US Imposes Additional Russia Sanctions, Investment Ban
The U.S. on April 6 issued a series of new financial restrictions on Russian banks, including full blocking sanctions on Sberbank and Alfa Bank, two of the country's largest financial institutions. The wide-ranging designations also include full-blocking sanctions against a group of Russian state-owned entities "critical" to funding the war in Ukraine, the White House said. Sanctions were also levied against additional Russian government officials, oligarchs and their family members, including the adult children of Russian President Vladimir Putin and members of the Russian security council. President Biden also issued an executive order blocking new investment in Russia by Americans or American companies.
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The new sanctions will "dramatically" escalate U.S. financial restrictions against Russia, a senior administration official told reporters April 6, adding that Sberbank holds one third of all bank assets in Russia. Alfa Bank is Russia’s largest private financial institution and Russia’s fourth-largest financial institution overall, the Office of Foreign Assets Control said. "This will make sure that the the mass exodus from Russia that we're seeing from the private sector, which is now over 600 multinational companies and growing, will endure," the official said.
The president's new executive order will ban all new investment in Russia by U.S. people or companies, regardless of their location, as well as “any category of services" determined by the Treasury Department. "Without investment from our private sector," the administration official said, "Putin will lose private sector know-how and skills that travel with investment. The knock-on effects to the ongoing brain drain from Russia will be profound."
OFAC updated its Specially Designated Nationals List to include an additional 18 Russian individuals, 50 entities, and five vessels. OFAC also issued Russian General Licenses 8B, 9B, 10B, 21, 22 and 23. The licenses allow interactions with Russian banks for the purpose of energy purchases through 12:01 a.m. eastern daylight time, June 24, 2022, and wind-downs of some financial transactions with Sberbank.
OFAC had previously imposed a "dollar-clearing prohibition" on Sberbank in February (see 2202240069), the administration official said, which restricted the bank's ability to conduct transactions in U.S. dollars. But the new blocking sanctions mean "any transaction in any currency with a U.S. person or US institution" involving Sberbank is prohibited. "It's a much more severe action," the person said. "This is the most severe action we can take in terms of financial measures."
The administration expects the full-blocking sanctions against Sberank and other Russian entities to dramatically restrict which countries will accept their business. "In practice, the history of sanctions shows us that when we impose a full-blocking sanction on a financial institution, the rest of the world, even in other jurisdictions that had not yet imposed a full-blocking sanction, they respect the regime," the official said. "And so there tends to be a multiplier effect. That's what we expect to happen here as well."
Even before the latest round of restrictions, the U.S.'s sanctions have been "generating the impact we wanted," the official added. "The reality is the country is descending into economic and financial and technological isolation."