On March 20 2014 the US government responded to the latest developments affecting Crimea by blocking the property of certain Russian government officials, their supporters and a Russian bank. These parties were identified as specially designated nationals (SDN) under Executive Orders 13660 and 13661 of March 6 and March 16 2014, respectively. Their names have been added to the SDN list published by the Office of Foreign Assets Control (OFAC) and US persons are now barred from having any dealings with them. In addition, the president issued a third executive order relating to the situation in Ukraine that again expands the criteria for further designations.

According to OFAC, the new designations target Russian government officials and "members of the Russian leadership's inner circle". The US government also designated the first entity, Bank Rossiya, in relation to the national emergency relating to Ukraine. This designation is significant, as Bank Rossiya is ranked as Russia's 17th largest bank and holds correspondent accounts at many major US financial institutions. Any entities that are majority owned by Bank Rossiya are also blocked. Rossiya's 2012 financial statements identify the following entities as majority-owned subsidiaries:

  • Sobinbank;
  • Zest;
  • SVK;
  • Leasing Company Kapital;
  • Leasing Company Kapital-ABR;
  • IC Abros; and
  • SOGAZ.

SOGAZ is a major insurance company in Russia.

US companies should move quickly to identify any interactions with the newly designated parties. US companies must also cease providing services to the named SDNs and any entities in which they hold a majority ownership interest. In addition, US companies must block any property (eg, letters of credit, services agreements and insurance contracts) in which the SDNs have an interest and report the blocked property to OFAC within 10 business days. Any cash funds in which the SDNs have an interest must be placed in an interest-bearing account at a US financial institution.

More sanctions may follow. The March 20 2014 executive order expanded designation criteria to permit sanctions against Russian industrial sectors identified by the treasury secretary. The executive order specifically mentions the following industrial sectors as potential targets for further sanctions:

  • financial services;
  • energy;
  • metals and mining;
  • engineering; and
  • defence and related material.

For further information on this topic please contact Lisa Crosby, Andrew Shoyer, Robert Torresen or Barbara Kunzinger at Sidley Austin LLP by telephone (+1 202 736 8000), fax (+1 202 736 8711) or email ([email protected],[email protected], [email protected] or [email protected]). The Sidley Austin LLP website can be accessed at www.sidley.com.