U.S. Sanctions on Russia Related to the Ukraine Conflict

Updated February 26, 2018 U.S. Sanctions on Russia Related to the Ukraine Conflict Background Since 2014, the United States has imposed sanctions on over 600 individuals, entities, and vessels in response to Russia’s invasion and annexation of Ukraine’s Crimea region and Russia’s subsequent support of separatists in eastern Ukraine. President Barack Obama, in initiating economic sanctions on Russia, declared that Russia’s activities in Ukraine threaten the peace, security, stability, sovereignty, and territorial integrity of its neighbor and constitute a threat to U.S. national security. The United States, in coordination with the European Union and others, promised to impose increasing costs on Russia until it “abides by its international obligations and returns its military forces to their original bases and respects Ukraine’s sovereignty and territorial integrity.” The Department of the Treasury’s Office of Foreign Assets Control (OFAC) continues to investigate transactions and designate individuals and entities, most recently in January 2018. Table 1. U.S. Ukraine-Related Sanctions on Russia: Authorities, Targeted Behavior, and Treasury Designees Authority Targeted Behavior Designations (as of 2/2018) EO 13660 (3/6/2014); Countering Russian Influence in Europe and Eurasia Act of 2017 (P.L. 115-44, Countering America’s Adversaries Through Sanctions Act [CAATSA], Title II; 22 U.S.C. 9501 et seq.) Those responsible for undermining Ukraine’s democracy; threatening peace, security, stability, sovereignty, or territorial integrity; misappropriating funds. 114 individuals, 24 entities EO 13661 (3/17/2014); P.L. 115-44 Anyone designated, including Russian government officials; those engaged in Russia’s arms sector; entities owned or controlled by a senior Russian government official; those materially assisting or supporting a senior Russian government official. 64 individuals, 56 entities EO 13662 (3/20/2014); P.L. 115-44 Entities operating in sectors of the Russian economy, such as financial services, energy, metals and mining, engineering, and defense and related matériel. Directives 1-4 specify financial services, energy (including certain kinds of oil projects), and defense. 290 entities EO 13685 (12/19/2014); P.L. 115-44 Activities in the Crimea region, including new investment, trade, and related economic activities. 4 individuals, 58 entities, 2 vessels Support for the Sovereignty, Integrity, Democracy, and Economic Stability of Ukraine Act of 2014 (P.L. 113-95, as amended; 22 U.S.C. 8901 et seq.) Those responsible for violence; human rights abuses in Ukraine or in any territory forcibly occupied or controlled by the Russian government; the undermining of Ukraine’s security and sovereignty. No designations to date; authorities and categories of targets partially overlap with executive orders and related designations. Ukraine Freedom Support Act of 2014 (P.L. 113-272, as amended; 22 U.S.C. 8921 et seq.) State-run arms exporter Rosoboronexport; Russian entities that transfer weapons to Syria, Ukraine, Georgia, or Moldova (or other states, depending on President’s designations); and persons who facilitate such transfers. Russian government officials (or associates) responsible for acts of significant corruption. Foreign persons who evade sanctions or facilitate significant transactions for persons subject to sanctions. Foreign persons (and financial institutions) that make significant investments in (or transactions for) certain kinds of oil projects. Foreign financial institutions that engage in significant transactions for persons subject to Ukraine-related sanctions. Source: Congressional Research Service (CRS). https://crsreports.congress.gov No designations to date. Rosoboronexport is designated under EO 13662. U.S. Sanctions on Russia Related to the Ukraine Conflict Executive and Congressional Actions A series of executive orders (EOs) issued in 2014 and codified in the Countering America’s Adversaries Through Sanctions Act (CAATSA; P.L. 115-44) form the basis for designating Russian individuals and entities subject to Ukraine-related sanctions. Also in 2014, Congress adopted two laws, amended by CAATSA, to strengthen and expand sanctions (see Table 1). In issuing the EOs, President Obama identified individuals and entities subject to economic restrictions for having undermined the stability of Ukraine; misappropriated its state assets; annexed Crimea to Russia; used illicit armed force in Ukraine; and conducted business, trade, or investment in Crimea (see Table 2). Any individual or entity designated pursuant to these orders is subject to the blocking of assets under U.S. jurisdiction, prohibitions against U.S. persons engaging in transactions, and (for individuals) denial of entry into the United States. Under EO 13662, Treasury also restricts transactions by persons under U.S. jurisdiction related to investment and financing for designated state-controlled companies in Russia’s financial sector, financing for designated companies in Russia’s energy and defense sectors, and transactions related