On 27 August, the US Treasury Department’s Office of Financial Assets Control (“OFAC”) issued new Frequently Asked Questions regarding restrictions imposed on US persons in their dealings with Russian entities included on the Sectoral Sanctions Identifications (“SSI”) List.

The sectoral sanctions, which were issued in July of this year, prohibit US persons from transacting or otherwise dealing in new long-term debt or equity of companies designated under Directive 1, and just new long-term debt of companies listed under Directive 2.  Currently, all the listed companies are Russian financial-services and energy companies.  Debt or equity is considered “new” if it was issued after the entity was designated for sectoral sanctions. “Long-term debt” is defined to mean debt with a maturity over 90 days.

Among other things, the newly issued FAQs make explicit that the sectoral sanctions apply only to newly issued debt or equity of the listed entities, and do not restrict dealings involving debt or equity in which the SSI-listed entity was not the borrower or issuer.  For example, the FAQs make clear that:

  • A US person may purchase from, or sell to, an SSI entity the debt or equity of a non- sanctioned person.
  • A US person may deal in loans on which the SSI entity was the lender to a non-sanctioned person.
  • A US person may deal in debt or equity securities of a non-sanctioned person for which the SSI entity was the underwriter.
  • A US person may accept payment from a non-sanctioned person in the form of a letter of credit issued, advised or confirmed by an SSI entity.
  • A US person may engage in transactions necessary to exit or replace its participation in existing long-term loan facilities to an SSI entity.
  • A US person may extend credit to a third party for the purchase of goods from an SSI entity, even if the term exceeds 90 days.
  • A US person may extend a series of short-term loans to an SSI entity that exceed a cumulative period of 90 days so long as (i) each individual loan has a maturity of less than 90 days and is paid back in full before the next disbursement, and (ii) the US lender is not contractually obligated to roll over the balance for a cumulative period of longer than 90 days at the SSI entity’s request.
  • A US person may not extend payment terms in excess of 90 days to an SSI entity under a purchase agreement, even if no interest charge is included.

However, in each of these cases, the transaction must not involve the extension of new credit over 90 days to the SSI entity as part of the transaction. In addition, the FAQs clarify that a US person may not agree to extended payment terms in excess of 90 days on a sale to an SSI entity, even if no interest is added.

New FAQs on SSI List