Executive Order 13662, signed on March 20, 2014, authorized sector-based sanctions against the Russian economy in response to the crisis in Ukraine. Rather than freezing individual assets, it created a framework the Treasury Department uses to restrict specific kinds of transactions with named entities in designated Russian sectors. If you or your company deal with Russian counterparties, the order matters because it determines what financing, equity, and energy-sector activity you can and cannot lawfully engage in, and what penalties apply when you get it wrong.
What the Order Does and Where Its Authority Comes From
The President issued the order under the International Emergency Economic Powers Act (IEEPA), which lets the executive branch regulate economic transactions when a national emergency has been declared over an unusual and extraordinary foreign threat.1Office of the Law Revision Counsel. 50 U.S. Code 1701 – Unusual and Extraordinary Threat; Declaration of National Emergency; Exercise of Presidential Authorities The National Emergencies Act supplies the procedural scaffolding.
The order delegates to the Secretary of the Treasury, acting with the Secretary of State, the authority to identify sectors of the Russian economy that warrant sanctions. Regulations under the order currently reach financial services, energy, defense and related materiel, railway, and metals and mining.2eCFR. 31 CFR Part 589 Subpart B – Prohibitions Identifying a sector does not ban all trade with every company in that field. It lets OFAC issue directives that restrict particular kinds of transactions with named entities, so pressure can be calibrated sector by sector. The Countering America’s Adversaries Through Sanctions Act (CAATSA) tightened those directives in 2017, and the tightened limits are what apply today.
The Four OFAC Directives
OFAC implements the order through four directives codified in 31 CFR Part 589.3eCFR. 31 CFR Part 589 – Ukraine-/Russia-Related Sanctions Regulations The first three limit dealings in new debt (and, for banks, new equity) issued by designated entities. The fourth restricts certain oil-project activity. Only debt or equity issued on or after the relevant sanctions effective date counts as “new”; pre-existing instruments are not retroactively prohibited.
For these directives, “debt” reaches bonds, loans, extensions of credit, loan guarantees, letters of credit, drafts, bankers’ acceptances, and commercial paper. “Equity” covers stocks, share issuances, depositary receipts, and any other evidence of ownership.
Directive 1: Financial Sector
U.S. persons may not deal in new debt with a maturity longer than 14 days, or in any new equity, issued by or for the benefit of entities named under this directive.4U.S. Department of the Treasury. Office of Foreign Assets Control – Frequently Asked Questions – 370 This is the tightest of the debt directives and effectively cuts designated Russian banks off from medium- and long-term dollar financing.
Directive 2: Energy Sector
For debt issued on or after November 28, 2017, the prohibition applies to maturities longer than 60 days.5eCFR. 31 CFR 589.203 – Prohibited Transactions With Respect to Financing Activities in the Energy Sector of the Russian Federation Economy (Directive 2) Directive 2 does not restrict equity.
Directive 3: Defense and Related Materiel
U.S. persons may not deal in new debt with a maturity longer than 30 days issued by or for the benefit of designated defense-sector entities.6eCFR. 31 CFR 589.204 – Prohibited Transactions With Respect to the Defense and Related Materiel Sector of the Russian Federation Economy (Directive 3)
Directive 4: Certain Oil Projects
Directive 4 works differently. Instead of financial instruments, it bans the supply of goods, technology, and non-financial services for deepwater, Arctic offshore, and shale projects that could produce oil in Russia or in maritime areas Russia claims.7U.S. Department of the Treasury. Office of Foreign Assets Control – Frequently Asked Questions – 412 CAATSA extended the directive to reach projects anywhere in the world, not just in Russia, when three conditions all hold: the project started on or after January 29, 2018; it has the potential to produce oil; and a person subject to Directive 4 holds at least a 33 percent ownership stake or a majority of voting interests. Compliance teams most often trip up on this global reach, because the project location alone will not tell you whether the directive applies.
The SSI List and the 50 Percent Rule
Entities designated under the four directives appear on the Sectoral Sanctions Identifications (SSI) List, which OFAC publishes separately from the Specially Designated Nationals (SDN) List.8U.S. Department of the Treasury. Office of Foreign Assets Control – Additional Sanctions Lists The two lists are not interchangeable. An SDN designation triggers a full asset freeze and a near-total ban on dealings. An SSI designation freezes nothing; it imposes only the specific transaction restrictions in the applicable directive. An SSI-listed energy company can still sell oil to a U.S. buyer. It just cannot obtain long-term dollar financing from one. When an entity appears on both lists, the SDN prohibitions control.
