On June 20, 2017, the US Office of Foreign Assets Control (“OFAC”) announced that it had added 38 individuals and entities to the Specially Designated Nationals and Blocked Persons List (“SDN List”) and 20 entities to the Sectoral Sanctions Identification List (“SSI List”) under US sanctions targeting Russia and Crimea. On June 21, 2017, the US Bureau of Industry and Security (“BIS”) also announced that it would add some of these SDN entities to the Entity List.
These announcements represent the first designations by the Trump Administration under US sanctions targeting Russia and Crimea. In a press release, OFAC stated that these designations and identifications are part of the US Government’s ongoing efforts to resolve the crisis in Ukraine and to assist the private sector with sanctions compliance. OFAC’s announcement was made on the same day that the Ukrainian President visited the White House.
The individuals and entities added to the SDN List were targeted pursuant to Executive Orders 13660, 13661, and 13685. In particular, several individuals were added to the SDN List for their separatist actions and official positions within the so-called Donetsk People’s Republic in Ukraine. US Persons are generally prohibited from dealing, directly or indirectly, with parties on the SDN List, entities 50% or more owned by one or more SDNs, or their property.
In a coordinated action, BIS announced that it will add the non-bank entities designated as SDNs on June 20 to the Entity List under the Export Administration Regulations (“EAR”). These Entity List designations will take effect when BIS’s notice is published in the Federal Register on June 22, 2017. As a result, an EAR license requirement will apply for exports, reexports, or transfers (in-country) of all items subject to the EAR to these entities, subject to a license review policy of presumption of denial. No license exceptions are available for exports, reexports, or transfers (in-country) to these entities.
In addition to the SDN designations, OFAC identified several subsidiaries owned 50% or more by Joint Stock Company Transneft (“Transneft”), a Russian state-owned entity that is the largest oil pipeline company in the world. Transneft was originally added to the SSI List on September 12, 2014, pursuant to Executive Order 13662. Transneft and its 50%-or-more owned subsidiaries are subject to Directive 2, which prohibits US Persons from dealing in “new debt” (e.g., extensions of credit, payment terms) of greater than 90 days’ maturity for Directive 2 entities. Although such subsidiaries were already subject to Directive 2 because of their ownership by Transneft, OFAC stated that these specific identifications should enable the private sector to more effectively comply with sanctions targeting Transneft. The BIS notice will not add the Transneft subsidiaries to the Entity List, which is consistent with BIS’s past practices for entities on the SSI List.
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OFAC’s announcement came one day after the European Council announced that EU sanctions issued in response to Russia’s annexation of Crimea and Sevastopol have been extended until June 23, 2018 (see our recent blog post here), and just a few days after the US Senate advanced legislation that would, among other things, expand and codify existing US sanctions targeting Russia and restrict the President’s authority to unilaterally terminate such sanctions (see our recent blog post here). These designations by OFAC and BIS may represent an effort by the Trump Administration to demonstrate its commitment to US sanctions targeting Russia in order to head off such congressional efforts to expand and codify existing US sanctions.