New Jersey has barred its state and local public entities from doing business with the Russian government and companies with direct ties to it, under a bipartisan bill Gov. Phil Murphy signed into law Wednesday in response to the country’s invasion of Ukraine.
The measure — which moved through the state Legislature in fewer than two weeks since the invasion began — also applies to dealings with Belarus, a Russian ally, because Russian troops entered part of Ukraine through that country.
Murphy, who has repeatedly called Russian President Vladimir Putin a “thug” who launched a “war of choice” on Ukraine, said in a statement Wednesday that “New Jersey cannot and will not stand idly by as a tin-pot dictator invades the free and independent nation of Ukraine.”
“We are sending a strong message today to Vladimir Putin and his cronies in Belarus that their actions will not be tolerated,” the governor said.
Under the law, S1889, state and local governments in New Jersey are now prohibited from conducting business with Russia and Belarus or companies that have direct interests with those countries, are headquartered there, or support the invasion.
The state Department of Treasury is charged with keeping a list of people and entities that have ties to the countries. Those that do will then be barred from entering into or renewing a government contract, getting tax breaks or government subsidies, and more.
In addition, the law bars the state from investing in pension or annuity funds in entities or companies on the list and from banking with institutions tied to the Russian and Belarusian governments.
The law will remain in effect until the U.S. lifts its economic sanctions on the countries.
Because of how quickly the bill moved, the nonpartisan state Office of Legislative Services said it could not determine the fiscal impact of the measure.
State Treasurer Elizabeth Maher Muoio said Wednesday her department has “assessed” the state public-worker pension fund’s “exposure to Russian investments“ and is “in the process of identifying what state contracts, if any, might have ties to Russian businesses.”
“We will use the power of our purse to stand in solidarity with the people of Ukraine,” Muoio said.
The bill sent state officials scrambling last week to identify any Russian investments made through New Jersey’s pension fund, which had a recent valuation of $93.8 billion.
As of Oct. 31, the fund had at least $226.6 million tied up in Russian equities and an additional $21.4 million in Belarus, according to a recent state investment report.
Those numbers were diminished in recent months mostly due to losses. The RTS Index, which tracks Russia’s main stock market, plummeted about 50% between October and Feb. 25, when Russia closed its financial markets.
“The total New Jersey pension fund exposure to Russian investments is approximately $50 million as of the close of Feb. 28,” state Treasury spokeswoman Jennifer Sciortino told NJ Advance Media last week.
There likely will be a race to dump Russian equities once markets reopen, and losses could widen amid the turmoil. Russia’s central bank reopened trading on its currency market Wednesday, but the country’s stock market remained closed for an eighth day.
It is still unclear how much of the state pension fund‘s private market portfolio is exposed to Russia, and getting details will be difficult because of the private nature of those investments.
“The pension fund’s private market exposure to Russia comprises a very small portion of its private equity and distressed debt portfolios,” Sciortino said.
Pension funds across the country have rushed to divest holdings from Russia and Belarus in the wake of the war. Officials in other states from New York to California are taking similar steps to New Jersey.
Experts say identifying investments in Russia is complicated, and unloading the holdings may prove even harder.
Murphy has also ordered all state agencies in New Jersey to review how they can prevent state resources from supporting the Russian government. The governor said the move is to complement this law.
Under Murphy’s executive order, all agencies are required review their authority to suspend or revoke licenses, permits, registrations, and certifications of businesses that invest directly in companies owned or controlled by the governments in Russia and Belarus. The order also directs the agencies to review the state’s ability to boycott or halt the import or purchase of products or services provided by the two countries.
New Jersey’s law moved swiftly through the Legislature since Russia began its attack on Feb. 24. The state Senate voted 39-0 last week to approve the legislation, while the Assembly passed it 70-0 on Tuesday.
Sponsors say the goal is not to punish Russian residents but to bolster economic sanctions the U.S. and other countries have already imposed on the country. Most recently, the U.S. banned imports of Russian oil.
“We can help cut off Russia’s finances and the profiteering of Putin and his oligarchs, including sanctions on tax breaks for developers,” said state Sen. Paul Sarlo, D-Bergen, a main sponsor of New Jersey’s law. “They obviously have no respect for human rights, but we can make them pay an increasingly heavy price for their actions.”
This isn’t the first time New Jersey has taken such moves. In 2016, then-Gov. Chris Christie signed a law barring the state’s public worker pension fund from investing in companies boycotting Israeli goods and services.
In 2018, the state’s pension fund divested from a Danish bank that investment officials determined was boycotting Israeli businesses. And last year, the pension fund pulled its $182 million in investments from the parent company of Ben & Jerry’s over the ice cream maker’s move to stop selling its products in the Israeli-occupied territories.
In 1985, then-Gov. Tom Kean signed a law to make New Jersey the first state to divest the pension fund from companies doing business with the South African government amid the push to end apartheid.
The war in Ukraine has caused broad economic effects across the globe. Most notably, gas prices — already on the rise in recent months — have increased even more.
The average has price in New Jersey was $4.33 a gallon on Wednesday, according to the American Automobile Association. That’s higher than the national average of $4.25.
The Associated Press contributed to this report.
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