United States Sanction
The U.S: sanctions on Russia are focused on the financial services, energy and defense industries. The sanctions contain a variety of targeted prohibitions that have increasingly expanded the scope of the sanctions program to include:
- Designating or blocking certain Russian individuals and entities, and an important change in the Office of Foreign Assets Control (“OFAC”) policy on entities owned by blocked persons;
- Limiting the availability of debt financing for certain Russian financial institutions;
- Prohibiting the provision of goods, services, and technology in support of certain activities relating to the exploration or production of oil or gas in Russia;
- Restrictions on the supply of certain items for use in oil or gas exploration or production in Russia;
Economic sanctions administered by OFAC
On July 16, 2014 and September 12, 2014, OFAC issued a series of Directives imposing targeted sanctions upon key elements of the Russian economy. Each Directive governs activities between U.S. persons (to include any person within the United States) and those persons listed on the Sectoral Sanctions Identifications (“SSI”) List. The SSI List is organized according to the four Directives. Unlike the Specially Designated Nationals (“SDN”) List, which includes blocked persons and prohibits substantially all activity with so-called SDNs, the SSI List designations result in prohibitions that are limited to those activities targeted by the Directives. As an aside, OFAC also recently revised its policy on entities that are owned by SDNs and SSI List persons to extend the designations to entities owned 50 percent or more by one or more persons on the SDN or SSI List.
The four Directives are as follows:
- Directive 1 targets the financial services sector of the Russian economy. This directive prohibits engaging in transactions in, providing financing for, or otherwise dealing in new debt with a maturity of longer than 30 days, or equity for persons identified on the SSI List under Directive 1.
- Directive 2 targets Russia’s energy sector of the Russian economy by prohibiting transactions in, provision of financing for, and other dealings in new debt with a maturity of longer than 90 days for persons identified on the SSI List under Directive 2.
- Directive 3 targets the Russian defence and related material sector by prohibiting all transactions in, provision of financing for, and other dealings in new debt of longer than 30 days for persons identified on the SSI List under Directive 3.
- Directive 4 expands on the sanctions targeting the Russian energy sector by prohibiting “the provision, exportation, or re-exportation, directly or indirectly, of goods, services (except for financial services), or technology in support of exploration or production for deepwater, Arctic offshore, or shale projects that have the potential to produce oil in the Russian Federation, or in maritime area claimed by the Russian Federation and extending from its territory” that involve any person identified on the SSI List under Directive
OFAC has also issued General Licenses authorizing certain transactions relating to derivative products (relevant to SSI List entities under Directives1-3) and a short wind-down period (relevant to Directive 4).