Sanctions Tracker – Further U.S. Responses to the Crisis in Ukraine

We previously discussed Russia-related sanctions measures imposed by the United States on April 21, April 11, April 7, March 25, March 15, March 14, March 9, March 8, March 3, February 28, February 25, February 23, and February 4.  We also discussed recent sanctions measures related to the Russian energy sector in a podcast episode.

This post provides an update regarding further Russia-related sanctions measures in the United States.

New General Licenses

On April 25, 2022, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) issued two new General Licenses (“GLs”):

• GL 13R supersedes and replaces GL 13Q, and authorizes all transactions prohibited by the Ukraine Related Sanctions Regulations, 31 CFR part 589 (“URSR”) that are ordinarily incident and necessary (1) to divest or transfer debt, equity, or other holdings in GAZ Group to a non-U.S. person, or (2) to facilitate the transfer of debt, equity, or other holdings in GAZ Group by a non-U.S. person, through May 25, 2022. It also authorizes all transactions and activities otherwise prohibited by the URSR that are ordinarily incident and necessary to (1) divest or transfer debt, equity, or other holdings in GAZ Group, or any entity owned 50% or more by it, that were issued by GAZ Auto Plant (“Other Issuer Holdings”) to a non-U.S. person; or (2) facilitate the transfer of Other Issuer Holdings by a non-U.S. person to another non-U.S. person, through May 25, 2022.  It states that the authorized transactions and activities include facilitating, clearing, and settling transactions to divest to a non-U.S. person debt, equity, or other holdings in GAZ Group, or Other Issuer Holdings, including on behalf of U.S. persons.
• GL 15L supersedes and replaces GL 15K, and authorizes all transactions and activities prohibited by the URSR that are ordinarily incident and necessary to the wind down of transactions involving GAZ Group, or any entity owned 50% or more by it, through May 25, 2022. It does not authorize any debit to an account of GAZ Group, or any entity owned 50% or more by it, on the books of a U.S. financial institution.

Additional Guidance and Clarifications

OFAC also issued substantial guidance related to old and new sanctions measures.  In particular, OFAC issued the following new Frequently Asked Questions (“FAQs”):

• FAQs 570 and 571 clarify the authorizations in GL 13R. They also clarify that GL 13R does not authorize U.S. persons to sell debt, equity, or other holdings to; to purchase or invest in debt, equity, or other holdings in; or to facilitate such transactions with, directly or indirectly, GAZ Group or any other blocked person, other than transactions and activities involving GAZ Group, or any entity owned 50% or more by it, that are ordinarily incident and necessary to the divestment or transfer of debt, equity, or other holdings in these entities.
• FAQ 586 clarifies the authorizations in GL 15L. It also clarifies that:  (i) all funds blocked prior to May 22, 2018 remain blocked; (ii) unlike its predecessors, GL 15L no longer authorizes the use of those blocked funds for the activities that it authorizes; and (iii) transactions involving blocked persons other than GAZ Group, or any entity owned 50% or more by it, must be blocked.
• FAQ 589 clarifies that activities authorized by GL 15L will not be considered “significant” for the purposes of a sanctions determination under section 10 of the Support for the Sovereignty, Integrity, Democracy, and Economic Stability of Ukraine Act, or section 5 of the Ukraine Freedom Support Act.
• FAQ 590 clarifies that U.S. persons may engage in activities authorized by GL 15L that occur on or after May 22, 2018, except for activities involving blocked persons other than GAZ Group (or any entity owned 50% or more by it) without making associated payments into a blocked account. It also clarifies that foreign persons may engage in activities that would be authorized by GL 15L if engaged in by a U.S. person without making associated payments into a blocked account.
• FAQ 591 clarifies that any exports to GAZ Group must be consistent with GL 15L and must also be consistent with the requirements of other U.S. federal agencies.
• FAQ 592 clarifies that GL 15L authorizes U.S. persons to receive regularly scheduled payments of principal and interest from GAZ Group (or any entity owned 50% or more by it) only to the extent such transactions are ordinarily incident and necessary to the wind down of transactions involving GAZ Group (or any entity owned 50% or more by it), through May 25, 2022, and provided the other terms of GL 15L are met. It states that, as a general matter, GL 15L would also authorize U.S. persons to receive accelerated payments or voluntary prepayments from GAZ Group (or any entity owned 50% or more by it) so long as they were ordinarily incident and necessary to the wind down of transactions as authorized by GL 15L.  However, GL 15L does not authorize U.S. persons to send accelerated payments or voluntary prepayments to GAZ Group (or any entity owned 50% or more by it).

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We will continue to monitor developments in this area and encourage you to subscribe to be kept informed of latest developments. Please contact the authors or your usual Herbert Smith Freehills contacts for more information.