The U.S. government escalated sanctions against the Russian Federation following the U.S. Department of State's determination that, in connection with Russia's alleged use of the "Novichok" nerve agent in Salisbury, United Kingdom in March 2018, the country had failed to comply with the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (amended as the "CBW Act").
Under a new CBW Act Directive, which OFAC issued pursuant to an August 1, 2019 Executive Order, U.S. banks will be prohibited from (i) participating in the primary market for non-ruble denominated bonds issued by the Russian sovereign and (ii) lending non-ruble-denominated funds to the Russian sovereign. "Russian sovereign" is defined as any ministry, agency or sovereign fund of the Russian Federation, including the Central Bank of Russia, the National Wealth Fund, and the Ministry of Finance of the Russian Federation, but the term does not encompass "state-owned enterprises of the Russian Federation." OFAC also published a list of FAQs related to the CBW Act Directive.
As described in a press release issued by the U.S. Department of State, the aforementioned prohibitions on activities by U.S. banks will be accompanied by (i) U.S. opposition to the extension of any loan or financial or technical assistance to Russia by international financial institutions, and (ii) additional export licensing restrictions on U.S. Department of Commerce-controlled goods and technology.
The CBW Act Directive and other measures will become effective on August 26, 2019, following a 15-day Congressional notification period.
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