In the 24 hours since Russia’s announcement that it will recognize the independence of two regions in Ukraine, the United States (“US”), European Union (“EU”) and United Kingdom (“UK”) have taken initial actions in response that have significant implications for businesses. The initial round of sanctions include restrictions targeting certain Russian financial institutions, individuals closely tied to the Kremlin, Russian sovereign debt, and territorial restrictions against the two affected regions in Ukraine. While it remains to be seen how Russia will respond, we expect other jurisdictions to follow suit, and the US, EU and UK have signaled a resolve to impose additional and more restrictive measures in response to further Russian actions they view as destabilizing Ukraine.

Because of the historic complexity of sanctioning a jurisdiction that is as integrated into the global economy as Russia, today’s actions and these measures—and the responses of Russia and its allies and proxies—will likely be the first in a series of legal changes that will significantly impact transactions, investments and operations well beyond the borders of Russia and Ukraine.

We provide below: (i) an overview of sanctions actions taken by the US, EU and UK in the first 24 hours since Russia’s announcement and their implications for companies; (ii) a discussion of the kinds of additional potential sanctions and export control measures that the US, EU, UK and other jurisdictions have been considering and may implement in the event of further escalation; and (iii) considerations for companies to potentially consider as they navigate these issues in the coming period.

US: Executive Order on Investment, Trade and Financing in the DNR and LNR, and New Sanctions on Russian Banks, Sovereign Debt, and Individuals

On February 21, 2022, in response to the Russian government’s recognition of the independence of the Donetsk People’s Republic (“DNR”) and the Luhansk People’s Republic (“LNR”), President Biden issued Executive Order 14065, “Blocking Property of Certain Persons and Prohibiting Certain Transactions With Respect to Continued Russian Efforts to Undermine the Sovereignty and Territorial Integrity of Ukraine” (the “Executive Order”), announcing new restrictions on investment, imports from and exports to and financing relating to the DNR and LNR.1 On February 22, 2022, President Biden further announced new comprehensive sanctions on two large, Russian state-owned banks, their subsidiaries, and associated vessels; comprehensive sanctions on a number of Russian elites and their family members; and additional sanctions on Russian sovereign debt. President Biden also highlighted US cooperation with Germany to block the Nord Stream 2 pipeline and stated that these would be the “first tranche of sanctions,” making clear that additional US sanctions are likely to follow. In conjunction with this announcement, the US Department of Treasury’s Office of Foreign Assets Control (“OFAC”) also issued two General Licenses authorizing the wind-down of transactions involving VEB, and VEB’s servicing of sovereign debt.

President Biden’s February 21, 2022 Executive Order expands the scope of the national emergency declared in prior Russia-related executive orders—13660 of March 6, 2014, expanded by 13661 of March 16, 2014; 13662 of March 20, 2014; 13685 of December 19, 2014; and 13849 of September 20, 2018—to address the Russian government’s alleged recognition of the DNR and LNR as independent.

While the DNR and LNR have been designated by OFAC as Specially Designated Nationals and listed on the US Department of Commerce’s Bureau of Industry and Security’s (“BIS’s”) Entity List since July 2014, the Executive Order would take further action and impose the following new restrictions relating to the DNR and LNR regions:

  • Prohibit investment by US Persons (US citizens and permanent residents and US entities wherever located, as well as anyone otherwise located in the United States) in the DNR and LNR regions of Ukraine or other regions of Ukraine (“Covered Regions”) as determined by the Secretary of the Treasury, in consultation with the Secretary of State;
  • Prohibit the direct or indirect importation of any goods, services, or technology from the Covered Regions into the United States;
  • Prohibit the direct or indirect export, reexport, sale or supply of any goods, services or technology to the Covered Regions from the United States or a US Person, wherever located; and
  • Prohibit any approval, financing, facilitation or guarantee by a US person, wherever located, of a transaction by a foreign person where such a transaction would be prohibited if it involved a US Person.

The Executive Order also establishes new authority, as of February 21, 2022, for the Secretary of the Treasury, in conjunction with the Secretary of State, to impose sanctions on the following parties:

  • Persons found to operate or to have operated in the Covered Regions since the date of the Executive Order;
  • Persons who are or have been, since the date of the Executive Order, a leader, official, senior executive officer or member of the board of directors of an entity operating in the Covered Regions;
  • Persons owned or controlled by, or who have acted or purported to act for or on behalf of, directly or indirectly, any person sanctioned pursuant to the Executive Order; or
  • Persons who have materially assisted, sponsored, or provided financial, material or technological support for, or goods or services to or in support of, any person sanctioned pursuant to the Executive Order.

