On September 12, 2014, the US Treasury Department significantly expanded US sanctions against Russia. The new sanctions broaden the so-called "sectoral sanctions," initially imposed under two Directives issued on July 16, and impose blocks on the assets and property of additional Russian entities.

US sectoral sanctions target entities within certain sectors of the Russian economy. Previously, the sectors consisted of the Russian financial services, energy, and arms or related materiel sectors. The US has now added the Russian "defense and related materiel sector", amended the initial two Directives, and added two further Directives.

  • Directive 1, as issued on July 16, prohibited US individuals and companies (US Persons) from engaging in transactions involving debt of longer than 90 days' maturity or new equity of designated persons (including entities) within the Russian financial services sector. As amended, the applicable debt maturity period is 30 days instead of 90 days.

The US has designated Russia’s largest bank, Sberbank of Russia, under Directive 1, joining Bank of Moscow, Gazprombank OAO, Russian Agricultural Bank, VEB and VTB Bank.

  • Directive 2, as issued on July 16, prohibited US Persons from engaging in transactions involving debt of longer than 90 days' maturity of designated persons within the Russian energy sector. The amendments make only technical changes and do not alter the applicable debt maturity period under Directive 2, which remains at 90 days.

The US has designated two additional Russian energy companies -- Gazprom Neft and Transneft – under Directive 2.

  •  Directive 3 prohibits US Persons from engaging in transactions involving debt of longer than 30 days' maturity of designated persons in the Russian defense and related materiel sector of Russia.

The US has designated Rostec, a major Russian conglomerate that operates in the Russian defense and related materiel sector, as well as certain of its subsidiaries, under Directive 3.

  • Directive 4 contains additional new sanctions on persons within the Russian energy sector, prohibiting US Persons from providing or exporting goods, services (except for financial services), or technology in support of exploration or production for deepwater, Arctic offshore, or shale projects that have the potential to produce oil in the Russian Federation, or in maritime area claimed by the Russian Federation and extending from its territory, if a person designated under Directive 4 is involved.

The US has designated Gazprom, Gazprom Neft, Lukoil, Surgutneftegas, and Rosneft under Directive 4.

The US has also issued two related general licenses. General License No. 1A authorizes US Persons to engage in transactions involving certain derivative products linked to debt covered by Directives 1, 2 or 3. General License No. 2 authorizes US Persons to engage in activities related to winding down their involvement in transactions prohibited in Directive 4, but only until September 26.

Finally, the US has also listed as Specially Designated Nationals (SDNs) and blocked the property and interests in property of five Russian state-owned defense technology firms. These SDNs are OAO ‘Dolgoprudny Research Production Enterprise,’ Mytishchinski Mashinostroitelny Zavod OAO, Kalinin Machine Plant JSC, Almaz-Antey GSKB, and JSC NIIP.

It is important to keep in mind that sanctions imposed against persons subject to sectoral sanctions under Directives 1-4, and sanctions imposed against SDNs, also apply to entities owned 50% or more by such sanctioned persons.