OFAC Sanctions Russian Oligarchs and Major Russian Companies

Today, the US Department of Treasury, Office of Foreign Assets Control (OFAC) designated several Russian individuals and companies as Specially Designated Nationals (SDNs).  Specifically, in response to what Treasury Secretary Steven Mnuchin described as Russia’s “malign activity”, OFAC indicated that it sanctioned

seven Russian oligarchs and 12 companies they own or control, 17 senior Russian government officials, and a state-owned Russian weapons trading company and its subsidiary, a Russian bank.

In making the new designations, OFAC issued a press release, web notice, General License No. 12 under the Ukraine-Related Sanctions Regulations (URSR, 31 C.F.R. Part 589), General License No. 13 under the URSR, eight new Frequently Asked Questions (FAQs) related to the new designations, and one updated FAQ related to the Countering America’s Adversaries Through Sanctions Act (CAATSA). OFAC made the designations pursuant to Executive Orders 13661 and 13662, which are focused on the crisis in Ukraine, as well as Executive Order 13582, which relates to the Syrian civil war. New Designations OFAC has designated the newly sanctioned individuals and entities as SDNs, meaning that they are “blocked” under US law.  Specifically, all US persons worldwide (including US banks) are required to freeze the SDNs’ assets that are in their possession or control, and are prohibited from engaging in any transactions or dealings with them, subject to certain narrow authorizations.  These restrictions apply not only to the listed SDNs, but to any unlisted entities owned 50% or greater by any combination of SDNs. Unlisted entities controlled by SDNs, but not owned 50% or greater by them, are not automatically blocked, but could be designated as SDNs in the future. Individuals OFAC has designated the following individuals as SDNs:

• Andrey Akimov
• Vladimir Bogdanov
• Oleg Deripaska
• Alexey Dyumin
• Mikhail Fradkov
• Sergei Fursenko
• Oleg Govorun
• Suleiman Kerimov
• Vladimir Kolokoltsev
• Konstantin Kosachev
• Andrey Kostin
• Alexey Miller
• Nikolai Patrushev
• Vladislav Reznik
• Igor Rotenberg
• Kirill Shamalov
• Evgeniy Shkolov
• Andrei Skoch
• Alexander Torshin
• Vladimir Ustinov
• Timur Valiulin
• Viktor Vekselberg
• Alexander Zharov
• Viktor Zolotov

Entities OFAC has designated the following entities as SDNs:

• AgroHolding Kuban
• Basic Element Ltd.
• B-Finance Ltd.
• EN+ Group plc
• GAZ Group
• Gazprom Burenie, OOO
• JSC Eurosibenergo
• Ladoga Menedzhment, OOO
• NPV Engineering OJSC
• Renova Group
• Rosoboroneksport OAO
• Russian Financial Corporation
• Russian Machines
• United Company Rusal plc

General Licenses General License No. 12 authorizes US persons to wind down dealings with all of the SDN entities listed above, except for Rosoboroneksport OAO and Russian Financial Corporation, until June 5, 2018.  The general license does not authorize such winding down of business with individuals designated as SDNs, or with Rosoboroneksport OAO or Russian Financial Corporation.  Furthermore, the general license does not authorize divestiture of debt, equity, or other holdings in the blocked entities; transactions with other blocked persons not covered by the general license; the unblocking of blocked property; or the export of goods from the United States.  Moreover, US persons taking advantage of the general license must make any payments owed to the covered SDNs into a blocked account in the United States, and must file a comprehensive report with OFAC by June 15, 2018. General License No. 13 authorizes US persons, until May 7, 2018, to divest or transfer debt, equity, or other holdings in EN+ Group plc, GAZ Group, and United Company Rusal.  It does not authorize divestment from any other SDN entities.  Furthermore, the general license does not authorize the unblocking of blocked property; selling of holdings in the covered entities back to those entities; the purchase of any holdings in such entities; or any dealings with SDNs, including the SDNs identified in the general license.  US persons taking advantage of the general license must file a comprehensive report with OFAC by May 17, 2018. FAQs The FAQs include questions related to the following subjects:

• US person employment or board membership at designated entities;
• US person importation of goods from designated entities;
• US person divestment of holdings in designated entities;
• SDN ownership of US entities; and
• Sanctions applicable to non-US persons that deal with Russian SDNs.

We will follow up with an advisory that assesses these FAQs in more detail.

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The new designations mark a significant intensification of US sanctions against Russia, as OFAC has targeted Russian oligarchs with extensive holdings and ties to President Putin, and further has targeted certain major Russian companies.  The use of SDN designation authority is particularly severe, as compared with the less severe “sectoral” sanctions previously used to target major Russian companies. We will follow up with a more detailed advisory assessing today’s OFAC action.