President Biden unveils “further consequences” for Russian economy.

President Biden, following a meeting with the Leaders of the G7 on Thursday morning, addressed the ongoing Russian invasion of Ukraine as well as the “further consequences” that the U.S., in conjunction with many other nations, would be imposing against Russia. President Biden announced additional economic sanctions targeting major Russian financial institutions as well as more designations of Russian elites and their family members. Notably, President Biden for the first time announced that new export controls will be implemented to “cut off more than half” of Russia’s high-tech imports. However, despite pressures from domestic lawmakers and foreign heads of state, Russia was not ousted from the SWIFT financial messaging system, nor was Russian President Putin himself personally sanctioned. But, as President Biden made clear, such options remain “on the table.”

Export controls target Russian defense, aerospace, and maritime sectors.

Shortly after President Biden’s remarks on Thursday afternoon, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) announced in a press release that it is “implementing a sweeping series of stringent export controls that will severely restrict Russia’s access to technologies and other items that it needs to sustain its aggressive military capabilities.” Specifically, these new export controls will target Russian defense, aerospace, and maritime sectors and will effectively sever Russia’s access to vital technological inputs. According to BIS’s press release, these newly announced export control measures constitute “the most comprehensive application of Commerce’s export authorities on U.S. items, including technology, as well as on foreign items produced using U.S. equipment, software, and blueprints, targeting a single nation.” The regulation, which was publicly released by the Federal Register on February 24, 2022, takes effect immediately. This BIS final rule expands existing restrictions on exports to Russia and implements additional policies specifically for Russia and Russian end-users. Some of the most important policies being implemented by this final rule are (i) imposing new Commerce Control List ("CCL")-based license requirements for Russia (Categories 3 to 9 of the CCL); (ii) applying a stringent licensing review policy of denial to license applications for exports, reexports to, or transfers within Russia; (iii) expanding the scope of restrictions on Russian military end users and military end uses to cover all items subject to the EAR (with limited exceptions); (iv) adding two new Foreign Direct Product Rules for Russia and Russian military end users; (v) significantly limiting the use of EAR license exceptions for Russia exports, reexports, and transfers (in-country); and (vi) updating BIS’s Entity List and Military End User List.

Additional economic sanctions tighten grip on Russian financial system.

The U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) also issued a press release describing additional economic sanctions being imposed today, in partnership with allies and partners, targeting “the core infrastructure of the Russian financial system – including all of Russia’s largest financial institutions and the ability of state-owned and private entities to raise capital.” Today’s economic sanctions against Russia, which “target nearly 80 percent of all banking assets in Russia,” are designed to maximize long-term harm to the Russian economy and financial system, while minimizing the collateral harm to the others. Among the major economic actions being taken by OFAC are measures specifically targeting Russia’s two largest financial institutions – Public Joint Stock Company Sberbank of Russia (“Sberbank”) and VTB Bank Public Joint Stock Company (“VTB”) – which together account for “more than half of the total banking system in Russia by asset value.” In addition, OFAC is imposing blocking sanctions on three other major Russian financial institutions – Otkritie, Novikom, and Sovcom – that play a “significant role” in the Russian economy. OFAC is also expanding the number of Russian entities subject to debt and equity prohibitions to include more major state-owned and private entities. Moreover, OFAC is designating additional Russian elites and families close to Putin, many of whom are believed to participate in, or benefit from, Russia’s corrupt regime.

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Torres Law will continue to monitor Russia-related developments and will update our readers as new developments arise. In the meantime, if you wish to contact us, please do not hesitate to call us at 202.851.8200 or 214.295.8473.