Alert
12.22.14
On December 18, 2014, President Obama signed into law the Ukraine Freedom Support Act of 2014. The statute requires sanctions to be imposed against Russian arms broker/exporter Rosoboronexport and government-owned companies which the President determines produce, transfer or broker sales of defense articles to Syria, Ukraine, Georgia or Moldova. It provides authority for the President to impose sanctions against foreign persons who make investments in “special Russian crude oil projects,” against foreign financial institutions that facilitate sanctioned activities, and against Gazprom if it is determined that Gazprom is withholding gas supplies to NATO countries, Ukraine, Georgia or Moldova. Upon signing the law, however, the President stated that he does not intend to implement any sanctions authorized by the statute at this time. Separately, the European Union (EU) announced the approval of additional sanctions related to business in Crimea and Sevastopol, and the U.S. government took similar but broader action with the President issuing a new Executive Order prohibiting transactions involving Crimea.
Ukraine Freedom Support Act
The enactment of the Ukraine Freedom Support Act of 2014 starts the timeline for the following new extraterritorial sanctions:
The President is authorized on a contingent basis to prohibit investment in debt or equity and impose one other sanction on Gazprom if he determines that Gazprom is withholding significant natural gas supplies from NATO countries, Ukraine, Georgia, Moldova or similarly situated countries. In addition, the Commerce Department’s Bureau of Industry and Security is authorized to impose export controls and licensing requirements on the export and reexport of items for use in Russia’s energy sector, including equipment used for tertiary oil recovery. The statute authorizes military support for Ukraine and appropriates funds for non-military assistance.
The menu of sanctions that the President may impose on the defense and energy sectors, as discussed above, include:
All of the sanctions are subject to national security waivers and other exceptions.
The President already had the authority under existing Ukraine-related executive orders to impose the types of sanctions addressed in the Ukraine Freedom Support Act, but the enactment of the sanctions in statutory form will now allow Congress to pressure the Administration to use this explicitly granted authority should the situation in Ukraine deteriorate.
A copy of the law is available here.
EU Sanctions on Crimea
The EU issued EU Council Regulation 1351/2014, dated December 18, 2014, which applies broad additional sanctions on investment, services and trade with Crimea and Sevastopol effective December 20, 2014. This builds on existing EU sanctions for Crimea and includes:
For the first two prohibitions, contracts concluded before December 20, 2014 or related ancillary contracts are exempted. For the latter two, the prohibitions are delayed until March 21, 2015 for obligations arising from a contract concluded before December 20, 2014 or related ancillary contracts. Authorizations may be available for health and safety or humanitarian purposes or to ensure the safety of existing infrastructure.
U.S. Executive Order on Crimea
Acting in parallel with the EU, the President on December 19, 2014 issued a new Executive Order imposing a broad investment and trade embargo on Crimea, including prohibitions on:
The Executive Order also provides for blocking the property of any person who is determined by the Treasury Department to be operating in Crimea, to be a leader of any entity operating in Crimea, to be owned or controlled by or acting on behalf of any persons blocked person under the Executive Order, or to have materially assisted, financed or otherwise supported any persons blocked under the Executive Order.
Concurrently with the issuance of the Executive Order, the Treasury Department issued General License No. 4 authorizing the exportation or reexportation of certain agricultural commodities, medicine, medical supplies and replacement parts to Crimea. The Commerce Department is expected to issue rules under the Export Administration Regulations (EAR) to implement the trade restrictions.
Download: U.S. Sanctions Legislation Targets Russia While EU and U.S. Expand Crimea Sanctions