The SSI List is not the whole picture. Under OFAC’s 50 Percent Rule, if one or more SSI-listed entities collectively own 50 percent or more of another company (directly or indirectly), that subsidiary is subject to the same directive restrictions as its parent, even without being separately named.9U.S. Department of the Treasury. Office of Foreign Assets Control – Frequently Asked Questions – Entities Owned by Blocked Persons (50 Percent Rule) Ownership from multiple sanctioned parties aggregates. If Sanctioned Company A owns 30 percent of Entity B and Sanctioned Company C owns another 25 percent, Entity B is caught, because the combined sanctioned ownership exceeds 50 percent. You have to trace the ownership chain of any Russian counterparty far enough to know. Failing to run that analysis does not excuse a violation.
Who Has to Comply
The regulations bind every “United States person,” defined as any U.S. citizen, permanent resident, entity organized under U.S. law (including foreign branches of that entity), or any person physically present in the United States.3eCFR. 31 CFR Part 589 – Ukraine-/Russia-Related Sanctions Regulations A U.S. citizen working abroad for a foreign employer is still bound. So is the London branch of a New York bank.
Facilitation extends this reach. A U.S. person cannot help a foreign party complete a transaction the U.S. person could not perform directly. Arranging logistics, providing administrative support, or offering a financial guarantee on restricted debt all count as facilitation, even when the U.S. person is not a party to the final deal.
Humanitarian Carve-Outs
The sanctions do not prohibit the export of food, agricultural commodities, medicine, or medical devices to Russia. Those categories are carved out of the framework, and financial institutions may process the associated transactions.
Licenses and Wind-Down Windows
OFAC issues two kinds of licenses. General licenses appear in the regulations and apply automatically to anyone who meets their conditions. Specific licenses are granted case by case in response to an application filed through the OFAC Licensing Portal, either as a registered user or a guest.10OFAC Licensing Portal. Welcome The application must describe the transaction, the parties, and why an exemption is warranted. OFAC does not guarantee approval or promise a timeline, but you get a case ID for tracking.
When new sanctions come in or existing ones tighten, OFAC sometimes issues a wind-down authorization that gives affected parties a limited period, typically 30 to 90 days, to exit existing contracts. Wind-down authority covers exit activity, not new business. Signing a new sanctionable deal during a wind-down window is not wind-down activity and can be penalized immediately.
Reporting and Recordkeeping
When a U.S. person rejects a transaction because it would violate the sanctions, a report has to go to OFAC within 10 business days.11eCFR. 31 CFR 501.604 – Reports of Rejected Transactions Reports are filed through the OFAC Reporting System (ORS).12Department of the Treasury. Office of Foreign Assets Control Reporting System (ORS) The same 10-business-day window applies to reports of blocked property held under other Russia-related sanctions programs.
Recordkeeping obligations were extended in March 2025. Anyone involved in a transaction subject to OFAC regulations must now keep complete records for at least 10 years after the transaction date. For blocked property, records have to be kept for the whole time the property remains blocked and for 10 years after it is unblocked. That is a doubling of the previous five-year retention period, and it applies retroactively to records already on file.
Penalties
IEEPA authorizes civil and criminal penalties. The base civil penalty for one violation is the greater of $250,000 or twice the value of the underlying transaction.13Office of the Law Revision Counsel. 50 U.S.C. 1705 – Penalties Annual inflation adjustments raised the per-violation civil cap to $368,136 as of 2025.14U.S. Department of the Treasury. Appendix A to 31 CFR Part 501 – Civil Penalties Inflation Adjustment For large deals, the “twice the value” alternative often runs much higher.
Criminal penalties apply to willful violations. A person convicted of knowingly violating the sanctions faces fines up to $1,000,000 and up to 20 years in prison per count. Enforcement in this area frequently turns on whether a financial institution knew or should have known that a transaction exceeded the permitted maturity or involved a restricted counterparty.
Voluntary Self-Disclosure
A company that finds a violation and reports it to OFAC before any government inquiry can receive up to a 50 percent reduction in the base civil penalty.15U.S. Department of the Treasury. OFAC Disclosure Form Home The disclosure has to be truthful, complete, timely, and made before any investigation begins. Qualifying disclosures also tend to draw less aggressive enforcement overall, which is why building internal detection is worth more than waiting for OFAC to arrive on its own.