Client Alert

Biden Administration Issues Sweeping New Sanctions on Russia in Response to Election Interference, Malicious Cyber Activity, and Other “Russian Malfeasance”

19 Apr 2021

On April 15, 2021, following discussions just days earlier of a potential summit between President Biden and Russian President Putin and as Russian troops amassed along the Ukrainian border, the Biden Administration issued long-awaited and highly anticipated sanctions against Russia, including a far-reaching new executive order (“E.O.”), “Blocking Property With Respect To Specified Harmful Foreign Activities Of The Government Of The Russian Federation,” which authorizes sanctions on any “person” (individual or entity) determined to meet an expansive array of criteria related to the Russian Federation’s involvement in, among other things, election interference, political destabilization, cyber-enabled activities, and corruption.  

Citing a number of different U.S. foreign policy and national security goals, the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) used the new E.O. to impose broad prohibitions on U.S. financial institution participation in the primary market for certain Russian sovereign debt and lending and to broadly target the Russian technology and defense sectors. OFAC also referenced the new E.O. and previous E.O.s related to Ukraine, Crimea, and election interference to add to its sanctions list 32 entities and individuals for their roles in attempting to influence U.S. elections, five individuals and three entities for activities related to the ongoing crisis in Crimea, and six technology companies for their roles in supporting Russian espionage campaigns, including specifically the SolarWinds incident (which we cover in a separate client alert).  President Biden also announced the expulsion of ten Russian diplomats from the United States.

With these sanctions, the Biden Administration has taken its first major public action to respond to Russian malign activities.  While these actions are undoubtedly significant, they also are notable for what they did not include, such as sanctions targeting the Russia-Germany gas pipeline Nord Stream 2, Russian oligarchs, or additional sectors of the Russian economy.  Last week’s actions follow a predictable pattern of employing sanctions and diplomatic expulsions, which the U.S. government employed in prior responses to malicious Russian activities, such as interference in the 2016 presidential election. This tough but measured approach reflects the fact that U.S. policy towards Russia remains extremely complex and potentially evolving. In the very same week the Administration sent this shot across Russia’s bow, and as Russia positioned tens of thousands of troops along Ukraine’s border, President Biden also extended an olive branch through the reported offer of a summit with President Putin, and, indeed, when President Biden announced the new sanctions, he remarked that the United States would prefer a “stable and predictable relationship” with Russia. 

Key Takeaways

1. The new E.O. broadens the already complex sanctions landscape against Russia, expanding previous sovereign debt-related prohibitions via a new Directive 1 (which is unrelated to the existing Directive 1 for the Russia Sectoral Sanctions Identifications (“SSI”) program) targeting three major Russian state-owned entities.

2. The new E.O. targets the Russian defense and technology sectors and individuals and entities involved in a number of different malign activities, including election interference, malicious cyber-enabled activities, disinformation campaigns, and the obstruction of access to gas or energy supplies to Europe, the Caucasus, or Asia.

3. OFAC designated on its List of Specially Designated Nationals and Blocked Persons (“SDN List”) dozens of individuals and entities pursuant to the new E.O. and various pre-existing E.O.s that focus on malicious cyber-enabled activities, the crisis in Ukraine/Crimea, election interference, and even weapons of mass destruction. While these sanctions must be complied with by U.S. persons, they also carry secondary sanctions consequences, meaning that non-U.S. financial institutions and others that knowingly engage with these designated parties now face significant U.S. sanctions risk.

4. As part of a multi-agency coordinated action, OFAC published informal guidance in the form of Frequently Asked Questions (“FAQs”) to clarify the scope of these new sanctions, as well as how they relate to previous sanctions against Russia.

5. Although the new sanctions are undoubtedly substantial, they leave the Biden Administration and the U.S. Congress with significant room for escalation against additional sectors of the Russian economy, major Russia state-owned enterprises, and oligarchs, to name just a few of the possible additional pressure points.

