Client Alert

Congress Pushes Legislation to Sanction Russia in Anticipation of Invasion of Ukraine

31 Jan 2022

In response to Russia’s increasingly aggressive troop build-up on the Ukrainian border and the lack of progress of negotiations between Russia and the United States, Democrats and Republicans in Congress appear united in their desire for tough new sanctions on Russia, although they continue to haggle over the scope and timing of such sanctions. The prime focus of current Congressional sanctions efforts is “The Defending Ukraine Sovereignty Act of 2022” (S.3488, the Bill), introduced by Senator Robert Menendez on January 12, 2022. The Bill currently has 41 cosponsors and companion legislation in the House (H.R. 6470) with 25 co‑sponsors. Media reports indicate that Sen. Menendez is working with a bipartisan group of five Democrat and five Republican senators to revise the bill into a version that would receive the 60 votes necessary for passage in the Senate. Speaker Pelosi reportedly plans to fast track the House version of the Bill and may bring it to a vote in early February.

The Bill, which has been endorsed by the Biden Administration, would require the President to determine within 15 days of passage whether Russia or its proxies are “engaged in or knowingly supporting a significant escalation in hostilities” against Ukraine for the purposes of destabilizing or overthrowing the government of Ukraine, occupying Ukrainian territory, or otherwise interfering with Ukraine’s sovereignty. Should the President make an affirmative determination, the Bill would require the President to impose sanctions on the Russian state, economy, and leadership, including President Vladimir Putin. Sanctions to be imposed include:

  • Mandatory blocking sanctions on 12 senior Russian government officials, including President Putin, Prime Minister Mikhail Mishustin, Foreign Minister Sergei Lavrov, and the heads of each branch of the Russian military;
  • Mandatory blocking sanctions on at least three of 12 major Russian financial institutions listed in the Bill, including Sberbank, VTB, and Gazprombank;
  • Mandatory blocking sanctions on targets operating within the coal, minerals, mining, gas, and oil industries that the President determines should be sanctioned, as well as any other industry the President determines warrants imposing sanctions;
  • Discretionary blocking sanctions on persons that continue to provide or enable access to international financial messaging services to any sanctioned Russian financial institution 90 days after designation for blocking sanctions;
  • Prohibitions on transactions in Russian sovereign debt within U.S. jurisdiction;
  • Mandatory blocking sanctions on non-U.S. parties that the President determines are engaging in transactions involving the debt of at least 10 entities controlled by the Russian Federation; and
  • Mandatory blocking sanctions on foreign entities and individuals responsible for planning, constructing, or operating the Nord Stream 2 pipeline, a Russian-backed natural gas pipeline between Russia and Germany that would skirt Ukraine.

Other key provisions of the Bill include prioritizing the delivery of defense equipment to Ukraine, increasing U.S. financing and training to Ukraine’s armed forces, authorizing programs to combat Russian disinformation activities in Ukraine, and bolstering Ukraine’s cyber defense capabilities in coordination with NATO.

As noted above, all sanctions described in this Bill as currently written would be triggered only by a Presidential determination that Russia has escalated hostilities in Ukraine, although many Republicans have insisted that aggressive sanctions should be imposed now to pressure Russia not to launch a full-scale invasion of Ukraine. Sen. Menendez addressed that point of negotiations on January 30:

 “Look, there are some sanctions that really could take place upfront because of what Russia has already done. Cyberattacks on Ukraine, false flag operations, the efforts to undermine the Ukrainian government internally, those are just some examples of sanctions that could take place now…. But then the devastating sanctions that ultimately would crush Russia’s economy and the continuing lethal aid that we are going to send, which means Putin has to decide how many body bags of Russian sons are going to return to Russia, the sanctions that we’re talking about would come later on if (Russia) invades. Some sanctions would come up front for what has been done already, but the lethal aid will travel no matter what.”

Events on the ground will determine if this Act or similar legislation is approved and sanctions take effect, although Senate Democrats and Republicans appear eager to pass sanctions quickly.

While the Bill appears to be the most likely to pass in the near future in Congress, there is still significant uncertainty as to what will be in the final version. Public reporting indicates there is disagreement over whether to impose sanctions on the Nord Stream 2 pipeline, and the Biden Administration has signaled that it may not target Russia’s oil and gas industry at all on its own. MoFo’s National Security team will continue to monitor and report on the developing situation in Ukraine and the status and scope of U.S. sanctions targeting Russia.

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