On December 19, 2018, the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) submitted a letter to congressional leaders (“Congressional Letter”) notifying Congress of its intent to terminate the sanctions imposed on En+ Group plc (“En+”), UC Rusal plc (“RUSAL”), and JSC EuroSibEnergo (“ESE”) in 30 days. On the same day, OFAC announced new sanctions against a number of individuals and entities for their involvement in a range of malign activities. Concurrently, the US Department of State announced it had added 12 individuals and entities to the List of Specified Persons under Section 231 of the Countering America’s Adversaries Through Sanctions Act (“CAATSA”) for being part of, or operating for or on behalf of, the defense or intelligence sector of the Russian Federation.

The following day, on December 20, 2018, OFAC extended the expiration dates from January 21, 2019 to March 7, 2019 for the authorizations in two general licenses related to divestment from and winding down business with GAZ Group.

Delisting of EN+, RUSAL, and ESE

EN+, RUSAL, and ESE were added to OFAC’s List of Specially Designated Nationals (“SDN List”) on April 6, 2018 for being owned or controlled, directly or indirectly, by Mr. Oleg Deripaska, who was also designated on that date. More information on the original designation of these parties can be found in our blog post here.

After months of negotiations with OFAC, the Congressional Letter indicates that EN+, RUSAL, and ESE have agreed to undertake significant restructuring and corporate governance changes to address the circumstances that led to the companies’ designations, including, among other commitments:

  • reducing Mr. Deripaska’s direct and indirect shareholding stake;
  • overhauling the composition of the En+ and RUSAL boards of directors;
  • taking other restrictive steps related to their corporate governance; and
  • committing to full transparency with OFAC by undertaking extensive, ongoing auditing, certification, and reporting requirements.

The Congressional Letter indicates that OFAC will reserve the right to relist one or all of these companies should they fail to comply with the agreement.

EN+, RUSAL and ESE will be removed from the SDN List after 30 days of the Congressional Letter unless Congress passes a joint resolution of disapproval. Mr. Deripaska himself will remain on the SDN List and his property will remain blocked. US persons will continue to be prohibited from dealing, directly or indirectly, with Mr. Deripaska and foreign persons will continue to be subject to secondary sanctions should they knowingly facilitate a significant transaction for, or on behalf of, Mr. Deripaska.

Additional SDN Designations

Also on December 19, 2018, OFAC added 18 individuals and 15 entities to the SDN List. These parties were designated for their involvement in a range of malign activity including attempts to interfere with the 2016 US election, efforts to undermine international organizations through cyber-enabled means, and involvement in the Novichok nerve agent assassination attempt in the United Kingdom. This included 15 designations under CAATSA.

Additions to CAATSA Section 231 List

Concurrently, the US Department of State also added 12 individuals and entities to the List of Specified Persons under Section 231 of CAATSA (“Section 231 List”) for being part of, or operating for or on behalf of, the defense or intelligence sector of the Russian Federation. Any person determined to knowingly engage in a significant transaction with these 12 parties or with any other parties on the Section 231 List may be sanctioned, including by being designated as an SDN.

Extension of Deadline for Divestment and Winding Down Business with GAZ Group

On December 20, 2018, OFAC extended the expiration dates for the authorizations in two general licenses related to divestment from and winding down business with GAZ Group, another entity designated on April 6, 2018 for being owned or controlled, directly or indirectly, by Mr. Deripaska. The relevant general licenses were reissued as General License 13I and General License 15D, and the expiration dates were extended from January 21, 2019 to March 7, 2019. 

These expiration dates have been extended several times. OFAC has previously acknowledged that these earlier extensions were due to GAZ Group proposing substantial corporate governance changes that could potentially result in significant changes in control and its removal from the SDN List.

Ms. Contini focuses her practice on export controls, trade sanctions, and anti-boycott laws. This includes advising US and multinational companies on trade compliance programs, risk assessments, licensing, review of proposed transactions and enforcement matters. Ms. Contini works regularly with companies across a wide range of industries, including the pharmaceutical/medical device, oil and gas, and nuclear sectors.