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The United States and the European Union Target Additional Russian Individuals and Entities in Response to Escalating Ukraine Crisis

April 29, 2014

 

In response to Russia’s continued intervention in Ukraine and Russia’s apparent failure to meet its commitments to de-escalate the Ukrainian situation under the April 17, 2014 Geneva Accords, the United States and the European Union have sanctioned additional Russian and Ukrainian individuals and entities. These sanctions build on sanctions imposed in March that targeted Ukrainian individuals, senior Russian government officials, and associates of President Putin (see OMM alert here). 

The United States has sanctioned seven additional individuals and 17 additional companies. The European Union also announced similar actions, with 15 additional Russian and Ukrainian individuals now subject to the EU’s asset freeze and travel bans. Individuals subject to the U.S. asset freeze include Igor Sechin, who is the CEO of Rosneft, Sergei Chemezov, who is the CEO of Rostec Corporation, and various Russian government officials. Many of the United States’ newly-listed companies are ones that are owned in whole or in part by individuals previously added to the Specially Designated Nationals (“SDN”) List. For example, the newly-listed Volga Group is owned by Gennady Timchenko, who was added to the OFAC list on March 20, 2014. Other companies operate in the financial and energy sectors. A complete list is available here.

Individuals subject to the EU sanctions include Gen. Valery Gerasimov, who is chief of the Russian general staff, Russian Deputy Prime Minister Dmitry Kozak, Lt. Gen. Igor Sergun, identified as head of GRU, the Russian military intelligence agency, and a number of separatist leaders. However, unlike the United States, the EU has not targeted officials overseeing Russia’s state owned oil giant Rosneft or the assets of Kremlin-connected oligarchs. A complete list of individuals and entities subject to the EU sanctions is available here.

Separately, the U.S. Commerce Department announced that it would deny export licenses and revoke existing licenses for exports of military-related items to Russia. It also designated 13 of the Russian companies added to the SDN List on the Entity List, effectively prohibiting the export or re-export of any U.S. goods to such companies.

Implications for EU and U.S. Companies Operating in Russia

The targeted approach taken by the United States and the EU means that U.S. and EU companies may continue to pursue their business interests in Russia and Ukraine, provided they do not engage in any dealings with blocked individuals or companies. With no sign of a resolution to the crisis, however, the prospect of further listings is very real, thus increasing the risk that such on-going business activities will be adversely affected. In a White House statement issued in parallel to the new designations, the Obama Administration made clear that it is prepared to sanction additional entities and individuals under the authority of the March 20 Executive Order that authorizes sanctions on persons and companies that operate in key Russian sectors, including financial services, energy, metals and mining, engineering, and defense.

U.S. and EU companies operating in Russia and Ukraine should continue to examine existing and new business opportunities for potential sanctions risk, including conducting careful due diligence on counterparties. In the United States, the property and interests of entities that are 50 percent or more owned by a blocked person are also deemed to be automatically blocked, regardless of whether that entity is itself included on the SDN List. OFAC also advises U.S. persons to “act with caution” when dealing with entities that are less than 50 percent owned by blocked persons, as such entities may be subject to future OFAC designation or action.

In the EU, companies will also need to assess whether they are dealing with an entity in which a sanctioned person has a majority or even a minority interest, as such dealings may violate the EU sanctions. In the EU, entities that are 50 percent or more owned by an EU designated person will generally be deemed to be blocked. In addition, dealings with entities in which a listed person holds a minority interest may violate the sanctions depending on the particular factual circumstances.

For questions or additional information, please contact Ted Kassinger at (202) 383-5170, Greta Lichtenbaum at (202) 383-5249, Lauren Sun at (202) 383-5294, or Hayley Ichilcik at +44 (0) 20 7558 4863 in our London Office with regard to the new EU measures.


This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Theodore Kassinger, an O'Melveny partner licensed to practice law in the District of Columbia and Georgia, Greta Lichtenbaum, an O'Melveny partner licensed to practice law in the District of Columbia, Hayley Ichilcik, an O'Melveny counsel licensed to practice law in England and Wales, and Lauren Sun, an O'Melveny counsel licensed to practice law in California and the District of Columbia contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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