Yesterday, President Biden issued an executive order (EO) prohibiting US persons from engaging in new investment, trade, and financing in Donetsk and Luhansk — two Russian-backed separatist regions in Eastern Ukraine. The restrictions come after President Putin signed two decrees earlier in the day recognizing the independence of the self-proclaimed separatist Donetsk People's Republic (DNR) and the Luhansk People's Republic (LNR).
The EO largely mirrors the current sanctions regime in the Crimea Region of Ukraine, which prohibits the following:
- New investment in DNR or LNR regions of Ukraine by a US person, wherever located;
- The importation into the United States, directly or indirectly, of any goods, services, or technology from the DNR or LNR;
- The export, reexport, sale, or supply, directly or indirectly, from the United States, or by a US person, wherever located, of any goods, services, or technology to the DNR or LNR; and
- Any approval, financing, facilitation, or guarantee by a US person, wherever located, of a transaction by a foreign person where the transaction would be prohibited by the EO if performed by a US Person or within the United States
The EO permits the US Secretary of Treasury (Treasury), in consultation with US Secretary of State (State), to expand the EO to other regions of Ukraine. The EO permits Treasury and State to block all property within the US Jurisdiction of any person that continues to operate in the DNR or LNR regions as of February 21, 2022. Officials of entities within DNR or LNR and any person who acts on behalf of or assists any blocked individual may also be determined to have their property subject to US jurisdiction blocked. Thus, there could be subsequent designations of individuals or entities under this EO.
The effect of this executive order is immediate. The Treasury issued six general licenses, which allow for the wind down of activities and permit the export of humanitarian aid, such as food and medicine, to the affected regions. Telecommunications, internet services, and mail operations will remain operational.
The White House stressed this measure is separate from any additional sanctions the United States and its allies have been preparing in the event Russia further invades Ukraine. Therefore, we anticipate that additional sanctions are on the horizon as Russia's aggressive tactics continue.
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