Additional US Sanctions Imposed on Russian and Ukrainian Persons, But No Significant Escalation
On July 30, 2015, the U.S. Government added dozens of Russian and Ukrainian individuals and entities to the Ukraine-related sanctions lists.1 U.S. officials have stated that these new additions are not an escalation of U.S. sanctions policy, and instead are intended to counter attempts to circumvent U.S. sanctions, further align U.S. measures with those of other countries that have imposed similar sanctions (including the European Union and Canada) and provide further sanctions compliance guidance to the private sector. The Russian Government has denounced the measures and vowed to retaliate, though no specific response has been made public yet.
Summary of U.S. Actions
The following actions were taken by the U.S. Government:
- Twenty-six individuals and entities were added to the List of Specially Designated Nationals and Blocked Persons (SDN List), including certain Crimean port companies and individuals and entities associated with previously-sanctioned targets such as Kalashnikov Concern, Viktor Yanukovych and Boris Rotenberg. As a result of these additions to the SDN List, U.S. persons are prohibited from engaging in any transactions involving these persons and must block any property or interests in property of such persons.
- Thirty-six companies were added to the Sectoral Sanctions Identification List (SSI List), all of which are subsidiaries of Rosneft and Vnesheconombank (VEB), which already were included in the SSI List. Under U.S. sanctions, restrictions applicable to entities on the SSI or SDN Lists automatically apply to entities that are 50% or more owned by such entities, and these additions were to explicitly note for the private sector that Rosneft and VEB subsidiaries also are subject to the same measures applicable to their parent companies. As a result of these additions to the SSI List, U.S. persons are prohibited from engaging in transactions involving certain debt and/or equity instruments of such companies. (Please see our legal updates dated 17 July 2014 and 15 September 2014 for more information on SSI-type sanctions).
- The U.S. Treasury Department also issued guidance to the private sector regarding practices being used to evade U.S. sanctions regarding Crimea, which broadly prohibit U.S. persons from engaging in any transactions that directly or indirectly involve the region.2 The evasive practices include the removal or disguising of references to Crimea in payment instructions and other transaction documents. The guidance recommends that U.S. companies further enhance compliance measures to address these concerns.
U.S. officials stated that these measures are intended to address problems faced in enforcing sanctions that already have been imposed. It appears that the list of additions to the SDN and SSI Lists had been finalized some time ago, but took time to work its way through the system. However, the timing of the issuance of the new list caused concern since some diplomatic progress had recently been made, and certain countries (Finland, for example) had not been warned in advance.
The Russian Ministry of Foreign Affairs issued a strongly worded statement denouncing the expanded sanctions and accusing the United States of “choosing a path of confrontation.” Prime Minister Medvedev vowed that “asymmetrical measures” would be taken in response. So far, no formal announcement of countermeasures has been made.
Some observers linked a recent Russian Government decision to physically destroy sanctioned food products that were illegally imported into Russia in violation of “counter-sanctions” imposed on western produce with then-anticipated additions to SDN and SSI Lists, but Russian officials were quick to dismiss any such allegations. The Russian Government has called on European countries to resist following the U.S. lead in this most recent round of sanctions actions, and it remains to be seen how Europe will respond.
1) The full list of sanctions targets can be found at http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20150730.aspx
2) Available at http://www.treasury.gov/resource-center/sanctions/Programs/Documents/crimea_advisory.pdf