In conjunction with the Executive Order, OFAC also issued a number of new General Licenses authorizing certain activities relating to the DNR and LNR, including:

  • The wind down of transactions involving the DNR and LNR;
  • 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 DNR and LNR;
  • Certain transactions related to telecommunications and mail, including activities of common carriers “involving the Covered Regions that are ordinarily incident and necessary to the receipt or transmission of mail and packages,” except those involving persons blocked pursuant to the Executive Order;
  • Transactions related to official business of international organizations;
  • Certain noncommercial, personal remittances and certain activities “that are ordinarily incident and necessary to maintaining, operating, or closing an account of an individual ordinarily resident in the Covered Regions” so long as they are not for the benefit of persons blocked pursuant to the Executive Order. Notably, this General License permits “[t]ransferring institutions [to] rely on the originator of a funds transfer with regard to compliance…provided that the transferring institution does not know or have reason to know that the funds transfer is not in compliance”; and
  • Transactions that are ordinarily incident and necessary to the exportation or reexportation, directly or indirectly, from the US or by US persons, to Covered Regions of certain services and software incident to internet-based communications so long as they are not for the benefit of persons blocked pursuant to the Executive Order and provided that the relevant software is either classified as EAR99 or under Export Control Classification Number (“ECCN”) 5D992.c pursuant to the Export Administration Regulations (“EAR”). In the case of software not subject to the EAR, this General License requires that such software not be listed under any multilateral export control regime.

On February 22, 2022, President Biden and OFAC announced a “first tranche” of sanctions on Russia, pursuant to Executive Order 14024 of April 15, 2021, “Blocking Property With Respect To Specified Harmful Foreign Activities of the Government of the Russian Federation.” These actions include:

  • Comprehensive sanctions on two large Russian state-owned banks: State Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank (“VEB”) (previously subject to US sectoral sanctions) and Promsvyazbank Public Joint Stock Company (“PSB”), 42 of their affiliates, and 5 vessels indirectly owned by PSB;
  • Sanctions on a number of Russian elites and their family members;
  • Issuance of Russia-related Directive 1A, “Prohibitions Related to Certain Sovereign Debt of the Russian Federation” (the “Russia-related Sovereign Debt Directive”), extending existing sovereign debt prohibitions to encompass participation in the secondary market for bonds issued after 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.2

President Biden also announced that the US had cooperated with Germany “to ensure that Nord Stream 2…will not move forward,” further to German action earlier on February 22, as discussed below.

UK: New Sanctions Designations

On February 22, 2022, the UK announced comprehensive sanctions on five Russian banks and three Russian individuals. The new designations were made under the UK’s Russia (Sanctions) (EU Exit) Regulations 2019, which were expanded earlier this month to grant the UK government authority to impose assets freezes and travel bans on a broader range of individuals and entities.

The sanctions announced by the UK government are not as wide in scope as the package of sanctions announced by the US nor as the proposed EU package. Notably, many of the UK sanctions targets were previously designated by the US and EU. The UK assets of the targets will now be subject to an asset freeze, and the three individuals will be banned from entering the UK.

Prime Minister Boris Johnson described this as the “first barrage” of sanctions by the UK, signaling what we expect to be additional designations under the existing regulations. Additional regulations would need to be laid before Parliament in order to impose many of the broader sanctions measures that have been proposed as part of the US and EU responses, but no significant objections are expected in the House of Commons.

EU: Adoption of New Sanctions Package

Immediately following the Russian government’s recognition of the independence of the DNR and LNR, the Presidents of the European Council and the European Commission issued a joint statement stressing that the EU would “react with sanctions against those involved in this illegal act.”3

While the EU had preemptively prepared a comprehensive package of sanctions in case of a full-fledged invasion of Ukraine by Russia, reportedly including unprecedented sanctions targeting inter alia Russia’s financial sector and exports of key technologies, no position had been agreed on regarding the sanctions to be imposed in other scenarios.

As a result, informal discussions took place the morning of February 22 between the EU institutions and Member States in order to formalize the scope of the sanctions to be adopted. At mid-day, the Presidents of the European Council and the European Commission issued another joint statement confirming that a new package of sanctions would be put for a vote by the member states.4

Following an informal meeting of EU foreign ministers in Paris, which started at 4 pm (CET) on February 22, 2022, the Commission announced that a political agreement had been reached for a new package of sanctions which would “directly target individuals and companies involved in [the violations of international law by the Kremlin]. They target banks that finance the Russian military apparatus and contribute to the destabilisation of Ukraine. We are also banning trade between the two breakaway regions and the EU – as we have done after the illegal annexation of Crimea in 2014. And finally, we are limiting the Russian government´s ability to raise capital on the EU's financial markets.”5

