On Friday 11 April, 2014, the Office of Foreign Assets Control (“OFAC“) in the US Treasury Department announced its third group of “Specially Designated Nationals” (“SDNs“) related to the crisis in Ukraine and added the Crimea-based oil and gas company Chernomorneftegaz and seven individuals to the US SDN List pursuant to Executive Order 13660.
“U.S. Persons” are now prohibited from dealing (directly or indirectly) with these SDNs and any entities 50% or more owned by these SDNs. “U.S. Persons” include (i) entities organized under U.S. laws and their non-U.S. branches, (ii) individuals or entities in the United States, or (iii) U.S. citizens or permanent resident aliens (“Green Card” holders) wherever located or employed. Separately incorporated foreign subsidiaries of U.S. companies may be subject to U.S. jurisdiction if they cause any SDN-related transactions to occur in whole or in part in the United States.
According to the US Treasury Department press statement, Chernomorneftegaz has been targeted on the basis that it has been “complicit in the misappropriation of state assets of Ukraine or of an economically significant entity in Ukraine.” Chernomorneftegaz’s designation is expressly stated not to apply to its parent company, which we understand is Naftogaz.
In a coordinated statement, the Bureau of Industry and Security (“US BIS“) in the US Commerce Department also announced that it plans to add Chernomorneftegaz to the Entity List pursuant to the Export Administration Regulations (“EAR“). Chernomorneftegaz’s inclusion on the Entity List means that a US BIS licence will be required for the export, reexport or in-country transfer by any U.S. or non-U.S. person of items subject to the EAR to Chernomorneftegaz, with a presumption of denial. Although it will not be clear until US BIS formally adds Chermomorneftegaz to the Entity List, the new EAR licensing requirements appear to apply to both controlled and non-controlled (a.k.a “EAR99“) items intended for Chermomorneftegaz.
The seven SDN individuals announced on 11 April are:
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Aleksei Chaliy
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Mikhail Malyshev
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Valery Medvedev
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Rustam Temirgaliev
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Sergey Tsekov
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Yuriy Zherebtsov
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Pyotr Zima
The new SDN individuals, who had already been designated by the EU, include six Crimean separatist leaders and a former Ukrainian official. According to the US Department Treasury press statement, these individuals are responsible for, have been complicit in or have engaged in, actions or policies that undermine democratic processes or institutions in Ukraine, that threaten the peace, security, stability, sovereignty, or territorial integrity of Ukraine, or because they have asserted governmental authority over any part or region of Ukraine without the authorisation of the Government of Ukraine.
Canada has followed suit with the announcement that it is also designating Chernomorneftegaz, Mikhail Malyshev and Valery Medvedev in response to growing pro-Russia uprisings in eastern Ukraine. Canada has also pledged to take further measures if the crisis escalates.
