In a one-two punch, President Biden announced additional sanctions against Russia in response to Russia’s initial invasion of Ukraine’s regions in Donetsk and Luhansk (hereinafter “DNR” and “LNR”).  Yesterday, on February 21, 2022, President Biden issued a new Executive Order targeting the DNR and LNR regions of Ukraine.  These sanctions imposed an embargo similar to that imposed against the region of Crimea in 2014.

Today, President Biden announced additional sanctions against Russia, blocking: (1) VEB Bank (Vnesheconombank) and Promsvyazbank Public Joint Stock Company Bank (“PSB”), including 42 subsidiaries; (2) Russia’s sovereign debt; and (3) additional oligarchs closely associated with Russian President Putin.

VEB Bank and PSB Bank are state-owned institutions that play important roles in Russia’s financial system. VEB services a large amount of Russia’s sovereign debt, export financing and financing for investment projects. PSB plays a significant role in supporting Russia’s defense sector. PSB is Russia’s eighth largest  financial institutions.

OFAC’s action includes designation of 25 of VEB’s subsidiaries and 17 of PSB’s subsidiaries.  All entities owned 50 percent or more, directly or indirectly, by VEB or PSB are subject to the blocking and SDN Listing. The 42 specific entities are listed here.

OFAC issued general licenses authorizing certain transactions related to the wind-down of transactions involving VEB, as well as VEB’s servicing of sovereign debt.

As part of the designation of PSB, OFAC also designated five vessels owned by PSB Lizing OOO, a designated subsidiary of PSB,  These vessels include: (1) Baltic Leader (IMO: 9220639); (2) Linda (IMO: 9256858); (3) Pegas (IMO: 9256860); (4) Fesco Magadan (IMO: 9287699); and (5) Fesco Moneron (IMO: 9277412).

Sovereign Debt

OFAC also increased restrictions on dealings in Russia’s sovereign debt. Specifically, OFAC issued Russia-related Directive 1A under E.O. 14024, “Prohibitions Related to Certain Sovereign Debt of the Russian Federation,” amending and superseding Directive 1 under E.O. 14024. This extends existing sovereign debt prohibitions to cover participation in the secondary market for bonds issued after March 1, 2022, by the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation.

Additional Oligarch Designations

The Biden Administration also designated three additional oligarchs with close ties to President Putin.  The new designated oligarchs included:

(1) Denis Aleksandrovich Bortnikov, son of Aleksandr Vasilievich Bortnikov: Aleksandr Vasilievich Bortnikov (Aleksandr Bortnikov) is the Director of the Federal Security Service (FSB) of the Russian Federation and a permanent member of the Security Council of the Russian Federation. Aleksandr Bortnikov was previously designated in March 2021. Aleksandr Bortnikov’s son, Denis Aleksandrovich Bortnikov (Denis Bortnikov), is currently a Deputy President of Russian-state owned financial institution VTB Bank Public Joint Stock Company (VTB Bank) and a Chairman of the VTB Bank Management Board.

(2) Petr Mikhailovich Fradkov (Petr Fradkov) is the Chairman and CEO of PSB. Petr Fradkov is also the son of Mikhail Efimovich Fradkov (Mikhail Fradkov), former Prime Minister of Russia and former Director of the Russian Foreign Intelligence Service (SVR). Mikhail Fradkov was designated by OFAC in April 2018. Since 2018, Petr Fradkov has worked to transform PSB into a bank that services the defense industry and supports state defense contracts. Petr Fradkov is also the General Director of Joint Stock Company Russian Export Center, which was blocked as a subsidiary of VEB.

(3) Vladimir Sergeevich Kiriyenko, son of Sergei Vladilenovich Kiriyenko: Sergei Vladilenovich Kiriyenko (Sergei Kiriyenko) is the First Deputy Chief of Staff of the Presidential Office. Sergei Kiriyenko is reported to be Putin’s domestic policy curator. Previously, Sergei Kiriyenko served as the Prime Minister of the Russian Federation and as the General Director of Rosatom State Atomic Energy Corporation. Sergei Kiriyenko was previously designated in March 2021. Sergei Kiriyenko’s son, Vladimir Sergeevich Kiriyenko (Vladimir Kiriyenko), previously worked as a vice president at the Russian state-controlled company, Rostelecom, and is presently the CEO of VK Group, the parent company of Russia’s top social media platform, VKontakte. Any entities that are owned, directly or indirectly, individually or in the aggregate, 50 percent or more by one or more blocked persons are also blocked.