In practical terms, the EU is reported to have imposed:

  • Asset freeze measures against Russian lawmakers (including 351 members of the Russian State Duma who voted for the recognition of the DNR and LNR), as well as 27 individuals and entities in the political, military, business and media sectors, including banks associated with the DNR and LNR;
  • Sanctions targeting the ability of the Russian government to access the EU’s capital and financial markets, likely consisting of restrictions on securities and money-market instruments issued by, as well as loans and credits granted to, Russia, the Russian government, its public bodies, corporations or agencies, as well as certain entities associated with them;
  • Sanctions targeting economic relations between the EU and the DNR and LNR, likely replicating existing restrictions applicable to Crimea/Sevastopol.

At the time of this Legal Update, the legal texts imposing these sanctions had not yet been published. However, it was confirmed that the legal texts were undergoing scrutiny to be formally adopted and published on February 23, 2022. New sanctions will start to apply as soon as they are published in the Official Journal of the EU.

Additional sanctions may also be discussed and imposed at a later stage, if the situation in Ukraine further deteriorates. As emphasized by the European Commission’s President, “[i]f Russia continues to escalate this crisis that it has created, [the EU is] ready to take further action in response.”6

On a separate but related note, on February 22, Germany also announced its decision to suspend the approval for the Nord Stream 2 pipeline.

Preparing for New Sanctions and Export Controls

The considerations above lead to several conclusions.

First, as a result of the initial measures adopted in the US and UK today, and the legal texts expected to be published by the EU tomorrow, potentially impacted companies should immediately take steps to evaluate the potential impact on their operations and dealings, and carefully consider their options in light of these new restrictions. Companies with with Ukraine-related business—whether presence in the country, sales to or from the country, or with business partners whose operations may involve a presence in the affected regions—should quickly identify and evaluate those relationships to assess whether they may have direct or indirect ties to the DNR and LNR. More generally, in light of the significant role that VEB, Promsvyazbank and its affiliates play in Russia-related financial transactions (both inside and outside Russia) across a variety of sectors, companies with Russia-related business or business partners should closely evaluate their ties to these institutions or any of the newly designated individuals for interests that may trigger restrictions and potential reporting obligations. Wind-down general licenses provide important potential avenues for existing relationships and mitigating associated commercial and dispute risks, but should be evaluated carefully with both legal and practical considerations in mind in order to ensure the issues are managed appropriately.

Second, as the discussion above suggests, as US, EU and UK officials have signaled for months and in statements today, the potential sanctions that may be imposed in the near and medium term may be far more expansive than this initial round of restrictions. Indeed, these initial measures reflect a relatively limited approach that is likely intended to reflect an assessment of proportionality to Putin’s relatively limited initial steps and the possibility of further and more aggressive escalation. Companies with potentially impacted operations and business relationships should consider the range of possible measures, which officials have signaled for several months, and the potential impact on their activities. This includes in respect of likely impacted sectors, potential expansion of export controls to expand reach and target technologies and goods of strategic value to Russia’s economy, consideration of the sufficiency of existing KYC due diligence to assess beneficial ownership issues, and existing contractual protections, termination rights and potential dispute considerations. Consideration should also be given to appropriate recusal mechanisms to ensure compliance with potentially applicable prohibitions on “facilitation” (including direction, decision-making or approval) by US Persons with respect to dealings involving sanctions targets.

Third, there are a number of complex legal, political and national security considerations that will impact the direction of travel in the coming months and that may have significant collateral consequences for companies navigating these issues. Much will depend on how Russia responds to and counters Western sanctions, both directly, through strategic cooperation with others who may have common interests, and through informal proxy networks. Companies with significant legal and operational exposure and risk should take a holistic approach to risk planning and mitigation (including legal, operational, reputational and government relations dimensions) and have a plan in place to ensure active monitoring of developments across jurisdictions and internal communications in real time based on their risk profile and interests.

1 See

2 See

3 Press statement by President Charles Michel of the European Council and President Ursula von der Leyen of the European Commission, February 21, 2022, available at:

4 Statement by the Presidents of the European Council and European Commission on Russian aggression against Ukraine, February 22, 2022, available at:

This was subsequently echoed by the EU High Representative. Ukraine: Declaration by the High Representative on behalf of the European Union on the decisions of the Russian Federation further undermining Ukraine’s sovereignty and territorial integrity, February 22, 2022, available at:

5 Press statement by President von der Leyen on the EU's response to the Russian aggression against Ukraine, February 22, 2022, available at:

6 Ibid.

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