United States Implements Trade Sanctions on Additional Persons & Entities for Activities in Crimea
International Trade & Customs Update
Date: September 08, 2016
On September 1, 2016, the Department of the Treasury, Office of Foreign Assets Control (OFAC) implemented further trade sanctions to address the continuing Russian occupation of the Crimea region of Ukraine. On September 7, 2016, the Department of Commerce, Bureau of Industry and Security (BIS) took similar actions to ensure the efficacy of existing sanctions on the Russian Federation (Russia) for violating international law and undermining the democratic processes and institutions in Ukraine. Together, OFAC and BIS expanded sanctions under existing Executive Orders pertaining to the conflict; added persons and entities to the Specially Designated Nationals (SDN) List, the Sectoral Sanctions Identifications (SSI) List and the Entity List; identified a number of subsidiaries that are owned 50 percent or more by previously sanctioned Russian companies; and directly targeted construction, transportation and defense entities either operating in Crimea or involved in the construction of the Kerch Bridge, which, if completed, will connect the Crimean peninsula to Russia.
In announcing the expanded sanctions, these agencies reaffirmed the U.S. pledge to maintain sanctions until Russia fully implements its commitments under the Minsk agreements, including a comprehensive cease fire, the withdrawal of all weapons and military personnel, and the restoration of Ukrainian control over the Ukraine side of the internationally recognized border.
In total, OFAC added 37 persons and entities to the SDN List, identified and added one banking entity to the SDN List as a foreign sanctions evader, and added 96 entities to the SSI List (see Russia/Ukraine-related Designations and Identifications). BIS added 81 entities to the Entity List (see Russian Sanctions: Addition of Certain Entities to the Entity List).
Additions to the SDN List
OFAC added 17 Ukrainian separatists to the SDN List for being responsible for, or complicit in, actions or policies that threaten the peace, security, stability, sovereignty or territorial integrity of Ukraine. This list includes certain persons related to the previously designated, self-proclaimed Donetsk People’s Republic and the previously designated, self-proclaimed Luhansk People’s Republic. In addition, OFAC has listed the Salvation Committee of Ukraine on the SDN List for being owned or controlled by, or acting for or on behalf of, former Ukrainian Prime Minister Mykola Azarov.
OFAC has also targeted 18 construction, transportation and defense entities and placed them on the SDN List due to their operations in Crimea. These include several defense firms operating shipbuilding, repair or maintenance companies and the Sovfracht-Sovmortrans Group, a Russian shipping and logistics company, and its numerous affiliated companies. In the construction area, OFAC has designated numerous Russian construction, engineering and federal institutions for their involvement in the construction of the Kerch Bridge.
Most notably, OFAC has added PJSC Mostotrest, a major Russian construction company, to the SDN List. Given this entity’s size and breadth of operations, OFAC also issued a General License to authorize for a limited period of time certain transactions necessary to divest or transfer holdings in Mostotrest. U.S. persons have until October 1, 2016 to divest or transfer to a non-U.S. person any holdings in PJSC Mostotrest.
Designation for Sanctions Evasion Involving Bank Rossiya
OFAC has identified and added CJSC ABR Management to the SDN List for acting for or on behalf of Bank Rossiya (previously placed on the SDN List in March 2014). Bank Rossiya managers founded ABR Management to strategically manage the banking group’s assets. As the trustee under a trust agreement with certain Bank Rossiya shareholders, ABR Management has the power to exercise voting rights for a majority of Bank Rossiya shares, including rights to propose candidates for Bank Rossiya management positions.
Further, additional “also known as” names have been added to the description for Bank Rossiya: a.k.a. AB Rossiya, OAO; f.k.a. Aktsionerny Bank Russian Federation; and a.k.a. Otkrytoe Aaktsionernoe Obshchestvo Aaktsionerny Bank Rossiya.
Additions to the SSI List
OFAC also identified additional subsidiaries of Bank of Moscow and Gazprombank as being 50 percent or more owned by their parent entities and placed them on the SSI List. The Bank of Moscow and Gazprombank were previously sanctioned in July 2014 and are subject to Directive 1 under the SSI List, which prohibits certain transactions and dealing in debt and equity of the sanctioned entities. Further, OFAC identified and added subsidiaries of Gazprom to the SSI List and made them subject to Directive 4, which prohibits the exportation of goods, services or technology in support of exploration or production for Russian deepwater, arctic offshore or shale oil projects. In adding these subsidiaries to the SSI List, OFAC noted that each were already subject to the trade restrictions given their relationship to their respective parent entities per OFAC’s Revised Guidance on Entities Owned by Persons Whose Property and Interests in Property are Blocked (i.e., OFAC’s “50 percent rule guidance”). OFAC stated that specifically naming and listing these additional entities will help U.S. persons and companies more effectively conduct due diligence and comply with the sanctions on these companies.
Additions to the Entity List
In a related action on September 7, 2016, BIS added 81 entities to the Entity List, with most of them mirroring the entities sanctioned and listed by OFAC. For example, BIS has also placed the Salvation Committee of Ukraine on the Entity List for its actions to undermine democratic processes and institutions in Ukraine, and its ongoing activities that threaten the country’s peace, security and stability. Further, BIS has added the same 18 construction, transportation and defense entities to the Entity List as OFAC added to its SDN List due to their activities in Crimea.
BIS has designated the following 11 entities due to their operations in Russia’s arms or related materiel sector: Angstrem-M; Giovan Ltd.; Joint Stock Company Angstrem; Joint Stock Company Angstrem-T; Joint Stock Company Foreign Economic Association (FEA) Radioexport; Joint Stock Company Perm Scientific Industrial Instrument-Making Company (PNPPK); Joint Stock Company Mikron; Joint Stock Company Research and Production Company Micran; NPC Granat; Technopole Company; and Technopole Ltd.
BIS added 51 entities to the Entity List based on its determination that they operate in the energy sector of Russia and are owned or controlled by, or have acted for or on behalf of, Gazprom. These entities are all subsidiaries of Gazprom, and a BIS license will now be required for exports, reexports or transfers (in-country) of all items subject to the Export Administration Regulations (EAR) to these entities when the exporter knows that the item will be used in exploration for, or production of, oil or gas in deepwater (greater than 500 feet) or arctic offshore locations or shale formations in Russia, or is unable to determine whether the item will be used in such projects.
For all 81 entities added to the Entity List, BIS now imposes a license requirement for all items subject to the EAR and has implemented a license review policy of a presumption of denial.
FOR MORE INFORMATION
For more information, please contact:
Samir D. Varma
Scott E. Diamond
Senior Legislative & Regulatory Policy Advisor
Not licensed to practice law
or any member of our International Trade & Customs group.
This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgment of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel.
This document may be considered attorney advertising in some jurisdictions.
© 2016 THOMPSON HINE LLP. ALL RIGHTS RESERVED.