On July 16, 2014, the Obama Administration responded further to developments in Ukraine by imposing another new round of sanctions on Russian, Ukrainian and Crimean parties. Importantly, for the first time, the United States imposed sectoral sanctions against Russian interests pursuant to Executive Order 13662. The new sectoral sanctions impose specific restrictions on financial dealings with four prominent Russian businesses—two in the financial sector and two in the energy sector. The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) also added five individuals and 11 entities to its Specially Designated Nationals (SDN) list, while the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) added the same 11 entities to the its Entity List. The European Union (EU) also recently added individuals to its sanctions list and, concurrently with the new U.S. sanctions, concluded to expand restrictive measures against Russian entities.
New U.S. Sanctions on Russian Industry Sectors
This latest round of sanctions is particularly significant because OFAC created a new Sectoral Sanctions Identification List (SSI List), separate and distinct from the SDN list, and imposed specific restrictions on targeted entities’ access to new U.S. debt and/or equity financing. The new sectoral sanctions target four entities in Russia’s financial and energy sectors.
Financial Sector Sanctions
Directive 1 of the new SSI List prohibits U.S. persons or anyone in the United States from transacting in, providing financing for or otherwise dealing in new debt of longer than 90 days’ maturity or new equity for these persons (listed below), their property or their interests in property. All other transactions with these persons or involving any property in which one or more of these persons has an interest are permitted, provided such transactions do not otherwise involve property or interests in property of a person blocked pursuant to Executive Orders 13660, 13661 or 13662, or any other sanctions programs implemented by OFAC.
(1) VNESHECONOMBANK (a.k.a. BANK FOR DEVELOPMENT AND FOREIGN ECONOMIC AFFAIRS (VNESHECONOMBANK) STATE CORPORATION; a.k.a. BANK RAZVITIYA I VNESHNEEKONOMICHESKOI DEYATELNOSTI (VNESHEKONOMBANK) GOSUDARSTVENNAYA KORPORATSIYA; a.k.a. "VEB").
(2) GAZPROMBANK OAO (a.k.a. GAZPROMBANK GAS INDUSTRY OJSC; a.k.a. GAZPROMBANK OJSC; a.k.a. GAZPROMBANK OPEN JOINT STOCK COMPANY; a.k.a. GAZPROMBANK OTKRYTOE AKTSIONERNOE OBSHCHESTVO; a.k.a. GPB, OAO; a.k.a. GPB, OJSC)
Energy Sector Sanctions
Directive 2 of the new SSI List prohibits U.S. persons or anyone in the United States from transacting in, providing financing for or otherwise dealing in new debt of longer than 90 days’ maturity for these persons (listed below), their property or their interests in property. All other transactions with these persons or involving any property in which one or more of these persons has an interest are permitted, provided such transactions do not otherwise involve property or interests in property of a person blocked pursuant to Executive Order 13660, 13661 or 13662, or any other sanctions programs implemented by OFAC.
(1) NOVATEK (a.k.a. FINANSOVO-INVESTITSIONNAYA KOMPANIYA NOVAFININVEST OAO; a.k.a. NOVATEK).
(2) ROSNEFT OIL COMPANY (a.k.a. OAO ROSNEFT OIL COMPANY; a.k.a. OIL COMPANY ROSNEFT; a.k.a. OJSC ROSNEFT OIL COMPANY; a.k.a. ROSNEFT; a.k.a. ROSNEFT OIL COMPANY).
Inclusion of these entities on the new SSI List does not:
Block the property of these entities or prohibit commercial transactions with these entities, unless they are separately identified on the SDN list
Prohibit transactions in debt with maturities of 90 days or less
Prohibit transactions involving debt/equity financing concluded before July 16
Prohibit the maintenance of correspondent accounts
Prohibit the processing of U.S. dollar-clearing transactions
New SDN Designations
In addition to the new sectoral sanctions, pursuant to Executive Orders 13660 and 13662, OFAC placed on the SDN list five Russian officials, including a top aide to President Putin and a senior official of the Federal Security Service, and 11 entities. The sanctioned entities include defense-related companies and a munitions producer. U.S. persons are generally prohibited from transacting business with entities on the SDN list.
New EU Sanctions
On July 11, the European Council (the Council) amended the Ukraine sanctions regulation (Regulation 269/2014) by issuing Regulation 753/2014. This amendment added 11 new individuals to the Ukraine sanctions list on the basis that they engaged in activity that undermined Ukraine’s territorial integrity, sovereignty and independence. No entities were included in this list.
Also, on July 16 the Council agreed to expand sanctions against individuals and entities “actively provid(ing) material or financial support to the Russian decision makers responsible for the annexation of Crimea or the destabilization of Eastern Ukraine.” As of this writing, the specific new EU sanctions have not been announced.