As the United States and Russia continue to clash over Russia’s actions in the Ukraine, on September 12, the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) issued additional sanctions further restricting designated Russian financial institutions’ access to capital markets, targeting Russian defense entities, and prohibiting exports to Russian entities that have been specifically designated as participants in exploration and production in deepwater, Arctic offshore, or shale projects. As part of these recent changes, OFAC amended Directive 1, previously issued July 16, 2014, and added Directives 3 and 4 targeting the Russian defense and energy sectors. OFAC also added five more entities to its Specially Designated Nationals List (“SDN List”).

OFAC amended Directive 1 to change the debt maturity restriction from 90 days to 30 days. U.S. persons may not transact in, provide financing for, or deal in new debt or new equity of longer than 30 days, with entities designated under Directive 1 of the Sectoral Sanctions Identifications List (“SSI List”). All other previous restrictions provided for in Directives 1 and 2 remain unchanged. Directive 3 specifically targets the “defense and related materiel sector” of Russia, and prohibits “all transactions in, provision of financing for, and other dealings in new debt of longer than 30 days maturity” of designated entities. OFAC designated one Russian entity under Directive 3, Rostec State Corporation.

Directive 4 introduces new prohibitions targeting entities in Russia’s energy sector. OFAC designated five entities under Directive 4, prohibiting “the provision, exportation, or reexportation, directly or indirectly, of 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 Russia or any territory claimed by Russia. Concurrently, OFAC also issued General License Number 2, which allows U.S. persons until September 26, 2014, to engage in activities with Directive 4 designated entities that are “ordinarily incident and necessary to the wind down of operations, contracts, or other agreements” prohibited under Directive 4. The five entities designated under Directive 4 are Lukoil OAO, OJSC Gazprom Neft, Open Joint Stock Company Gazprom, Surgutneftegas, and Open Joint-Stock Company Rosneft Oil Company. Directive 4 prohibitions also apply to any entities 50 percent or more owned by one or more of the designated entities.

According to OFAC guidance, the Directive 4 prohibition does not apply to the provision of financial services, such as clearing transactions or providing insurance. However, the exportation of services, such as drilling services, geophysical services, geological services, logistical services, management services, modeling capabilities, and mapping technologies, are examples of prohibited activities under Directive 4.