U.S. Continues to Increase Pressure on Russia Through Ukraine-Related Sanctions
In mid-September, OFAC and BIS announced new sanctions that target Russia’s financial services, energy, and defense and related materiel sectors. OFAC imposed sanctions that prohibit the direct or indirect export or reexport of goods, services (not including financial services) or technology in support of exploration or production for Russian deepwater (greater than 500 feet), Arctic offshore or shale projects that have the potential to produce oil in Russia to five Russian energy companies involved in these types of activities.
OFAC also issued a general license (General License NO. 2A) that allows U.S. persons to wind down applicable transactions with the newly sanctioned entities by September 26, 2014.
BIS has added these companies to its Entity List as well, imposing a license requirement for the export, reexport or foreign transfer of items subject to the EAR to these companies when the exporter, reexporter or transferor knows that those items will be used directly or indirectly for the purposes outlined above. BIS will consider these license requests with a presumption of denial if the item will be “used directly or indirectly for exploration or production from deepwater, Arctic offshore, or shale projects in Russia that have the potential to produce oil.”
Read a statement from Treasury Secretary Lew, as well as OFAC’spress release and new sanctions designations. See the general license here and the BIS press release. Additional news coverage is available at Reuters and The Washington Post.
Additional Iran Sanctions Designations Despite Extension of the Implementation of the Joint Plan of Action
Despite U.S. agreement in July 2014 to extend temporary sanctions relief to Iran until November 24, 2014 under the Joint Plan of Action (JPOA) between the P5+1 and Iran, the U.S. Department of State and OFAC have added Iranian individuals and entities to their sanctions programs in an apparent effort to increase pressure on Iran in nuclear negotiations. The new designations occurred in late August and targeted Iran’s missile and nuclear programs, support for terrorism and efforts to circumvent sanctions.
The State Department described the objective of the additional designations as intended to “underscore U.S. resolve to enforce sanctions as the P5+1 and Iran work toward a comprehensive solution to address the international community’s concerns over Iran’s nuclear program.” The Treasury Department added, “during this JPOA extension period, as we fulfill our commitment to provide targeted sanctions relief, we remain committed to enforcing existing sanctions against Iran.”
OFAC Clarifies Application of 50 Percent Rule
In late August, OFAC issued new guidance on its 50 Percent Rule that expands upon its earlier guidance by addressing entities owned 50 percent or more in the aggregate by blocked parties. Specifically, the new guidance states that “the property and interests in property of entities directly or indirectly owned 50 percent or more in the aggregate by one or more blocked persons are considered blocked regardless of whether such entities appear on OFAC’s Specially Designated Nationals and Blocked Persons List (SDN List).”
OFAC also applies the 50 Percent Rule to entities on the Sectoral Sanctions Identification List (“SSI List”) under the Ukraine-related sanctions. However, the property and interests in property of persons on the SSI List (and entities owned 50 percent or more in the aggregate by persons subject to the SSI List) are not required to be blocked. Instead, they are subject to only the SSI List restrictions.