On September 29, 2017, the US Treasury Department’s Office of Foreign Assets Control (“OFAC”) amended and reissued Directive 1 and Directive 2 implementing US sectoral sanctions targeting Russia pursuant to the Countering America’s Adversaries Through Sanctions Act (“CAATSA”). The maturity of prohibited “new debt” under Directive 1 will be reduced to 14 days (from 30 days) and the maturity of prohibited “new debt” under Directive 2 will be reduced to 60 days (from 90 days). As discussed in our previous blog post here, CAATSA requires OFAC to modify Directives 1, 2, and 4, in order to, among other things, tighten existing sectoral sanctions against Russia pursuant to Executive Order 13662. The amended and reissued Directives 1 and 2 will become effective November 28, 2017, in accordance with CAATSA. Entities subject to US sectoral sanctions are identified on the Sectoral Sanctions Identifications List maintained by OFAC. OFAC published updated FAQs related to the amended and reissued Directives. Also pursuant to CAATSA, OFAC is expected to amend and reissue Directive 4 no later than October 31, 2017 (90 days from the date of CAATSA’s enactment).

Directive 1 (financial sector sanctions)

Beginning on November 28, 2017, Directive 1 will prohibit US Persons from:

  • all transactions in, provision of financing for, and other dealings in
  • new debt of longer than 14 days maturity or
  • new equity for
  • the Russian financial institutions subject to this directive as well as any entities 50% or more owned by those entities.

Prior versions of Directive 1 are superseded by the September 29, 2017 version of Directive 1. The relevant tenors of prohibited “new debt” under Directive 1 are as follows:

Period when the debt was issued Applicable tenor of prohibited debt
On or after July 16, 2014 and before September 12, 2014 Longer than 90 days maturity
On or after September 12, 2014 and before November 28, 2017 Longer than 30 days maturity
On or after November 28, 2017 Longer than 14 days maturity

Directive 2 (energy sector sanctions)

Beginning on November 28, 2017, Directive 2 prohibits US Persons from:

  • all transactions in, provision of financing for, and other dealings in
  • new debt of longer than 60 days maturity for
  • Russian energy-sector companies subject to this directive as well as any entities 50% or more owned by those entities.

As with Directive 1, prior versions of Directive 2 are superseded by the September 29, 2017 version of Directive 2. Accordingly, the relevant tenors of prohibited “new debt” under Directive 2 are as follows:

Period when the debt was issued Applicable tenor of prohibited debt
On or after July 16, 2014 and before November 28, 2017 Longer than 90 days maturity
On or after November 28, 2017 Longer than 60 days maturity

The authors are grateful for the assistance of Andrea Tovar in the preparation of this blog post.