to the development of Russian deepwater, Arctic offshore, and shale oil projects. Table 2. Targeted Individuals/Entities (as of 2/2018) EO 13660: Former Ukrainian officials; individuals in Crimea and the Donbas secessionist entities; Russian supporters; associated companies or organizations. EO 13661: Russian officials, deputies, businesspeople, and associates who support Russia’s actions in Ukraine, are considered part of Putin’s “inner circle,” and/or support senior officials or sanctioned entities; Bank Rossiya, described by Treasury as the “personal bank” of Russian senior officials; Almaz-Antey, a state-owned defense company; other defense firms (mostly subsidiaries of Almaz-Antey or the state-controlled defense and hi-tech conglomerate Rostec); and associated companies or organizations. EO 13662: Sectoral sanctions on several major companies and subsidiaries: lending and investment restrictions on four large state-controlled banks and VEB, which “acts as a development bank and payment agent for the Russian government”; lending restrictions on state-controlled defense and hi-tech conglomerate Rostec, oil companies Rosneft and Gazpromneft, pipeline company Transneft, and private gas producer Novatek; restrictions on transactions related to deepwater, Arctic offshore, or shale oil projects. EO 13685: Mostly Russian or Crimea-based companies and subsidiaries operating in Crimea. Source: CRS. CAATSA directed the Secretary of the Treasury to further restrict financing for Russia’s financial and energy sectors and to extend prohibitions related to the above oil projects to projects worldwide that involve any designated persons who have an ownership interest of not less than 33%. Effectiveness and Impact of Sanctions More than three years since Ukraine-related sanctions were first imposed, observers note that Russia has not reversed its occupation and annexation of Crimea, nor has it dropped its support for the Donbas separatists. Since sanctions were introduced, however, Russia has signed two agreements that recognize all of the Donbas as a part of Ukraine and Russian-backed rebel military operations have been limited to areas along the perimeter of the current conflict zone. In terms of the economic impact of sanctions, it is difficult to disentangle their effect from the simultaneous drop in oil prices. Oil is a major export and source of revenue for the Russian government, and the twin shocks of sanctions and collapse in oil prices in 2014 hit the Russian economy hard. Between 2014 and 2016, Russia experienced capital flight, currency depreciation, inflation, and budgetary pressures. Growth slowed to 0.7% in 2014 before contracting by 2.8% in 2015 and by another 0.2% in 2016. The International Monetary Fund (IMF) estimated in 2015 that sanctions and Russia’s retaliatory ban on agricultural imports reduced output in Russia over the short term by up to 1.5%. Even though sanctions have been tightened, economic growth in Russia is strengthening, in part due to higher oil prices. Russia’s economy grew by 1.8% in 2017 and is projected to grow by 1.7% in 2018. However, the economic effects of restrictions on U.S. long-term financing for certain sectors and technology for specific oil exploration projects may manifest more prominently over the longer term. The Future of Ukraine-Related Sanctions Before the passage of CAATSA, the Trump Administration stated on several occasions that Ukraine-related sanctions would remain in place “until Moscow reverses the actions that triggered” them. It also has made additional designations under the existing executive orders. CAATSA has established a mechanism for Congress to review any action the President takes to ease or lift a variety of sanctions. Certain sanctions may be waived only if the President certifies that the Russian government “is taking steps to implement the Minsk Agreement to address the ongoing conflict in eastern Ukraine.” Although the President signed CAATSA, the Trump Administration has yet to exercise its authorities to impose additional sanctions related to Ukraine or other issues. Many in Congress are watching this closely. The United States also imposes sanctions on Russian individuals and entities for activities unrelated to events in Ukraine. For more, see CRS In Focus IF10779, Overview of U.S. Sanctions Regimes on Russia Also see CRS In Focus IF10614, EU Sanctions on Russia Related to the Ukraine Conflict; CRS Report R43895, U.S. Sanctions and Russia’s Economy; and CRS Report R44775, Russia: Background and U.S. Policy. The Departments of State and Commerce also deny export licenses for military, dual-use, and energy-related goods for designated end users (most of which also are subject to Treasury-administered sanctions). https://crsreports.congress.gov U.S. Sanctions on Russia Related to the Ukraine Conflict Cory Welt, Analyst in European Affairs Rebecca M. Nelson, Specialist in International Trade and Finance Dianne E. Rennack, Specialist in Foreign Policy Legislation IF10552 Disclaimer This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role. 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