What they mean for the industry

Today, the United States Treasury Department’s Office of Foreign Assets Control (OFAC) prohibited United States nationals from conducting transactions with the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation and the Ministry of Finance of the Russian Federation. Federation. This action effectively immobilizes all assets of the Central Bank of the Russian Federation held in the United States or by US nationals, wherever located.

These restrictions are in addition to previously enacted financial sanctions imposed on Russia and are listed below. US OEMs with operations in Russia are urged to review the new financial sanctions. While these sanctions do not impose a full trade embargo with Russia, they present significant challenges when making or receiving payments for trade transactions. If your product is already subject to export controls or has end customers in the military, please contact the Bureau of Industry and Security (BIS) directly for the latest controls update at export from the United States.

Financial penalties

The United States imposed full blocking sanctions against VTB, Otkritie, Sovcombank and Novikombank. Sberbank, Russia’s largest bank, has been targeted for correspondent and direct payments sanctions, preventing it from processing US dollar payments through the US financial system. These restrictions will also have an impact on the 25 subsidiaries of foreign financial institutions of Sberbank. The United States has also expanded the list of Russian companies (11 state-owned enterprises and two large private entities) subject to sanctions “Sector Sanctions Identifications or SSIs” – which are limitations on transactions by American persons in their debt. (with no maturity greater than 14 days) and equity. The United States added asset freezes and visa bans for the children of top Russian government officials and Sberbank and VTB executives

The United States imposed blocking sanctions on four major Russian banks, including VTB BankRussia’s second largest bank by assets holding about 20% of Russia’s banking assets; Otkritie and 12 of its subsidiaries in Russia and Cyprus; Sovcombank, the ninth largest bank in Russia and the third largest private bank; and Novikombank which the US government says is the “lead financial institution” of Russian state conglomerate Rostec. These sanctions have an immediate effect.

The action taken against Sberbank would require U.S. institutions to close any Sberbank correspondent or transit account within 30 days and prohibit future transactions with Sberbank or its subsidiaries of foreign financial institutions, unless exempted or authorized by the OFAC. The measure, which applies to U.S. dollar transactions and U.S. entities (including their foreign branches) as well as branches, offices and agencies of foreign financial institutions located in the United States, went into effect on March 26. 2022.

Thirteen large Russian companies, some of which are already subject to sector sanctions identifications, will now be subject to a new “Russia-related entities directive” which prohibits any new debt older than 14 days and any new capital. Debt or equity securities issued before the effective date of March 26, 2022 are not subject to the directive. The directive specifies that other entities may be added in the future.

Subject entities are

  • Sberbank
  • Gazprombank
  • Russian Agricultural Bank
  • Gazprom
  • Gazprom Neft
  • Transneft
  • Rostelecom (not previously subject to SSI sanctions)
  • RusHydro (not previously subject to SSI sanctions)
  • Alrosa (not previously subject to SSI sanctions)
  • Sovcomflot (not previously subject to SSI sanctions)
  • Russian Railways (not previously subject to SSI sanctions)
  • Alfa Bank (the largest private bank in Russia)
  • Moscow Credit Bank

The administration also imposed asset freeze and visa denial sanctions on the following Russian individuals: Sergei Sergeyevich Ivanov, the CEO of the Russian diamond mining company Alrosa; his father Sergei Borisovich Ivanov (renamed today); Andrei Patrushevwho works in the energy sector and who is the son of one of the heads of the Russian security services, Nikolai Platonovich Patrushev (also redesignated) and Ivan Igorevich Sechinwho would work at the Russian oil giant Rosneft and is the son of Igor Ivanovich Sechin, a close ally of Putin and chairman of Rosneft (which was also renamed). In addition, the Administration has designated Alexander Vediakhinfirst vice-president of Sberbank; Andrei Pushkov and Yuri Solovyovtwo executives of VTB Bank.

Given the fluidity of the situation and the continued imposition of new sanctions against Russia, AEM will provide member companies with additional updates in the coming days. If you have any questions, please contact Alex Russ, AEM’s Senior Global Public Policy Advisor, at aruss@aem.org or (202) 898-9006.

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