Reed Smith Client Alerts

On April 15, 2021, President Biden issued a new executive order (EO), “Blocking Property with Respect to Specified Harmful Foreign Activities of the Government of the Russian Federation.” This new executive order is designed to supplement the U.S. government’s toolkit to address and counter Russia’s “destabilizing behavior.” Simultaneously, the Biden administration designated a number of entities operating in the Russian technology sector, as well as some individuals and entities for their attempted influence of the 2020 U.S. presidential election. The United States also sanctioned persons and entities for asserting unauthorized governmental authority over the Crimea region of Ukraine. Under these new sanctions, persons doing business in Russia or those with supply chains involving Russia should carefully consider whether designated persons, or persons who are likely to be designated, are involved.

Authors: Leigh T. Hansson Michael J. Lowell Sarah S. Wronsky Alexander Brandt Paula A. Salamoun Eli Rymland-Kelly Ozra O. Ajizadeh

The new executive order

Blocking sanctions

The EO, “Blocking Property with Respect to Specified Harmful Foreign Activities of the Government of the Russian Federation” (April 15 EO), authorizes the Office of Foreign Assets Control (OFAC) and the Department of State to target persons operating in the technology or defense sector of the Russian economy, and any other sector of the Russian economy, as determined by the Secretary of Treasury, with blocking sanctions. Although prior to the April 15 EO, the United States had already targeted Russia’s defense, financial, and energy sectors under other legal authorities, the Biden administration’s inclusion of the technology sector, and identification of the use of digital currencies as a means to evade sanctions, could lead to the designation of other technology companies.

In addition to targeting Russia’s technology and defense sector, the April 15 EO immediately authorizes sanctions on persons involved in certain actions on behalf of the Russian government. Specifically, the April 15 EO authorizes the imposition of sanctions on persons determined to have engaged in or attempted to engage in the following activities: malevolent cyber-enabled activities; obstruction in a U.S. or other foreign government election; actions or policies that undercut democracy in the United States or abroad; transnational corruption; inflicting bodily harm to or causing the death of a U.S. person, citizen, or national of a U.S. ally; activities that threaten the tranquillity, safety, political strength, or territorial cohesion of the United States, its partners, or allies; or organizing transactions to evade U.S. sanctions, including through the use of digital currencies or assets.

The April 15 EO also authorizes sanctions on:

  • Russian persons or companies determined “to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of a government” subject to blocking sanctions including the governments of Cuba, Iran, Syria, North Korea, and Venezuela; and
  • Russian persons or companies determined to be complicit in, responsible for, or to have engaged in or attempted to engage in, cutting or interfering with energy or gas supplies to Asia, Europe, or the Caucasus.

Finally, and likely the most relevant to persons with Russian business, the April 15 EO authorizes sanctions on any person determined to have materially assisted, sponsored, or provided certain forms of support for, or goods or services to or for the aid of any person who is currently or becomes designated under the April 15 EO. Practically speaking, this means that certain dealings by non-U.S. persons with persons designated under the April 15 EO will give rise to a sanctions risk.