Executive Order 14024

Unlike previous E.O.s against Russia that focus on discrete malign activities – Ukraine, Crimea, human rights abuses, and corruption – the new E.O. targets a broad swath of Russia’s conduct of concern, including efforts to undermine democratic elections and institutions, facilitate malicious cyber-enabled activities, foster transnational corruption to influence foreign governments, pursue extraterritorial activities targeting dissents and journalists, and undermine security in countries and regions important to U.S. national security. Notably, it also cites as a basis for the national emergency and in the designation criteria for Treasury to use for future sanctions not only malicious activity against the United States, but also such activity directed against U.S. allies and partners, signaling a multilateral message of support from the Biden Administration.

The new E.O. authorizes sanctions on any person determined to operate or have operated in the technology or the defense and related materiel sector of the Russian economy (or any other sector identified under the E.O. in the future). In addition, the E.O. authorizes sanctions against any person determined to have engaged in a range of activities contributing to specified harmful foreign activities on behalf of the Russian government, including:

  • malicious cyber-enabled activities;
  • interference in a U.S. or foreign election;
  • activities that undermine democratic processes or institutions in the United States or abroad;
  • transnational corruption;
  • assassination, murder, or the infliction of bodily harm against a U.S. person or national of a U.S. ally or partner;
  • activities that undermine the peace, security, stability, or territorial integrity of the United States, its allies, or its partners; or
  • deceptive or structured transactions to circumvent U.S. sanctions, including via use of digital currencies.

The new E.O. also authorizes sanctions against Russian government agencies, high-ranking officials and leaders of institutions or businesses involved in any of the activities described above; Russian individuals and entities determined to have engaged in cutting or disrupting gas or energy supplies to Europe, the Caucasus, or Asia; and certain family members of SDNs.

Russian Sovereign Debt Prohibitions

Pursuant to the new E.O., as noted above, OFAC issued a new Directive 1, which expands existing prohibitions on U.S. financial institutions dealing in Russian sovereign debt. As outlined in a previous client alert, in August 2019 OFAC issued the CBW Act Directive pursuant to the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 and in response to Russia’s use of the “Novichok” nerve agent in the poisoning of Sergei and Yulia Skripal in the United Kingdom.  That Directive prohibited U.S. banks from participating “in the primary market for non-ruble denominated bonds issued by the Russian sovereign” and from “lending non-ruble denominated funds to the Russian sovereign.” Last week’s announcement left these restrictions in place and broadened them to also prohibit the participation by U.S. financial institutions in the primary market for ruble- and non-ruble-denominated bonds and funds, of, and lending to, three major Russian Government entities: Russia’s Central Bank, its National Wealth Fund, and the Russian Ministry of Finance. 

The CBW Act Directive applies to “U.S. Banks,” whereas Directive 1 applies to “U.S. Financial Institutions,” but the definitions remain largely the same. Directive 1’s definition of “U.S. Financial Institutions” includes “any U.S. entity (including its foreign branches) that is engaged in the business of accepting deposits, making, granting, transferring, holding, or brokering loans or other extensions of credit, or purchasing or selling foreign exchange, securities, commodity futures or options, or procuring purchasers and sellers thereof, as principal or agent.” The definition covers “depository institutions, banks, savings banks, trust companies, securities brokers and dealers, futures and options brokers and dealers, forward contract and foreign exchange merchants, securities and commodities exchanges, clearing corporations, investment companies, employee benefit plans, and U.S. holding companies,” as well as U.S. affiliates, or U.S. subsidiaries of any of those entities. While the definitions in Directive 1 and the CBW Act Directive are largely identical, the CBW Act Directive definition includes “depository institutions, banks, savings banks, trust companies, securities brokers and dealers, commodities futures and options brokers and dealers . . .”   

Unlike the CBW Act Directive, Directive 1 does not refer to the “Russian Sovereign” to characterize the entities to which U.S. Financial Institutions are prohibited from the applicable dealings. Instead, Directive 1 specifically names the three Russian institutions noted above as the entities with which U.S. Financial Institutions are prohibited from engaging in certain ruble‑and non-ruble debt-related transactions. 


In addition to amending several FAQs relating to the non-ruble-focused Russian sovereign debt prohibitions stemming from the CBW Act Directive, OFAC also issued a handful of new FAQs that clarify the scope of the new E.O., as enumerated below.

