06 Feb 2019
The U.S. Office of Foreign Assets Control (OFAC) recently removed three companies from its Specially Designated Nationals (SDN) List, where they had been each designated under two Executive Orders as part of OFAC’s Ukraine-/Russia-related program.
The delisting process for these firms, which was elongated due to the Congressional oversight mandated by the 2017 passage of the Combating America’s Adversaries Through Sanctions Act (CAATSA), seems to show that OFAC has failed to heed its own guidance, and the leveraging of a loophole in OFAC’s 50 Percent Rule.
In April 2018, a number of Russian oligarchs and firms they owned and controlled, as well as a number of government officials and state-owned enterprises were sanctioned by OFAC under Executive Orders 13661 and/or 13662.
Among these were a number of firms associated with Oleg Deripaska, including United Company Rusal PLC (“Rusal”), which is responsible for approximately seven percent of global aluminum production.
At the same time, a number of General Licenses were issued to allow for maintenance and wind-down of existing contracts, and divestment of securities investments in the designated firms.
The General Licenses related to Rusal, its corporate owner EN+ Group PLC (“EN+”), and JSC EuroSibEnergo (“ESE”, also owned by EN+), were amended to extend their expiration dates numerous times, the most recent versions expiring in January 2019.
This was in response to efforts by these firms to restructure Deripaska’s ownership and control of these firms so the resulting structure would be acceptable to U.S. regulators. On December 19, 2018, Congress was notified, as per the requirements in CAATSA, of OFAC’s intention to remove the three firms from the SDN List.
The Senate narrowly failed to block the removals and they were removed from the sanctions restrictions on January 27th.
Prior to the April sanctions designations, Deripaska owned approximately 70% of EN+, as well as an insignificant stake (0.01%) in Rusal and none whatsoever in ESE.
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