It has now been more than 40 days since the start of Putin’s brutal invasion of Ukraine. Today, following the recent revelations of the atrocities committed in Bucha, Ukraine by Russian armed forces, the United States – in coordination with the G7 and the EU – imposed new sanctions on Russia (see here). The sweeping new sanctions seek to further restrict Russia’s access to dollars and put economic pressure on Putin to end the war. The sanctions include a ban on all new investment in Russia as well as designations of Russia’s largest financial institutions (i.e., Sberbank and Alfa Bank), critical state-owned enterprises, and Russian government officials and their family members, including Putin’s children.

In addition, OFAC yesterday sanctioned the world’s largest — and Russia’s most prominent — darknet market, Hydra Market (Hydra), and virtual currency exchange Garantex (see here). According to OFAC, Hydra’s offerings have included ransomware-as-a-service, hacking services and software, stolen personal information, counterfeit currency, stolen virtual currency, and illicit drugs. OFAC also sanctioned over 100 virtual currency addresses associated with Hyrdra’s operations, which have been used to conduct illicit transactions (see here). For its part, Garantex is an Estonian virtual currency exchange that allows customers to buy and sell virtual currencies using fiat currencies, with its majority of operations carried out in Russia. Garantex joins other cryptocurrency exchanges – SUEX and Chatex – sanctioned by OFAC over the last few months (see our discussion of those sanctions, here and here).

Today’s announcement of sanctions against Russia come on the heels of the Treasury Department’s decision on Monday to prohibit Russia from paying holders of its sovereign debt more than $600 million from reserves held at U.S. banks. As a result, Russia will either have to default on its debt payments or use other government funds – either from existing dollar reserves in Russia or using other revenue – to make these payments.

Since the Ukraine conflict unfolded and the passage of multilateral sanctions from the United States and over 30 allies across the world, more and more companies are announcing an exit from Russia completely and ceasing all business in the country. The White House estimates that over 600 private companies have left the Russian market (see here).

Overview of the New Sanctions

• Prohibitions on New Investments in Russia: U.S. persons (i.e., companies and individuals) wherever located will be prohibited from making any new investment in Russia (see here).

• Designations of Sberbank and Alfa Bank: The designation of Sberbank, including 42 Sberbank subsidiaries, and Alfa Bank, including six subsidiaries and five vessels, as Specially Designated Nationals (SDNs) effectively cuts them off from any activity involving a U.S. person or U.S. Bank (see here). Both banks were previously subject to sanctions falling short of SDN designations. The designation of Sberbank and Alfa Bank, as well as their subsidiaries, join other major Russian Banks that were blocked from the U.S. financial system, including VEB, Promsvyazbank (PSB), VTB Bank, Otkritie, Sovcombank, and Novikombank (see our prior post about these designations here). In conjunction with the designations, OFAC updated and issued general licenses authorizing certain transactions involving Sberbank and Alfa Bank (among others), including certain energy-related transactions, related to derivative contracts, and transactions ordinarily incident and necessary to wind down transactions.

• Designations of Critical Major Russian State-Owned Enterprises: Similar to the designations of Sberbank and Alfa Bank, the SDN designations of critical Russian SOEs will prohibit any U.S. person from conducting any transactions with these SOEs.

• Designations of Russian Government Officials and their Family Members: Among those designated are Putin’s adult children, Foreign Minister Lavrov’s wife and daughter, and members of Russia’s Security Council including former President and Prime Minister of Russia Dmitry Medvedev and Prime Minister Mikhail Mishustin.