Out-Law News | 17 Jul 2014 | 5:20 pm | 2 min. read
The US said the move, in response to what it called Russia’s “continued destabilisation of Ukraine”, is designed to “increase the cost of economic isolation for key Russian firms that value their access to medium- and long-term US sources of financing”.
In addition, the sanctions target firms in the arms and related material sector, which the treasury said “cuts these firms off from the US financial system and the US economy”.
The 'sectoral' sanctions relate to Russian financial institutions Gazprombank OAO and Vnesheconombank (VEB), and two Russian energy firms, OAO Novatek and the world's largest oil company, Rosneft.
Treasury secretary Jacob Lew said anyone operating within Russia’s financial services sector “may now be subject to targeted sanctions”.
The companies named in the new sanctions are not subject to the much wider sanctions applicable to those on the US Specially Designated Nationals List. Any transactions with the four firms targeted by the new sanctions aside from the specific restrictions in relation to debt, equity or financing are not currently prohibited, but the restrictions are capable of being extended at the US Treasury's discretion.
"US and non-US companies which have contracts with the listed entities should consider the impact of these US sanctions on their operations," said regulatory expert Tom Stocker of Pinsent Masons, the law firm behind Out-Law.com. "In particular, any undertakings given to banks or other finance providers should be checked in light of these changes."
The US has imposed measures prohibiting “US persons and persons within the US from transacting in, providing financing for, or otherwise dealing in new debt of longer than 90 days maturity or new equity for Gazprombank OAO and VEB, their property, or their interests in property”. VEB is a Russian state-owned financial institution that acts as a development bank and payment agent for the Russian government.
According to the treasury, “as a practical matter, this step will close the medium- and long-term US dollar lending window to these banks, and will impose additional significant costs on the Russian government for its continued activities in Ukraine”.
The treasury said that while it had not blocked the property or interests in property of the banks, or prohibited transactions with them beyond specified restrictions, the “scope of the prohibited transaction types and the number of financial institutions may be expanded”.
In addition, the treasury said “persons operating within Russia’s energy sector may now be subject to targeted sanctions”. US persons and persons with the US are now prohibited “from transacting in, providing financing for or otherwise dealing in new debt of longer than 90 days maturity for Russian energy firms OAO Novatek and Rosneft, their property, or their interests in property”.
OAO Novatek is Russia’s largest independent natural gas producer. Rosneft is Russia’s largest petroleum company and third largest gas producer.