  • FAQ 886 provides an overview of the new national emergency the E.O. establishes and distinguishes this new E.O. from prior, related E.O.s (E.O. 13660, E.O. 13661, E.O. 13662, and E.O. 13685) concerning the crisis in Ukraine/Crimea.
  • FAQ 887 explains that persons who had been previously designated pursuant to E.O. 13662 for operating in the defense and related materiel sector of the Russian economy are not automatically sanctioned pursuant to this new E.O. Indeed, absent a formal OFAC designation, identification of a sector of the Russian economy pursuant to an E.O. merely puts individuals and entities that participate in that sector on notice that OFAC may sanction them, but the identification of a specific sector alone, without more, does not subject individuals and entities to immediate sanctions.
  • FAQs 888 and 889 describe the scope of the new Directive 1 and clarify that Directive 1 only prohibits U.S. financial institutions from participating in the primary, not secondary, market for bonds issued by the Russian Central Bank, the Russian National Wealth Fund, or the Russian Ministry of Finance.
  • As described above, U.S. banks were already prohibited from participating in the primary market for non-ruble-denominated bonds issued by the Russian sovereign (including the Central Bank, the National Wealth Fund, and the Ministry of Finance) and from lending non-ruble-denominated funds to the Russian sovereign pursuant to the CBW Act Directive. FAQ 890 clarifies that, although U.S. banks were already prohibited from engaging in these transactions, starting June 14, 2021, the prohibitions on U.S. banks will be expanded to include U.S. financial institutions that deal in ruble- and non‑ruble‑denominated transactions with the three Russian state entities noted above.
  • FAQ 891 clarifies that the 50 percent rule, which provides that any entity owned 50 percent or more by one or more SDNs is subject to the same restrictions as its sanctioned owners, does not apply to the Directive 1-named entities.

U.S.-Russia Relations

Whether these new sanctions will bring meaningful change remains to be seen, but President Biden has many tools at his disposal to ramp up the pressure, and the U.S. Congress is already juggling a number of bills that would add additional sanctions authorities and mandates. While the actions announced last week are mainly channeled through traditional sanctions mechanisms, the new E.O. gives the Administration a new tool for the U.S. to take further actions to respond to malicious cyber-enabled activity, foreign influence operations, continued Russian military activity inside Ukraine and along the Ukraine border, and other malign activities.  

In parallel to the E.O., the Administration also signaled that it is contemplating export control action pursuant to E.O. 13873 in order to better protect the information and communications technology and services supply chain from further exploitation by Russia and targets Russian‑connected websites that engage in foreign influence activities in the United States. In other words, Russia is on notice that, if diplomacy fails, President Biden has additional levers to pull.

It is also possible, if not likely, that Congress will weigh in with additional measures, as some lawmakers have expressed frustration that sanctions related to Nord Stream 2 were not included in President Biden’s sanctions announcement last week. For several years, Congress has made efforts to impose new sanctions on Russia, particularly related to Nord Stream 2, and members of Congress have recently introduced at least a half a dozen bills that would increase sanctions on Russia for a variety of reasons, including the poisoning of opposition leader Alexei Navalny, Iranian arms shipments, interference in Georgia and Libya, and infringements on religious freedoms. While none of the bills appear to be moving as of now, most would demand more significant measures against Russia than the sanctions announced last week.


As a result of the recent actions, along with the ongoing rhetoric in the Executive and Legislative branches signaling that more sanctions are on the way, global financial institutions and other companies should take steps to carefully evaluate transactions involving, in particular, the Russian defense and technology sectors, Russian sovereign debt and lending, and, of course, any of the newly identified SDNs. Businesses should also be prepared for additional sectors and Russian actors to be sanctioned in the future and, accordingly, take this opportunity to evaluate and fortify, if necessary, their sanctions compliance programs and ensure that their policies, procedures, and training programs are up-to-date. Companies should regularly monitor and evaluate their financial activity, imports, exports, and supply chains, and where firms have investments involving Russia, understand which parts of their business may be impacted now or in the future. Non-U.S. individuals and entities should also be mindful that while these changes all affect primary sanctions (i.e., those directed at U.S. persons), secondary sanctions remain an ever-present threat in the Russian sanctions program.

MoFo’s National Security practice will continue to monitor the situation and keep you apprised of any significant developments.



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