US Sanctions – Russia, Rusal and Venezuela

26 April 2018

As many Members are already aware, the US sanctions landscape continues to change. We highlight below some recent changes to Russian-related sanctions, in relation to which Members should continue to carry out careful due diligence, as well as a currency dilemma for vessels proceeding to Venezuelan ports.

• US Sanctions relating to Russia

On 6 April 2018, the US Office of Foreign Asset Affairs (“OFAC”) added a number of Russian individuals/entities to the SDN list. The new SDNs consist of officials, oligarchs and oligarch owned companies regarded as benefiting from the Putin regime and which are alleged to play a key role in advancing malign activities. This includes companies in the oil and gas, energy and power sectors, and a number of producers of aluminium, machinery and weapons. Although the sanctions do not have extra-territorial effect, amended sanctions legislation provides that “it is now mandatory that sanctions be imposed on any foreign person who is determined to have knowingly facilitated a significant transaction for or on behalf of any person subject to U.S. sanctions against Russia” (our emphasis in bold). Non-US persons and entities, as well as US persons and entities, should therefore be mindful of the effect of these sanctions. An overview of these sanctions, as well as some analysis of their effects, is provided by New York lawyers, Freehill Hogan & Mahar (“Freehills”), in their article which is available here.

• OFAC General Licence for Rusal

Amongst the recently designated companies is United Company Rusal PLC (“Rusal”) which is the world’s second largest producer of aluminium and a major shipper of materials and products. With disruption of so many shipping contracts and charterparties at stake, OFAC has issued General Licence 14 on 23 April, allowing US persons until 23 October 2018 to wind down such transactions/contracts. Freehills advise that where a US person can perform a transaction by way of License then the same type of transaction will not be considered to be ‘significant’ if performed by non-US persons/entities. Thus non-US entities’ transactions with Rusal should not be considered a breach of sanctions until the expiry of General Licence 14. For further discussion of this in Freehill’s article, click here

Members can also access OFAC’s page (click here) with an overview of the Ukraine/Russia related sanctions, FAQs and other guidance, which is regularly updated.

• US Sanctions relating to Venezuelan digital currencies

In March, US sanctions were imposed prohibiting any US persons, including US shipowners and US banks, from engaging in any transactions relating to any digital currency (including but not limited to the Petro) issued by the Government of Venezuela. However, a recent circular from the Venezuelan Maritime Authorities mandates that all payment for shipping services provided to foreign flag vessels must be made in Petros. This may additionally cause non-US shipowners calling at Venezuelan ports to be in violation of the sanctions, as funds (often in USD) remitted to ship agents to pay port charges and disbursements may include sums which will be used by the local agents to purchase Petros. Freehills advise that OFAC have informally indicated that causing a US bank to remit funds to an agent to pay in Petros would amount to a breach of sanctions.  For a copy of the Client Alert from Freehills, click here.