On June 6, 2022, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) published guidance in the form of frequently asked questions clarifying certain sanctions against Russia set forth in executive orders issued in response to Russia’s invasion of Ukraine. In particular, the FAQs clarify provisions of the executive orders that prohibit U.S. persons from making “new investments” in securities of Russian issuers.

Following the Russian invasion of Ukraine in February 2022, President Biden issued three executive orders relating to investments by U.S. persons in Russia:

• Executive Order 14066, issued March 8, 2022, which prohibits, among other things, new investments by U.S. persons in the Russian energy sector.
• Executive Order 14068, issued March 11, 2022, which prohibits, among other things, new investments by U.S. persons in Russian economic sectors as authorized by the U.S. Secretary of the Treasury in consultation with the U.S. Secretary of State.
• Executive Order 14071, issued April 6, 2022, which prohibits all new investments in Russia by U.S. persons, wherever they may be located.

Among the new FAQs issued by OFAC, FAQ 1049 clarifies that, for purposes of the foregoing executive orders, “new investments” include, among other things, purchases of real estate in the Russian Federation for other than personal use, lending funds to persons in Russia for commercial purposes, purchasing equity interests in an entity located in Russia and purchasing rights to natural resources in Russia, in each case pursuant to a commitment made after the effective dates of the applicable executive orders. FAQ 1054 clarifies that the new investment provisions of the foregoing executive orders prohibit U.S. persons from purchasing any new or existing debt or equity securities issued by any entity located in Russia. FAQs 1053 and 1054 clarify that the executive orders do not prohibit U.S. persons from selling or otherwise divesting, or facilitating the sale or other divestment of, Russian debt or equity securities to a non-U.S. person, and that the executive orders do not require U.S. persons to divest Russian securities that they already hold. In addition, FAQ 1054 clarifies that the new investment prohibitions of the executive orders do not apply to the conversion of depositary receipts to local shares of non-sanctioned Russian issuers or to the purchase by U.S. persons of U.S. funds that invest in debt or equity securities issued by Russian issuers, provided Russian securities do not represent a “predominant share” by value of the fund’s total assets. FAQ 1055 further clarifies that U.S. persons may lend funds to or purchase equity interests in entities located outside of Russia, so long as the funds are not specifically intended to fund new projects or operations in Russia and the entity’s revenues are not “predominantly” derived from investments in Russia.

The FAQs specify that any transactions allowed under the executive orders may not in any event involve blocked persons or other prohibited transactions unless exempt or otherwise authorized by OFAC.

In addition to the FAQs related to the prohibitions on new investments in Russia, OFAC also issued a series of FAQs on June 9, 2022 relating to prohibitions on providing accounting, trust and corporate formation and management consulting services to persons located in Russia.

The full list of OFAC’s FAQs relating to the Russian Harmful Foreign Activities Sanctions is available here.