Sectoral Sanctions Identification List
On 16 July, under the authority of Executive Order (“EO”) 13662, which authorises the imposition of sanctions on companies operating within specific sectors of the Russian economy, the US Treasury Department’s Office of Foreign Assets Control (“OFAC”) announced the Sectoral Sanctions Identification List (“SSI List”).
Under Directive 1 of the SSI List, US persons are prohibited from financing or otherwise transacting or dealing in new equity or new long-term debt, defined as debt of longer than 90 days maturity, for listed companies. Directive 2 of the SSI List prohibits US persons from transacting in new long- term debt for listed companies. Initially, two Russian banks, Gazprombank and VEB, were listed under Directive 1, and two energy companies, Rosneft and Novatek, were listed under Directive 2.
On 29 July, OFAC announced the addition of three state-owned financial institutions – VTB Bank, Bank of Moscow and Russian Agricultural Bank – to the SSI List under Directive 1.
Accompanying the release of the new SSI List, OFAC updated its online frequently asked questions (“FAQs”) to include “Questions Related to Sectoral Sanctions under Executive Order 13662.” The new FAQs make clear that companies included on the SSI List are not subject to blocking sanctions. OFAC also provides definitions of “debt” and “equity” and describes the circumstances in which rollover debt will fall under this prohibition. On 28 July, OFAC updated these FAQs to provide guidance on transactions involving SSI entities with regard to depositary receipts, revolving credit facilities and other loan agreements, credit exposures under derivatives contracts and letters of credit.
Finally, OFAC has also issued General License 1 under EO 13662, which authorises all US persons, without need to apply to or otherwise inform OFAC, to engage in transactions involving derivatives whose value is linked to long-term debt or equity issued by companies included on the SSI List.
The US also expanded blocking sanctions on Russia companies. On 29 July, OFAC announced the imposition of blocking sanctions on United Shipbuilding Corporation, a state-owned corporation and Russia’s largest shipbuilding company.
This action was preceded on 16 July by the imposition of blocking sanctions on eight Russian arms and defence industry firms, four Russian government officials, two separatist groups in Ukraine and a Crimean shipping facility.
The arms and defence industry firms are Almaz-Antey, Federal State Unitary Enterprise State Research and Production Enterprise Bazalt, JSC Concern Sozvezdie, JSC MIC NPO Mashinostroyenia, Kalashnikov Concern, KBP Instrument Design Bureau, Radio-Electronic Technologies, and Uralvagonzavod.
The four government officials are Sergey Beseda (a senior Russian Federal Security Service official), Oleg Savelyev (Russia’s Minister for Crimean Affairs), Sergei Neverov (Deputy Chairman of the State Duma of the Russian Federation), and Igor Shchegolev (Aide to the President of the Russian Federation).
The separatist groups that have been designated are the Luhansk People’s Republic and the Donetsk People’s Republic, both of which have also been designated by the EU. The entities are accused of having asserted unauthorised governmental authority over parts of Ukraine . Feodosiya Enterprises, a key shipping facility in the Crimean peninsula, has been designated for being complicit in the misappropriation of Ukrainian state assets.
On 29 July, the US Commerce Department’s Bureau of Industry and Commerce (“BIS”) instituted a policy denying the export, reexport or foreign transfer of items that are for use in Russia’s energy sector and may be used for exploration in or production from deepwater, Arctic offshore or shale projects that have the potential to produce oil.