Yesterday, OFAC issued General License No. 15 under the Ukraine-Related Sanctions Regulations (31 C.F.R. Part 589), authorizing the maintenance or wind-down of pre-April 6 contracts with GAZ Group and its subsidiaries through October 23, 2018. Previously, such activity with GAZ Group was permitted only through June 5, 2018 as per General License No. 12B (which has since been superseded, as described below). OFAC also issued six new Frequently Asked Questions (FAQs).
Similar to the recent easing of restrictions against Rusal as set out in General License No. 14, the new general license extends the period of authorized maintenance/wind-down-related dealings with GAZ Group through October 23, permits exports from the United States to GAZ Group in support of such activity, and removes the requirement that payments to GAZ Group for maintenance/wind-down purposes be made into a blocked account in the United States. The general license does not authorize divestiture of debt or equity (which is covered by General License No. 13A), dealings with other sanctioned entities (unless permitted by General License No. 12C, described below), or the unblocking of property except for use in maintenance/wind-down-related activity.
As with the general license for Rusal, while the authorization is directly applicable for U.S. persons, it is also of significance to non-U.S. persons. This is because non-U.S. persons are subject to secondary sanctions under Section 228 of the Countering America’s Adversaries Through Sanctions Act (CAATSA) where they engage in a “significant” transaction with an individual or entity subject to Russia-related sanctions, including SDNs such as GAZ Group. On this point, OFAC has provided consistent guidance that a non-U.S. person will not be subject to sanctions under Section 228 of CAATSA where it engages in activity for which a U.S. person would not require a specific license– including activity that is generally licensed for U.S. persons. In issuing General License No. 15, OFAC provided the same guidance regarding non-U.S. person dealings with GAZ Group at FAQ 589.
In addition to General License No. 15, OFAC also issued General License No. 12C regarding maintenance/wind-down activities with AgroHolding Kuban, Basic Element Limited, B-Finance Ltd., EN+ Group PLC, JSC EuroSibEnergo, Gazprom Burenie, Ladoga Menedzhment, NPV Engineering OJSC, Renova Group, Russian Machines, and any entity owned 50 percent or greater by those companies. The general license supersedes the previous authorization, General License No. 12B. Consistent with the previous authorization, General License No. 12C authorizes the maintenance and winding-down of pre-April 6 contracts with the foregoing entities. Furthermore, as explained by OFAC:
General License 12C permits originating and intermediary U.S. financial institutions to process funds transfers that they would otherwise block to an account held by a blocked U.S. person at a U.S. financial institution. In addition, General License 12C clarifies that U.S. financial institutions can release such funds for authorized maintenance and wind-down purposes.
General License No. 12C does not authorize exports from the United States, the divestiture of debt or equity, transactions with sanctioned individuals or entities not identified in the general license, or the unblocking of property except for use in maintenance/wind-down-related activity.