Directive 1. 

 

889. Does Directive 1 under Executive order (E.O.) of April 15, 2021 prohibit participation in the secondary market for bonds issued 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?

No, Directive 1 under E.O. of April 15, 2021 does not prohibit U.S. financial institutions from participating in the secondary market for bonds issued by these entities. 

890. Prior to June 14, 2021, are U.S. financial institutions prohibited from participating in the primary market for ruble or non-ruble denominated bonds issued by, or lending ruble or non-ruble denominated funds to, the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation?

Even prior to June 14, 2021, U.S. banks continue to be prohibited from participating in the primary market for non-ruble denominated bonds issued by the Russian sovereign (including the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation), and from lending non-ruble denominated funds to the Russian sovereign pursuant to the Russia-Related Directive under E.O. 13883 (the “CBW Act Directive”), which was issued on August 2, 2019.  However, the CBW Act Directive does not prohibit “U.S. banks” (as defined in the CBW Act Directive) from participating in the primary market for ruble denominated bonds issued by the Russian sovereign, or the lending of ruble denominated funds to the Russian sovereign. 

Starting June 14, 2021 (when the prohibitions in Directive 1 under E.O. of April 15, 2021 come into effect), “U.S. financial institutions” (as defined in Directive 1 under E.O. of April 15, 2021) are prohibited from participating in the primary market for ruble or non-ruble denominated bonds issued by, or the lending of ruble or non-ruble denominated funds to, the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation pursuant to Directive 1 under E.O. of April 15, 2021, unless otherwise authorized by OFAC.

Note that the prohibitions found in the CBW Act Directive remain in effect and are separate from the prohibitions in Directive 1 under E.O. of April 15, 2021.  For more information on the CBW Act Directive, please see FAQs 673 - 678

891. Does the 50 percent rule apply to Directive 1 under Executive order (E.O.) of April 15, 2021?

No.  The prohibitions of Directive 1 under E.O. of April 15, 2021 apply only to certain bonds issued by, or loans made to, the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation.  The prohibitions in Directive 1 do not apply to any entity that is owned, directly or indirectly, 50 percent or more by one or more of these three entities, whether individually or in the aggregate.