The latest on Russia sanctions from the International Trade and Supply Chain Team
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Yesterday, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced increased economic sanctions against Russia, including measures against Russia’s largest bank – Sberbank Russia – as well as several state-owned defense technology companies and five energy companies (Gazprom, Gazprom Neft, Lukoil, Surgutneftegas and Rosneft).  The United States has also tightened previous restrictions by lowering from 90 days to 30 days the allowable length of debt U.S. citizens and entities may buy from sanctioned Russian banks – Bank of Moscow, Gazprombank OAO, Vnesheconombank (VEB), Russian Agricultural Bank (Rosselkhozbank),  VTB Bank OAO and Sberbank Russia.

In the energy sector, OFAC issued Directive #4 that prohibits the provision, exportation, or reexportation, directly or indirectly, of goods, services (except for financial services), or technology in support of exploration or production for Russian deepwater, Arctic offshore, or shale projects that have the potential to produce oil, to Gazprom, Gazprom Neft, Lukoil, Surgutneftegas, and Rosneft.  This measure builds on the restrictions previously imposed by the the Commerce Department related to export of drilling and exploration equipment.  U.S. persons have until September 26, 2014 to wind down applicable transactions with these entities pursuant to a general license that Treasury’s Office of Foreign Assets Control issued yesterday. This Directive expanded what was previously in place and now prohibits services related to the drilling in addition to prohibiting export and reexport of US-origin equipment related to the drilling. OFAC also issued General License #2 which allows a 2-week wind-down period expiring September 26, 2014 for any projects caught under Directive 4.

The U.S. announcement of heightened sanctions coincides with new economic sanctions announced by the European Union against several state-owned Russian firms and individuals.  The EU sanctions include: (1) addition of 24 people to the asset freeze and travel ban list; (2) reduction from 90 days to 30 days maturity for the direct or indirect purchase or sale of the direct or indirect provision of investment services for or assistance in the issuance of, or any other dealing with bonds, equity, or similar financial instruments issued by major credit institutions or finance development institutions established in Russia with over 50 % public ownership or control listed in the directive; (3) prohibition on the sale, supply or transfer of dual-use items to certain Russian individuals and entities; and (4) prohibition on providing services necessary for deep water oil exploration and production, arctic oil exploration and production or shale oil projects.