Feb. 24, 2022
The Charity & Security Network strongly condemns the Russian government’s decision to invade Ukraine, which poses a serious threat to the Ukrainian people, as well as the civil society groups working on their behalf. Read our statement here. The following article addresses sanctions issued by the U.S. government on Feb. 21 and 22, and does not address subsequent sanctions.
In response to the deployment of Russian troops in eastern Ukraine, the U.S. government imposed a range of new sanctions on Russian entities and parts of Ukraine. Some of these sanctions, detailed in a new executive order, target areas of Ukraine recognized by the Russian government as independent states—the Donetsk People’s Republic (DNR) and the Luhansk People’s Republic (LNR) regions. Treasury has also issued new sanctions targeting Russian financial institutions and individuals, as well as accompanying general licenses (GLs) and FAQs.
Below you can find C&SN’s summaries of these new sanctions, their accompanying general licenses and FAQs, and analysis on their implications for civil society.
Summary of Sanctions on Certain Regions of Ukraine
On Feb. 21, 2022, President Biden issued an Executive Order on Blocking Property of Certain Persons and Prohibiting Certain Transactions With Respect to Continued Russian Efforts to Undermine the Sovereignty and Territorial Integrity of Ukraine. Among other specifics, the order:
- Prohibits new investment in the DNR or LNR regions of Ukraine, or other regions of Ukraine as determined by the Secretary of Treasury, in consultation with the Secretary of State (collectively referred to in the order as the “covered regions”);
- Prohibits the importation, exportation (from the United States), or sale of goods, services or technology from the covered regions;
- Blocks property held within or by the United States or by U.S. persons, when the property belongs to people determined to operate in the covered regions, officials of entities operating in the covered regions, and anyone determined to be acting on behalf of or providing support to such people.
Summary of New General Licenses Related to Sanctions on Certain Regions of Ukraine
In line with a commitment in its sanctions policy review to “expand sanctions exceptions to support the flow of legitimate humanitarian goods and assistance and provide clear guidance at the outset when sanctions authorities are created and implemented,” Treasury’s Office of Foreign Assets Control (OFAC) issued several general licenses alongside these new sanctions.
Ukraine General License 17 authorizes transactions through 12:01 a.m. eastern daylight time, March 23, 2022, that are ordinarily incidental and necessary “to the wind down of transactions involving” the covered regions, “and the winding down of operations, contracts, or other agreements in effect prior to February 21, 2022 involving the exportation, reexportation, sale, or supply of goods, services, or technology to, or importation of any goods, services, or technology,” in the covered regions.
Ukraine General License 18 authorizes transactions that are ordinarily incidental and necessary to “the exportation or reexportation of agricultural commodities, medicine, medical devices, replacement parts and components for medical devices, or software updates for medical devices,” to the covered regions, as well as transactions that are ordinarily incidental and necessary to the “prevention, diagnosis, or treatment of COVID-19 (including research or clinical studies relating to COVID-19),” in the covered regions.
Ukraine General License 19 authorizes transactions that are ordinarily incidental and necessary to “to the receipt or transmission of telecommunications.”
Ukraine General License 20 authorizes certain governmental and international agencies and organizations to continue working in the covered regions, including the United Nations and related organizations; the International Centre for Settlement of Investment Disputes (ICSID) and the Multilateral Investment Guarantee Agency (MIGA); The African Development Bank Group, the Asian Development Bank, the European Bank for Reconstruction and Development, and the Inter-American Development Bank Group (IDB Group), including any fund entity administered or established by any of the foregoing; The International Committee of the Red Cross and the International Federation of Red Cross and Red Crescent Societies; and the Organization for Security and Co-operation in Europe.
Ukraine General License 21 authorizes transactions that are ordinarily incidental and necessary “to the transfer of noncommercial, personal remittances to or from” the covered regions, “provided the transfer is not by, to, or through any person whose property and interests in property are blocked,” by the executive order.
Ukraine General License 22 authorizes transactions that are ordinarily incidental and necessary “to the exportation or reexportation… of services incident to the exchange of personal communications over the internet, such as instant messaging, chat and email, social networking, sharing of photos and movies, web browsing, and blogging,” as well as “software necessary to enable” these services.
Summary of Sanctions Targeting Russian Financial Institutions and Individuals
On Feb. 22, 2022, the Office of Foreign Assets Control (OFAC) issued Directive 1A Under Executive Order 14024: Prohibitions Related to Certain Sovereign Debt of the Russian Federation. The directive:
- Prohibits U.S. financial institutions from buying, selling or lending ruble or non-ruble denominated 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.
- Prohibits U.S. financial institutions from participating in the secondary market for ruble or non-ruble denominated bonds issued after March 1, 2022 by the listed Russian financial institutions.
As part of the same package of sanctions, Treasury also added certain Russian individuals and entities to its Specially Designated Nationals (SDN) list, and its Non-SDN Menu-Based Sanctions (NS-MBS) list. Among the financial institutions added to these lists are State Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank (VEB) and Promsvyazbank Public Joint Stock Company (PSB), which according to a Treasury press release “play significant roles in the Russian economy.”
Summary of General Licenses and FAQs Related to Sanctions Targeting Russian Financial Institutions and Individuals
General License 2 authorizes transactions with VEB that are ordinarily incidental and necessary “to the servicing of bonds issued before March 1, 2022 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.”
General License 3 authorizes transactions with VEB that are ordinarily incidental and necessary “to the wind down of transactions involving” VEB, “through 12:01 a.m. eastern daylight time, March 24, 2022.”
FAQ 964 clarifies that a sector determination made by the Treasury Secretary, such as a financial services sector determination targeting Russia, “exposes persons who operate or have operated in an identified sector to sanctions risk; however, a sector determination does not automatically impose sanctions on all persons who operate or have operated in the sector.”
FAQ 965 clarifies that Directive 1A, issued on Feb. 22, 2022, replaces and supersedes Directive 1, issued on April 15, 2021. It further clarifies that Directive 1A expanded on prohibitions in Directive 1 to include “participation in the secondary market for ruble or non-ruble denominated bonds issued by these entities after March 1, 2022.”
Alongside these new FAQs, Treasury also updated previous FAQs to further clarify its positions on sanctions targeting Russia.
Implications for Civil Society
For civil society groups operating in both Ukraine and Russia, these new sanctions raise serious questions.
While OFAC’s general licenses relating to the president’s executive order cover a wide range of activities, important civil society operations are not explicitly protected by these licenses. For example, while Ukraine General License 18 protects a range of activities related to humanitarian aid such as the delivery of food and medicine, none of the general licenses explicitly protect peacebuilding or human rights activities. This lack of explicit protections is particularly troubling given serious concerns over human rights in the regions of Ukraine covered by these sanctions, and the need for human rights organizations to continue operating in these areas.
Furthermore, sanctions targeting Russian financial institutions that in Treasury’s own words “play significant roles in the Russian economy,” raise the prospect that these sanctions could harm innocent civilians and undermine Russian civil society. Such impacts to civil society organizations and programs have been the result in other contexts, most recently in Afghanistan, when financial institutions integral or significant to a national economy are targeted.
C&SN will be closely monitoring U.S. sanctions policy surrounding the current conflict in Ukraine and will share updates as the situation develops.