Transactions Affected by the Russian/Ukrainian Conflict Since 2014.

• Date: 01 March 2023
• Author: Zeldis, Lyubov

In 1989, seeking asylum, I immigrated to the United States from a country that no longer exists, the Soviet Union. At that time and for a number of years thereafter, when Americans asked me where I was from, to avoid a long explanation or a history lesson, I would simply reply, "Russia." This was a common response of emigres from the former Soviet Union. Regardless of what part of the Soviet Union we came from (I was born in and came from the republic of Moldova), many of us referred to ourselves as "from Russia," and in return, received warm and curious responses from most Americans. We were associated with the great achievements Russia was known for: Dostoyevsky's writings, Tchaikovsky's music, the Bolshoi Ballet, the arts, the architecture of St. Petersburg, etc. Many of us felt proud to have that connection.

No longer.

No longer does "I am Russian" receive a warm response, and no longer can we feel proud to be associated with the Russian Federation (Russia) and its regime. The purported annexation of Crimea, Ukraine, in March 2014 and certainly the invasion of Ukraine on February 24, 2022, changed the way the democratic world, and the U.S. in particular, feels about Russia.

This article provides a brief summary of the types of transactions affected, since 2014, by the Russian/Ukrainian conflict and references resources that may be helpful to legal practitioners in navigating the rapidly evolving regulatory framework. This article focuses mainly on the effects of the economic and trade sanctions administered and enforced by the U.S. Department of Treasury, Office of Foreign Assets Control (OFAC). This article does not intend to be and is not a detailed summary of all laws, regulations, and export controls implemented as a result of the invasion of Ukraine. Rather, it is meant to help legal practitioners and businesses to identify whether their transactions with Russia, Belarus, or Ukraine may be prohibited under the imposed sanctions, the extent and scope of the restrictions, and whether a license may be required. Review and analysis of the pertinent regulations to each situation will be necessary to determine specific restrictions and licensing requirements.

Russian/Ukrainian Sanctions: My First Experience

Since the collapse of the Soviet Union, many U.S. companies in various industries have participated in trade with Russia. As recently as 2019, U.S. goods and services trade with Russia totaled an estimated $34.9 billion, with exports totaling $10.9 billion and imports totaling $24.0 billion. The U.S. goods and services trade deficit with Russia was $13.1 billion in 2019. (1)

In July 2014, during my engagement in an exciting and complex transaction between a U.S. public company and an entity in Russia, the Russian entity was added to the Specially Designated Nationals (SDN) List. Needless to say, the work stopped instantaneously. At that time, the Russian/Ukrainian sanctions were fresh, the guidance was scarce, and the U.S. individuals and entities engaged with Russia and the former Soviet Union territories navigated with heightened caution. Guidance on proper compliance and the legal framework was very much needed. Now, eight years later, the U.S. government, through its agencies, including but not limited to OFAC; the U.S. Department of State; (2) the U.S. Department of Commerce, Bureau of Industry and Security (BIS); (3) the U.S. Department of State, Directorate of Defense Trade Controls (DDTC); (4) and the U.S. Securities and Exchange Commission, (5) provides guidance and resources for those who may be impacted by the Ukrainian/Russian conflict.

Genesis of the Russian/U.S. Sanctions

The Ukraine/Russia-related sanctions program, implemented by OFAC, commenced on March 6, 2014, when President Obama, in Executive Order (EO) 13660, declared a national emergency to deal with the threat posed by the actions and policies of certain persons who had undermined democratic processes and institutions in Ukraine; threatened the peace, security, stability, sovereignty, and territorial integrity of Ukraine; and contributed to the misappropriation of Ukraine's assets. (6)

In further response to the actions and policies of the government of the Russian Federation, including the purported annexation of the Crimea region of Ukraine, President Obama issued three subsequent EOs that expanded the scope of the national emergency declared in EO 13660. Together, these orders authorized, among other things, the imposition of sanctions against persons responsible for or complicit in certain activities with respect to Ukraine, against officials of the government of the Russian Federation, against persons operating in the arms or related materiel sector of the Russian Federation, and against individuals and entities operating in the Crimea region of Ukraine. EO 13662 authorized the imposition of sanctions on certain entities operating in specified sectors...