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Sanctions on Russian and Ukrainian Entities Expanded

Monday, February 05, 2018
Sandler, Travis & Rosenberg Trade Report

The Treasury Department’s Office of Foreign Assets Control recently added 42 Russian and Ukrainian entities to its Specially Designated Nationals and Sectoral Sanctions Identifications lists.

U.S. persons are prohibited from engaging in any transactions with SDNs and must block any property in their possession or under their control in which an SDN has an interest. SSI list prohibitions range from financing restrictions to bans on supporting certain oil exploration and production end-uses.

The accelerating addition of companies to these lists can pose significant challenges for U.S. exporters, particularly due to the 50 percent rule, under which OFAC considers a subsidiary that is 50 percent or more owned by an SDN or SSI list entity to be subject to the same restrictions even if the subsidiary itself is not listed. Companies should thus ensure that their compliance programs continually screen business partners and customers against the SDN, SSI, and other U.S. government restricted party lists to avoid potential violations.

Highlights of the new listings include the following.

- All 12 of the SSI additions are owned 50 percent or more by a company previously added to the SSI list and are subject to Directive 4 prohibitions; i.e., U.S. persons may not deal with them in support of exploration or production for deepwater, Arctic offshore, or shale projects with the potential to produce oil. The same restrictions apply to companies owned 33 percent or more, or majority controlled, by these entities.

- Some of the SDN listings relate to the transfer to Crimea of four gas turbines made by a Russian-German joint venture and originally destined for Russia, while others were added for doing business in Crimea.

- Eleven officials of separatist Ukrainian factions (including unrecognized ministers of trade, finance, and foreign affairs), four Russian officials, and two related entities were added to the SDN list.

- Three individuals and four companies involved in the trade of coal out of Ukraine were added to the SDN list.

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