The US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) has recently continued to clarify and tighten Russia- and Iran-related sanctions. First, OFAC issued FAQ 1197, which is related to sanctions restrictions on the National Settlement Depository (“NSD”). Second, OFAC issued a new determination pursuant to Section 1(a)(i) of Executive Order (“EO”) 13902 regarding economic sanctions on Iran’s petroleum and petrochemical sectors. We discuss these updates in further detail below.
Russia-Related FAQ 1197
On October 10, 2024, OFAC issued Russia-related Frequently Asked Question (“FAQ”) 1197. The new FAQ stems from OFAC’s designation of NSD, along with the Moscow Exchange (“MOEX”) and the National Clearing Center (“NCC”) pursuant to E.O. 14024 on June 14, 2024, for operating or having operated in the financial services sector of the Russian Federation economy. We discussed this sanctions restrictions in our June 14, 2024 blog post.
The new FAQ concerns whether a US person with securities held at NSD are required to block such securities if such securities were transferred pursuant to Russian Decree 840 to another Russian registrar. Notably, OFAC stated that it “is aware that the Russian Federation has attempted to take action to evade or avoid OFAC sanctions on NSD via Presidential Decree 840 by requiring the transfer of certain securities to local Russian registrars.” However, OFAC cautioned that such transfers may not be authorized under the general licenses and may be considered null and void pursuant to OFAC’s regulations. OFAC further cautioned that these transactions may involve other blocked persons, including certain local Russian registrars who are subject to US SDN restrictions.
Alongside this designation, OFAC issued, and subsequently extended, two general licenses, General License 99A and General License 100A, to allow for wind-down of certain transactions involving NSD, MOEX, and NCC, and the divestment of securities held at NSD, among other authorized activities. Following the new FAQ, these licenses have now expired, as of 12:01 a.m. EDT, October 12, 2024. As a result, U.S. persons and business entities should now treat these securities as blocked.
Iran-Related Determination
EO 13902 previously imposed “secondary” economic sanctions on any person determined by the Secretary of the Treasury, in consultation with the Secretary of State, to operate in such sectors of the Iranian economy as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State. On October 11, 2024, the Secretary of the Treasury issued a Determination, pursuant to Section 1(a)(i) of EO 13902, identifying the petroleum and petrochemical sectors of the Iranian economy as subject to US secondary sanctions.
As a result, any individuals or business entities that operate in these sectors, including non-US persons, could be subject to secondary sanctions pursuant to Section 1(a)(i), after October 11, 2024.
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