United States: Department Of Commerce And OFAC Continue Imposing Hefty Sanctions On Russia, While Russia Retaliates With Own Sanctions

On August 6, the U.S. Department of Commerce (the "Commerce Department") issued new regulations, implementing additional sanctions against Russia and introducing new restrictions on exports for its energy sector. These new regulations closely follow recently-imposed sanctions promulgated by the Treasury Department's Office of Foreign Assets Control ("OFAC"), which prohibit the issuance of new medium- and long-term debt and, in some cases, new equity by U.S. Persons to designated Russia-related persons in the energy and financial sectors. Further, OFAC has continued to expand the Ukraine-related sanctions by adding various persons and entities to its Specially Designated Nationals ("SDN") List. As a result of these sanctions, Russia is now taking certain retaliatory trade actions against the United States.

New Energy Sector Export License Requirements/Presumption of Denial

The new Commerce Department regulations: (i) add another Russian company (United Shipbuilding Corporation) to the Entity List; (ii) remove Russia's favorable license review treatment under national security reasons for control; and (iii) institute a new license requirement for exports, reexports or in-country transfers of certain items subject to U.S. export controls for use in certain segments of Russia's energy sector, with a presumption of denial for applications for such licenses. The license application requirements apply to the specified items where the (re)exporter knows or is informed by the Commerce Department that they will be used, directly or indirectly, in exploration or production of oil or gas from deepwater (greater than 500 feet) or Arctic offshore locations, or shale formations in Russia, or where the (re)exporter is unable to determine whether the item will be used in such projects.1

These specified items include a broad variety of oil/gas exploration or production equipment (identified by specific Schedule B Nos.) and the items identified in new ECCNs 0A998 and 8D999, and in previously-existing ECCNs 1C992, 3A229, 3A232, 6A991, and 8A992. Covered items include:

  • Drilling rigs, parts for horizontal drilling, drilling and completion equipment, subsea processing equipment, Arctic-capable marine equipment, wireline and down hole motors and equipment, drill pipe and casing, software for hydraulic fracturing, high pressure pumps, seismic acquisition equipment, remotely operated vehicles, compressors, expanders, valves, and risers;
  • Oil and gas exploration software and data;
  • Software specifically designed for the operation of unmanned submersible vessels used in the Russian oil and gas industry;
  • Commercial charges and devices containing energetic materials and nitrogen trifluoride in a gaseous state;
  • Firing sets and equivalent high-current pulse generators;
  • Certain neutron generator systems, including tubes;
  • Detonators and multipoint initiation systems;
  • Marine or terrestrial acoustic equipment capable of detecting underwater objects or positioning surface/underwater vessels, and specially designed parts and components; and
  • Certain vessels, marine systems or equipment, and specially designed parts and components.

New Entity List Designations by Commerce Department

The addition of United Shipbuilding Corporation (a defense technology company) to the Entity List follows the addition of 11 other Russia-related entities to that List in July. Those entities included Joint-Stock Company Concern Almaz-Antey, state-owned enterprise Bazalt, Kalashnikov Concern, Joint-Stock Company Concern Radio-Electronic Technologies, and Feodosiya Enterprise.

These Entity List designations impose a license requirement for the export, reexport or foreign transfer of items subject to the Export Administration Regulations to the designated entities, with a presumption of denial.

OFAC Prohibitions on Issuance of New Debt and Equity to Identified Persons

On July 16, 2014, OFAC issued Directives 1 and 2 pursuant to Executive Order 13662 ("E.O. 13662"). The Directives apply to the persons identified on the new Sectoral Sanctions Identifications List ("SSI List").

Directive 1 of E.O. 13662 prohibits U.S. persons from transacting in, providing financing for, or otherwise dealing in new debt with a maturity of longer than 90 days or new equity ("new debt" or "new equity") for persons operating in Russia's financial sector identified on the SSI List, their property, or their interests in property. Entities designated under Directive 1 encompass several Russian banks, including Bank for Development and Foreign Economic Affairs (Vnesheconombank), VTB Bank, Bank of Moscow, Gazprombank, and Russian Agricultural Bank.

Directive 2 of E.O. 13662 separately prohibits U.S. Persons from transacting in, providing financing for, or otherwise dealing in new debt of longer than 90 days maturity for persons operating in Russia's energy sector identified on the SSI List, their property, or their interests in property. Russian oil giant Rosneft and financial investment company Novatek have been designated under Directive 2. Neither entity appears on OFAC's SDN List. However, Rosneft's CEO, Igor Sechin, has been designated as an SDN. As such, U.S. Persons should be careful not to engage in any discussions or transactions with him (or any other SDN) when engaging in permitted transactions with an SSI entity.

While Directives 1 and 2 prohibit issuing new debt/new equity to the entities on the SSI List, other transactions with such entities by U.S. Persons are allowed, provided they do not involve SDNs.

New SDN OFAC Designations

In addition to publishing the SSI List and implementing Directives 1 and 2, OFAC has recently also added numerous individuals and entities to its SDN List, including Joint-Stock Company Concern Almaz-Antey, state-owned enterprise Bazalt, Kalashnikov Concern, Joint-Stock Company Concern Radio-Electronic Technologies, Feodosiya Enterprise, and United Shipbuilding Corporation, consistent with sanctions imposed by the Commerce Department. U.S. Persons are prohibited from engaging in any transactions with them or with any entity in which they hold a 50 percent, or more, ownership interest.

Putin Imposes Retaliatory Trade Sanctions

On August 6, Russia's President Vladimir Putin issued a Presidential decree, ordering retaliatory sanctions on countries that have imposed restrictions on Russia. The Russian sanctions will implement a one-year ban on certain food, agricultural products, and raw materials. While the decree did not specify precisely which items will be restricted, additional sources indicate that these items may include cheese, fish, beef, pork, chicken, fruit, vegetables and dairy products from the U.S., the E.U., and other countries that have imposed sanctions against Russia. A final list is expected to be released shortly.

Best Practices

In light of the above, at this time, it is vital that, to the extent applicable, all companies impacted by the Russian sanctions:

  • Abstain from engaging in any transactions with entities designated as SDNs by OFAC;
  • Abstain from issuing covered new debt or equity to relevant entities identified on OFAC's SSI List;
  • Abstain from (re)exporting to Russia those goods which are set forth in the newest Commerce Department regulations for problematic end uses, unless they obtain proper licenses (which will almost always be denied);
  • Ensure that all transactions are screened to identify whether an SDN, Entity List, or SSI List company is involved in the transaction; and
  • Institute and maintain adequate procedures to prevent all potential violations.


1 The E.U. has recently imposed similar energy sector export restrictions on Russia.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions