In connection with Ukraine-/Russia-related sanctions, the U.S. Department of the Treasury Office of Foreign Assets Control ("OFAC") published (i) an amended Directive 4 related to sectoral sanctions on the Russian energy sector, and (ii) updated frequently asked questions ("FAQs").
The amended Directive 4 was issued pursuant to Executive Order 13662 and in accordance with the Countering America's Adversaries Through Sanctions Act ("CAATSA"). The Directive enhances previous sanctions by adding a new prohibition on the direct or indirect provision of goods, services (except for financial services), or technology in support of certain exploration or production for deepwater, Arctic, offshore or shale oil projects, anywhere in the world. The Directive applies to a designated individual or entity that has: (i) a 33 percent or greater ownership interest in the project; or (ii) ownership of a majority of the voting interests in the project. This new prohibition applies to projects that are initiated on or after January 29, 2018.
The FAQs address questions relevant to the amended Directive, as well as additional topics related to the requirements of CAATSA.
Commentary / James Treanor
While the revised Directive 4 ratchets up pressure on Russia's energy sector, OFAC's new FAQs relate to, among other things, financial-sector sanctions – yet to be implemented – which would apply to foreign financial institutions that engage in or facilitate "significant transactions" involving certain Russian parties. The FAQs demonstrate that the Trump Administration is prepared and, indeed, legally required to impose these sanctions if the requisite conditions are met. Foreign financial institutions that conduct business in the United States are advised to take notice of OFAC's interpretations, including of the term "significant transaction," and consider the potential costs and benefits of Russia-related business that may subject them to U.S. economic sanctions. U.S. financial institutions are also advised to understand the circumstances under which additional Ukraine-/Russia-related sanctions might be imposed and make preparations to impose any blocking or other actions that may be required.
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