Russia’s En+ OFAC plan

ENn+.pngEn+ Group has presented its proposal to OFAC to release it from the US sanctions which were imposed on 6 April 2018.

Oleg Deripaska has agreed to reduce his current stake in En+ Group to below 45% (currently around 66%), principally through the transfer of shares to Russian bank VTB. VTB will sell the shares into the market, but during the period it has control of those shares, their voting rights will be controlled by two US citizens appointed by En+ Group. OFAC has yet to decide on whether to approve the plan.

US puts chemical/biological weapons sanctions on Russia

US-Russia.jpgFollowing the use of a Novichok nerve agent on Sergei and Yulia Skripal, the US has determined under the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 that “the Russian government has used chemical or biological weapons in violation of international law or has used lethal chemical or biological weapons against its own nationals” – see Department of State press release. Consequently, after a 15-day Congressional notification period, mandatory sanctions under the Act will come into effect upon publication of a notice in the US Federal Register (expected on or around 22 August 2018).

The sanctions will impose (inter alia) a presumption of denial for all national security sensitive goods or technologies that are controlled by the US Commerce Department pursuant to the Export Administration Regulations. Those goods are currently subject to a licence (case-by-case licence determination), but all such licence applications will be presumptively denied once the sanctions come into effect.

The US will be making a number of carve-outs to the Act’s mandatory sanctions, including:

  • A waiver for the provision of foreign assistance to Russia and the Russian people;
  • A waiver of sanctions with respect to space flight activities (NB: the US is currently engaged with Russia in a number of space flight actions); and
  • A licence being available for national security sensitive goods or technologies used for the safety of commercial passenger aviation.

If the Russian government fails to meet a set of criteria within 90 days, then the US will have to consider whether a second round of sanctions should be imposed. The criteria: (i) that Russia is no longer using chemical or biological weapons in violation of international law or against its own nationals; (ii) that Russia has provided reliable assurances that it will not in the future engage in any such activities; and (iii) that Russia is willing to allow on-site inspections by UN observers or other similar internationally recognised bodies.

New Russian sanctions Bill introduced to US Senate

US Congress Building 1Last week (2 August), the Defending American Security from Kremlin Aggression Act of 2018 was introduced to the US Senate. The Bill aims to increase economic, political, and diplomatic pressure on the Russian Federation in response to “Russia’s continued interference in [US] elections, malign influence in Syria, aggression in Crimea, and other activities”. Its key elements include:

  • New sanctions on political figures, oligarchs, family members and other persons that facilitate illicit and corrupt activities on behalf of Vladimir Putin.
  • A sanction on transactions related to investment in energy projects supported by Russian state-owned or parastatal entities.
  • A prohibition on and sanctions with respect to transactions relating to new sovereign debt of the Russian Federation.
  • Sectoral sanctions on any person in the Russian Federation that has the capacity or ability to support or facilitate malicious cyber activities.
  • A requirement for the US Secretary of State to submit a determination of whether the Russian Federation meets the criteria for designation as a State Sponsor of Terrorism.
  • A prohibition on licenses for US persons to engage in activities relating to certain projects to produce oil in Russia.
  • Reinforcement for the State Department Office of Sanctions Coordination.
  • A report on the net worth and assets of Vladimir Putin.
  • Making interfering in US elections a ground of inadmissibility under immigration law.
  • Provisions expediting the transfer of excess defence articles to NATO countries to reduce some NATO countries’ dependence on Russian military equipment.
  • Provisions aimed at pressuring the Russian government to halt its obstruction of international efforts to investigate chemical weapons attacks, as well as punish the Russian government for chemical weapons production and use.

It is not certain if the legislation will pass the Senate and the House of Representatives in its current form. However, the Senate has passed similar measures against Russia with overwhelming support.

