On April 6, 2022, the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) added two of Russia’s largest banks, Public Joint Stock Company Sberbank of Russia (“Sberbank”) and Joint Stock Company Alfa Bank (“Alfa-Bank”), and their subsidiaries to the Specially Designated Nationals and Blocked Persons List (“SDN List”). OFAC also issued 3 new and 3 amended Russia-related General Licenses, and added several other parties to the SDN List. President Biden also issued a new Executive Order, “Prohibiting New Investment in and Certain Services to the Russian Federation in Response to Continued Russian Federation Aggression” (“New Investment Ban EO”). The White House fact sheet on these measures can be found here.
Full Blocking Sanctions on Sberbank and Alfa-Bank
Sberbank and 42 of its subsidiaries, as well as Alfa-Bank and 6 of its subsidiaries, are now SDNs subject to full blocking sanctions. This is a significant departure given that both Sberbank and Alfa-Bank were subject to more limited sanctions in the past, including those under Executive Order 14024 of April 15, 2021. Certain of these limited sanctions are summarized in our previous blog post here.
As a result of these designations, US persons are generally prohibited from dealing directly or indirectly with SDNs, entities that are owned 50% or more by one or more SDNs, and their property or property interests. Non-US persons can be held liable for “causing” violations by US persons involving transactions with SDNs and can also be subject to secondary sanctions risks (which would include, in particular, the risk of designation as an SDN themselves) for providing “material support” to SDNs.
New General Licenses
- General License 21 authorizes, subject to conditions, US persons to engage in transactions ordinarily incident and necessary to the wind down activities involving Sberbank CIB USA, Inc., or any entity in which Sberbank CIB USA, Inc., directly or indirectly, holds a 50 perfect or greater interest, through 12:01 am ET, June 7, 2022.
- General License 22 authorizes, subject to conditions, US persons to engage in transactions ordinarily incident and necessary to the wind down activities involving Sberbank, or any entity in which Sberbank, directly or indirectly, holds a 50 perfect or greater interest, through 12:01 am ET, April 13, 2022. This General License does not authorize transactions prohibited by Directive 2 under Executive Order 14024.
- General License 23 authorizes, subject to conditions, US persons to engage in transactions ordinarily incident and necessary to the wind down activities involving Alfa-Bank, or any entity in which Alfa-Bank, directly or indirectly, holds a 50 perfect or greater interest, through 12:01 am ET, May 6, 2022.
Amended General Licenses
- General License 8B, which amends and replaces previous General License 8A, adds Alfa-Bank to the list of entities with whom transactions “related to energy,” as defined in General License 8B, are authorized until June 24, 2022. Please see our previous blog here for further details regarding the scope of this General License.
- General License 9B, which amends and replaces previous General License 9A, continues to authorize transactions that are ordinarily incident and necessary to dealings in debt or equity involving certain sanctioned banks, and adds Alfa-Bank within scope (through 12:01 am ET, June 30, 2022) subject to conditions. Please see our previous blog here for further details regarding the scope of this General License.
- General License 10B, which amends and replaces previous General License 10A, continues to authorize transactions ordinarily incident and necessary to the wind down of certain derivative contracts involving certain sanctioned banks, and adds Alfa-Bank within scope (through 12:01 am ET, June 30, 2022) subject to conditions. Please see our previous blog here for further details regarding the scope of this General License.
New Executive Order
The New Investment Ban EO prohibits “new investment” in Russia by a US person, wherever located, although the term “new investment” is not defined. The New Investment Ban EO also authorizes OFAC to implement, in consultation with the US State Department, prohibitions on the exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a US person, wherever located, of any category of services to any person located in Russia. Further, any approval, financing, facilitation, or guarantee by a US person, wherever located, of a transaction by a foreign person where the transaction by that foreign person would be prohibited if performed by a US person or within the United States, is prohibited.
We will be reporting further on these developments as OFAC implements the sanctions set out in the New Investment Ban EO.
The authors acknowledge the assistance of Ryan Orange in the preparation of this blog post.
