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Ukraine/Russia OFAC Sanctions Summary

The conflict between Ukraine and Russia has led to a complex web of sanctions imposed by the U.S. and its allies. Let’s break down what’s going on.

Background

After Russia annexed Crimea in 2014, the U.S. began imposing sanctions through executive orders targeting individuals and entities responsible for undermining Ukraine’s sovereignty and misappropriating its assets[4].

As Russia further invaded Ukraine in 2022, sanctions ramped up significantly, targeting Russia’s economy, military, and elite[1]. The U.S. coordinates these sanctions closely with the G7 and European allies[3].

Key Sanctions Authorities

• Executive Order 14024 authorizes broad sanctions on Russia’s economy, military, and elite[5].
• The Ukraine Freedom Support Act of 2014 authorizes sanctions related to Russia’s occupation of Crimea[4].
• The Countering America’s Adversaries Through Sanctions Act of 2017 imposes sanctions on Russia’s defense, intelligence, and energy sectors[5].

Who is Targeted?

Sanctions target[6]:

• Russian government officials and oligarchs close to Putin
• Russian military and defense companies
• Russian banks and financial institutions
• Russian energy companies
• Entities operating in Crimea
• Entities evading sanctions

Over 1,000 Russian individuals and entities are now blocked from the U.S. financial system[2].

Types of Sanctions

Sanctions include[1]:

• Asset freezes – blocking targets’ property and interests in property within U.S. jurisdiction
• Transaction prohibitions – banning U.S. persons from transacting or dealing with targets
• Export controls – restricting export, re-export, or transfer of U.S. goods, services, or technology
• Visa restrictions – banning travel to the U.S.
• Debt/equity restrictions – prohibiting transactions/dealings related to new debt/equity of Russian entities[5]

Recent Developments

Some major recent sanctions actions include[2][3]:

• Banning all imports of Russian oil, gas, and coal
• Cutting off Russia’s largest banks from SWIFT
• Freezing assets of Putin’s inner circle
• Banning U.S. dollar transactions with Russia’s Central Bank
• Restricting export of quantum computing tech, semiconductors, and other critical supplies to Russia’s military

Sanctions Evasion

OFAC is cracking down on sanctions evasion tactics like[3]:

• Using digital currency
• Relying on third country suppliers
• Sending goods through third party countries

U.S. companies should be extremely cautious about dealing with Russian entities or operations that may violate sanctions[1]. Fines can be massive.

Licenses and Exemptions

OFAC does allow some Russia-related transactions through general and specific licenses, such as[1]:

• Export of agricultural commodities, medicine, and medical devices to Russia
• Transactions for the personal maintenance of blocked individuals
• Payments for services like telecom, internet, or software

Check with OFAC before proceeding with any potentially prohibited transactions.

Looking Ahead

Sanctions will likely continue ramping up as long as Russia’s invasion of Ukraine continues. Companies worldwide need to closely monitor sanctions developments to ensure compliance.

While sanctions come at an economic cost, the U.S. and allies believe the long-term benefits of defending Ukraine’s sovereignty outweigh short-term impacts[4].

However, sanctions have drawbacks as well. They can cause economic pain for ordinary Russians and hurt U.S. and European companies that relied on business with Russia[1]. Some argue sanctions have done little to deter Putin so far[2].

There is debate around how to make sanctions more effective while minimizing unintended consequences[3]. Ideas include:

• Tightening enforcement against sanctions evasion
• Expanding sanctions to more sectors like metals/mining
• Increasing coordination with allies to close loopholes
• Allowing some exemptions for humanitarian aid

Another challenge is sanctions’ impact on global energy and food markets. Russia is a major exporter of oil, natural gas, wheat, and fertilizers[4]. Reducing these exports contributes to higher global prices.

Some ways to mitigate the impact[5]:

• Increasing alternative energy and food production in allied nations
• Negotiating selective exemptions for critical exports like fertilizer and wheat
• Providing aid to developing nations most affected by price shocks

Going forward, the U.S. will likely continue expanding sanctions while working to minimize unintended effects. But fundamentally, the goal is to impose sufficient economic pain on Russia to end its aggression toward Ukraine[6].

Looking ahead, there are a few key things to watch with sanctions on Russia[1]:

• Compliance – Will companies properly implement and enforce sanctions to avoid violations?
• Evasion – How will Russia try to get around sanctions through new tactics?
• Impact – What will be the effects on Russia’s economy and Putin’s inner circle over time?
• Unintended consequences – What spillover effects will emerge globally, like rising energy/food costs?
• Allied unity – Will the U.S. and Europe stay aligned on sanctions as conditions evolve?
• Negotiations – Could selective sanctions relief bring Russia to the negotiating table?

Sanctions involve constant recalibration as circumstances change. Policymakers must balance effectiveness against unintended blowback[2].

Public opinion could also influence sanctions policy. If Europeans grow weary of economic sacrifices, political pressure may mount to ease certain measures[3].

But for now, sanctions will likely remain a key foreign policy tool. While imperfect, they allow the West to take concrete action against Russian aggression when military options are off the table[4].

[1] Russia Sanctions at One Year

[2] The Impact of Sanctions on Russia

[3] Cracks emerge in EU unity on Russia sanctions

[4] Brookings experts discuss the impact of sanctions on Russia