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Client Alert 14 Apr. 2022
The full alert is available for download with footnotes here
On April 6, 2022, President Biden issued an executive order titled “Prohibiting New Investment in and Certain Services to the Russian Federation in Response to Continued Russian Federation Aggression” (hereafter, “E.O. 14071”).
In addition, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) released the following updates: (1) added two of Russia’s largest banks and a Russian state-owned mining company to the Specially Designated Nationals and Blocked Persons List (“SDN List”), (2) issued new and amended General Licenses related to the Russian banks and mining company, (3) added several other parties to the SDN List, and (4) issued a General License related to telecommunications.
E.O. 14071 expands upon prior restrictions on new investment in the Russian energy sector (see Curtis Client Alert) by banning all new investments in Russia—regardless of sector. Specifically, E.O. 14071 prohibits the following:
The term “new investment” is not defined in the Executive Order. An FAQ published by OFAC in connection with related E.O. 14066 of March 8, 2022 defines “investment” as a “transaction that constitutes a commitment or contribution of funds or other assets for, or a loan or other extension of credit.”
It remains to be seen whether OFAC will apply the same interpretation to E.O. 14071. Curtis will monitor OFAC’s implementation of the sanctions.
Relying on the authorization granted by E.O. 14024 of April 15, 2021, OFAC added the following entities to the SDN List: Public Joint Stock Company Sberbank of Russia (“Sberbank”) and 42 of its subsidiaries, and Joint Stock Company Alfa-Bank (“Alfa-Bank”) and six of its subsidiaries.
All entities owned 50 percent or more, directly or indirectly, by Sberbank or Alfa-Bank will be blocked under E.O. 14024, even if not explicitly designated by OFAC.
Note that while certain transactions with Sberbank and Alfa-Bank were already prohibited by U.S. sanctions (i.e., pursuant to Directive 2 under E.O. 14024 for Sberbank, and pursuant to Directive 3 under E.O. 14024 for Alfa-Bank), they had not been designated on the SDN List.
In addition, OFAC has added Public Joint Stock Company Alrosa (“Alrosa”), a Russian state-owned enterprise, to the SDN List. Alrosa is the world’s largest diamond mining company, which is also responsible for 90 percent of Russia’s diamond mining capacity.
Furthermore, OFAC added United Shipbuilding Corporation, a major Russian shipbuilder, and its subsidiaries to the SDN List as well.
Related to the addition of Sberbank, Alfa-Bank, and Alrosa to the SDN List, OFAC has also issued new General Licenses and amended General Licenses to cover certain transactions with Sberbank, Alfa-Bank, and Alrosa.
On April 5, 2022, OFAC added Garantex Europe OU (“Garantex”) and Hydra Market, along with over 100 of its associated virtual currency addresses, to the SDN List. Garantex is a virtual currency exchange founded in 2019, and Hydra is a Russian darknet market launched in 2015.
Furthermore, OFAC added several family members of Russian government officials, most notably President Vladimir Putin’s two daughters, Katerina Vladimirovna Tikhonova and Maria Vladimirovna Vorontsova.
Additionally, all members of the Russian Security Council have now been added to the SDN List pursuant to E.O. 14024.
On April 7, 2022, OFAC issued General License 25 authorizing certain transactions “ordinarily incident and necessary to the receipt or transmission of telecommunications involving the Russian Federation.”
In addition, General License 25 authorizes the “exportation or reexportation, sale, or supply, directly or indirectly, from the United States or by U.S. persons, wherever located, to the Russian Federation of services, software, hardware, or technology incident to the exchange of communications over the internet, such as instant messaging, videoconferencing, chat and email, social networking, sharing of photos, movies, and documents, web browsing, blogging, web hosting, and domain name registration services, that is prohibited by the [Russian Harmful Foreign Activities Sanctions Regulations].”
Curtis will continue to monitor developments in this rapidly changing area.
Jason D. Wright
John Taishu Pitt
+1 212 696 6000
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