U.S. Russia Sanctions Update
26 FEBRUARY 2022
On 26 February 2021, a number of countries including the US, UK, France, Germany, and Italy released a coordinated statement outlining their commitment to further sanctions measures in response to the Ukraine conflict. Those measures are likely to include:
- Removal of certain Russian banks from the SWIFT messaging system.
- Restrictive measures to prevent the Russian Central Bank from deploying its international reserves to counteract the impact of sanctions.
- Targeting individuals and entities determined to be facilitating the invasion of Ukraine, which will include limiting “golden passport” facilities which enable wealthy Russians to gain citizenship and access to financial systems outside of Russia.
Further details are awaited.
28 MARCH 2022
OFAC issued new Directive 4 under E.O. 14024, “Prohibitions Related to Transactions Involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation” (Russia-related Sovereign Transactions Directive). The directive is targeted towards those identified as being “political subdivisions, agencies, or instrumentalities of the Government of the Russian Federation”.
Pursuant to Directive 4, US persons are prohibited from engaging in any transaction involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation. This action effectively prevents the use of any assets of the above entities held in the United States or by US persons, wherever located.
At the same time OFAC has issued a general license GL 8A which authorises through to 24 June 2022 certain energy-related transactions with the following entities:
- State Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank
- Public Joint Stock Company Bank Financial Corporation Otkritie
- Sovcombank Open Joint Stock Company
- Public Joint Stock Company Sberbank of Russia
- VTB Bank Public Joint Stock Company
- Central Bank of the Russian Federation.
OFAC has clarified that for the purposes of the license “related to energy” means
“the extraction, production, refinement, liquefaction, gasification, regasification, conversion, enrichment, fabrication, transport, or purchase of petroleum, including crude oil, lease condensates, unfinished oils, natural gas liquids, petroleum products, natural gas, or other products capable of producing energy, such as coal, wood, or agricultural products used to manufacture biofuels, or uranium in any form, as well as the development, production, generation, transmission, or exchange of power, through any means, including nuclear, thermal, and renewable energy sources.”
Although not clear, the inclusion of the word “transport” would suggest that shipping activities involving the above entities (including other companies in which the above hold a 50% or more ownership) would fall within the scope of GL8. OFAC has indicated that further guidance in this regard will be published.
The up-shot seems to be that at the time of publication OFAC remained willing to allow US persons to engage in energy-related transactions which involve the above companies through to 24 June 2022 (to the extent not prohibited by any other sanctions that might apply). Outside of energy, all other transactions appear to be prohibited.
OFAC also designated three entities alleged to be critical to managing one of Russia’s key sovereign wealth funds: Russian Direct Investment Fund (RDIF), its management company Joint Stock Company Management Company of the Russian Direct Investment Fund (JSC RDIF), and Limited Liability Company RVC Management Company (LLC RVC), a subsidiary of JSC RDIF. LLC RVC is reported to operate in deposit banking, management of investment funds, unit investment trusts, insurance, and private pension funds.