OFAC sanctions Russian bank and other facilitators of North Korean sanctions violations

OFAC2Today, OFAC has sanctioned Russian-registered bank Agrosoyuz Commercial Bank, pursuant to Executive Order 13810, for “knowingly facilitating a significant transaction on behalf of an individual designated for weapons of mass destruction-related activities in connection with North Korea”.

OFAC has also sanctioned a Moscow-based individual, Ri Jong Won, and two entities, Dandong Zhongsheng Industry & Trade Co Ltd and Korea Ungum Corporation, for “facilitating North Korean illicit financial activity”. See OFAC Notice and Treasury press release.

OFAC extends RUSAL, EN+ Group and GAZ Group general licence until 23 Oct.

US Treasury Building2OFAC has issued Ukraine/Russia-related General Licence 13C, which replaces and supersedes General Licence 13B in its entirety. General Licence 13C extends the expiration of the general licence to 23 October 2018 (previously 5 August 2018). OFAC Notice here.

Among other things, General Licence 13C authorises transactions and activities necessary to divest or transfer debt, equity or other holdings in EN+ Group, GAZ Group, or United Company RUSAL PLC. It also authorises such transactions in entities in which those persons own (directly or indirectly) a 50% or greater interest, provided that such debt, equity, or other holdings were issued by Irkutskenergo, GAZ Auto Plant, or Rusal Capital Designated Activity Company.

EU sanctions 6 entities for Crimea bridge

EU1As foreshadowed, today the EU has added 6 entities to its sanctions that target those who undermine or threaten the territorial integrity, sovereignty and independence of Ukraine. They have been listed for their involvement in the construction of the Kerch Bridge connecting Russia to the Crimean Peninsula.

The 6 entities are: AO “Institute Giprostroymost — Saint-Petersburg”; PJSC Mostotrest; JSC Zaliv Shipyard; Stroygazmontazh Corporation (SGM Group); Stroygazmontazh Most OOO; and CJSC VAD. See Council Decision (CFSP) 2018/1085, Council Implementing Regulation (EU) 2018/1072, and EU press release.  As we reported, Arkady Rotenberg, the reasons for whose original listing were annulled by the European court, was re-listed in July 2017 for being said to benefit from Stroygazmontazh’s construction contract for the bridge.

UK Government response to Moscow’s Gold report

Parliament6

We summarised in May the recommendations of the House of Commons Foreign Affairs Committee report Moscow’s Gold: Russian Corruption in the UK.  The Government has now published its response, which (inter alia):

  • Emphasises the Government’s commitment to counter Russia’s “malign activity” and “tackling illicit finance” including using sanctions and Unexplained Wealth Orders.
  • Explains (in response to the committee’s question as to how EN+ could float on the London Stock Exchange given Russia sanctions) that EN+ was not sanctioned when listed, the Financial Conduct Authority had concluded there would be no sanctions breach, and the US designation under CAATSA in April 2018 was not something to which the UK was party.
  • States that it has “established several multilateral working groups on specific sanctions regimes, including one on Russia”, will publish the names of people to be sanctioned by the UK for gross human rights violations under the new Sanctions & AML Act 2018, and undertakes that when it reports to Parliament each year on its sanctions regulations it will highlight and respond to recommendations made by Parliamentary committees.
  • Responds in detail to the report’s suggestion that it limit the issuance of Russian debt on global markets and prohibit the purchase of bonds in which a sanctioned entity has acted as bookrunner.
  • Reports on progress on registers of beneficial ownership in overseas territories.

US may de-list RUSAL

Steven Mnuchin.jpgWe previously reported that RUSAL had taken a number of steps, including electing a new board of directors (previous blog), to distance itself from US-designated Oleg Deripaska, who has resigned from the company’s board (previous blog).

US Treasury Secretary Steven Mnuchin has now said that sanctions could be lifted from Russian aluminium producer RUSAL, and that the objective was “not to put RUSAL out of business”. He also said RUSAL had approached OFAC on “certain de-listing issues”.