On 12 September, a few hours after the new EU sanctions were announced, the US Treasury Department announced an expansion of the sectoral sanctions program targeting Russian companies. In addition to adding new entities to existing Directives 1 and 2, which bar US persons from transacting in equity or long-term debt of listed financial services and energy companies, the US also has expanded the definition of long-term debt for financial services companies covered by Directive 1, has added a new Directive 3 targeting the defence and related materials sector, and has added a new Directive 4 supplementing US export controls on the Russian oil and gas sector. In addition to these changes to the Sectoral Sanctions Identifications (“SSI”) List, the US has imposed blocking sanctions against a number of Russian defence companies.
Sberbank, Russia’s largest bank, is now designated under Directive 1 of the SSI List. Directive 1 also has been amended to tighten the restrictions on debt financing transactions by reducing from 90 days to 30 days the maturity period of new debt. As a result, US persons are now prohibited from transacting or otherwise dealing in new equity or debt of greater than 30 days maturity of the financial institutions designated under Directive 1 of the SSI List, including both Sberbank and the banks that were previously designated.
Gazprom Neft and Transneft have been added to Directive 2 of the SSI List, which prohibits US persons from transacting or dealing in new debt of greater than 90 days maturity of these two companies and other listed companies in the Russian energy sector. The debt maturity period for Directive 2 remains at 90 days (and has not been shortened to 30 days, as with Directive 1).
The new Directive 3 of the SSI List currently includes just one entity, Rostec, a major Russian defence conglomerate. Directive 3 prohibits transactions by US persons involving new debt of greater than 30 days maturity issued by designated entities. With the introduction of Directive 3, the US has also made a conforming amendment to General License 1. The amended license, now designated as General License 1a, authorises derivatives transactions linked to instruments restricted under the SSI List Directives 1, 2 and 3.
The Treasury Department also announced new Directive 4 of the SSI List, which supports existing export restrictions administered by the Commerce Department’s Bureau of Industry and Security (“BIS”) that target Russia’s oil industry. Specifically, US persons are now prohibited from exporting goods, services (not including financial services) or technology in support of exploration or production for Russian deepwater, Arctic offshore or shale projects that have the potential to produce oil. The targeted companies are Gazprom, Gazprom Neft, Lukoil, Surgutneftegas and Rosneft. OFAC also has adopted a new General License 2, which grants a limited grace period ending on 26 September 2014 for winding down pre-existing contracts. Directive 4 represents an expansion of existing export controls because it applies to services as well as goods, software and technology, and because it applies to US persons anywhere in the world, even if they are not exporting goods from the US or reexporting US-origin goods from a third country.
Finally, the Treasury Department has blocked five additional state-owned defence technology companies pursuant to Executive Order (“EO”) 13661. The five entities, which have been added to the Specially Designated Nationals (“SDN”) List, are OAO ‘Dolgoprudny Research Production Enterprise,’ Mytishchinski Mashinostroitelny Zavod OAO, Kalinin Machine Plant JSC, Almaz Antey GSKB, and JSC NIIP. All transactions by US persons with these five companies are now prohibited, and any assets of the companies in the US or in the possession or control of a US person must be frozen.