EU to adopt Russia sanctions over recognition of Donetsk and Lugansk regions – US issues Executive Order

On 21 February, Putin decided to recognise the so-called Donetsk People’s Republic (DPR) and Luhansk People’s Republic (LPR) as independent territories. Immediately after, he ordered Russian troops to “maintain peace” in the two breakaway regions.

In response, the US, the EU and the rest of the allies issued statements condemning the move as a blatant violation of international law, as well as of the Minsk agreements. They also announced the introduction of sanctions. Below, more details on the restrictive measures:

 

  • EU sanctions

The sanctions that will be imposed at this stage are only targeted, and therefore different from the comprehensive package of sanctions that has been prepared in coordination with the US and the allies.

As confirmed in a press release, the sanctions package approved includes:

  • Sanctions on those involved in the illegal recognition of the self-proclaimed DPR and LPR – reportedly, all 351 Russian Duma lawmakers voting for the recognition, and around 24 high profile Russian individual who have played a role in undermining Ukraine's territorial integrity and stability. President Vladimir Putin would not be included;
  • Sanctions on banks that are financing Russian military and other operations in those territories – reportedly, 3 Russian banks with links to the self-proclaimed DPR and LPR will be targeted;
  • Restrictions on the ability of Russia to access EU’s capital and financial markets and services – including a sectoral prohibition to finance the Russian Federation, its government and the Central Bank.
  • Restrictions on trade from the two breakaway regions to and from the EU – this is, an extension of the current export/import ban on annexed Crimea to the self-proclaimed DPR and LPR.

In a statement, Charles Michel announced that the EU stands ready to introduce additional sanctions, should Russia further invade Ukraine. 

On another note, Germany has decided to halt the Nord Stream 2 gas pipeline, by stopping the ongoing certification process. Chancellor Olaf Scholz described Putin’s recognition of the self-proclaimed DPR and LPR as a “grave breach” of international law and said that “the situation today is fundamentally different”.

 

  • US sanctions

On 21 February, President Biden signed an Executive Order (E.O) expanding the scope of the previous Ukraine/Russia-related E.O’s, in order to respond to the recognition of the two breakaway regions (DPR and LPR) by Russia.

As clarified in a White House statement, this E.O is distinct from the crippling economic sanctions that the US had prepared with the EU, UK and Canada. The large/comprehensive package of sanctions will only be imposed in response to “a further invasion of Ukraine”, since the US does not consider Putin’s recent movements regarding the self-proclaimed DPR and LPR a new step. White House argued that Russia has had forces in the Donbas region for the past eight years.

Thus, this E.O imposes the following sanctions:

  • Prohibition of new investments in the so-called DPR or LPR regions by a US person;
  • Prohibition of imports into the US, directly or indirectly, of any goods, services, or technology from the self-proclaimed DPR or LPR;
  • Prohibition of exportation, re-exportation, sale or supply, directly or indirectly, from the US or by a US person, of any goods services, or technology to the self-proclaimed DPR or LPR.
  • Prohibition of any approval, financing, facilitation or guarantee by a US person of a transaction by a foreign person where the transaction by that foreign person would be covered by these prohibitions if performed by a US person or within the US.

It also authorises the Treasury Secretary, in consultation with the State Secretary, to designate as SDNs those natural or legal persons determined:

  • To operate or have operated since the date of the order in the self-proclaimed DPR or LPR;
  • To be or have been since the date of the order a leader, official, senior executive officer, or member of the board of directors of an entity operating in the self-proclaimed DPR and LPR;
  • To be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to this order;
  • Or to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of any blocked person under this order.

 

Against this backdrop, companies operating in Russia or in the two Ukrainian breakaway regions will face significantly higher sanctions risks and will probably have to review their existing contracts and their compliance safeguards.