JD Supra: OFAC and State Department Designate Severstal, Nord Gold and Additional Russians as SDNs

OFAC and State Department Designate Severstal, Nord Gold and Additional Russians as SDNs

by Grant Leach, Cortney O'Toole Morgan | Husch Blackwell LLP

On June 2, 2022, the Office of Foreign Assets Control (OFAC) added new Russian vessels and aircraft used by Russian elites, new top Russian government officials, and their companies and operations to the Specially Designated Nationals (SDN) List for aiding in the continued war effort by Russia against Ukraine. Notably, these designations include more Russian government officials and oligarchs, and two of the largest mining companies in Russia, Severstal PJSC (Severstal) and Nord Gold PLC (Nord Gold). This means that U.S. persons cannot engage in any transactions with Severstal or Nord Gold unless authorized by a license.

In its press release, the State Department explained that these new designations notably include “God Nisanov, one of the richest men in Europe and a close associate of several Russian officials, pursuant to Executive Order (E.O.) 14024…Evgeny Novitskiy, a Russian elite with close ties to the Government of the Russian Federation…Maria Zakharova, the spokesperson of the Russian Ministry of Foreign Affairs, for her role as an official of the Government of the Russian Federation… Sergei Gorkov for his role in the Government of the Russian Federation as the head of RosGeo…and Alexey Mordashov, the leader of Severgroup and one of Russia’s wealthiest billionaires, along with his wife and two adult children.” Additionally, four of Alexey Mordashov’s companies were designated, including Severgroup, Severstal, Algoritm, and Nord Gold. These new designations aim to target networks that enable Vladimir Putin to move and maintain money and other assets with other Russian oligarchs or family members. OFAC has also designated the family members of the newly designated oligarchs to ensure there is no work around through family ties. Finally, OFAC designated yachts and aircraft owned by or affiliated with Putin and other oligarchs to ensure that such vessels can be grounded if they come within the U.S. territory.

Severstal is one of the largest steel and mining companies based in Russia with operations mainly in Russia, Ukraine, Kazakhstan, France, and Italy. The owner of Severstal, Alexey Mordashav, was also added to the SDN List. Besides the steel and mining operations, Severstal has multiple subsidiaries, which are also subject to the same sanctions through OFAC’s 50% rule if they are 50% or more owned by Severstal or Mordashav.

Nord Gold is a gold mining company based in Russia that also operates mines in three other countries, the Suzdal mine in Kazakhstan, the Bissa and Bouly mine in Burkina Faso, and the Lefa mine in Guinea. Nord Gold was also added to the SDN list, and any of its subsidiaries or mines will also be subject to the same restrictions if they are 50% or more owned or controlled by Nord Gold.

OFAC concurrently issued general licenses 36 and 37.

General License 36 authorizes all transactions that are ordinarily incident and necessary to the wind-down of transactions with Severstal or any of its 50% or more owned entities until August 31, 2022. This license is still subject to the requirements of the Russian Harmful Foreign Activities Sanctions Regulations, which provide that any payment to Severstal or any other blocked person must be made into a blocked account.
General License 37 authorizes all transactions that are ordinarily incident and necessary to the wind-down of transactions with Nord Gold or any of its 50% or more owned entities until July 1, 2022. This license is still subject to the requirements of the Russian Harmful Foreign Activities Sanctions Regulations, which provide that any payment to Nord Gold or any other blocked person must be made into a blocked account.

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