Archive | September 2014

Gazprom, Lukoil, Other Russian Energy and Defense Companies Targeted in Latest Round of U.S. Export Controls and Ukraine-related Sanctions

Last Friday, the U.S. Department of Commerce, Bureau of Industry and Security (BIS) dramatically increased targeted economic sanctions and export controls against several Russian energy and defense companies, including Gazprom OAO, the largest gas extraction company in the world, and privately-owned petroleum company, Lukoil.  The BIS action is in addition to the U.S. Department of Treasury, Office of Foreign Assets Control (OFAC) issuing new Ukraine-related economic sanctions against Russia’s financial services, energy, and defense sectors, also announced on Friday.

BIS added the following major energy sector companies to the Entity List:

  • Gazprom OAO; Gazpromneft; Lukoil, OAO; Rosneft; and Surgutneftegas.

BIS maintains the Entity List to impose a specific license requirement for the export, reexport or foreign transfer of items subject to the Export Administration Regulations (EAR) on those parties – businesses, research institutions, government and private organizations, and individuals – named on the list.  These license requirements are in addition to any other requirements and restrictions imposed elsewhere in the EAR.  Often, the stated License Review Policy for parties on the Entity List is “Presumption of denial,” although certain parties have a stated License Review Policy of determining a license application on a “Case-by-case” basis.  Currently, the License Review Policy for nearly every Russian party on the Entity List is Presumption of Denial.  This License Review Policy applies to the newly added parties.

The five (5) Russian energy sector companies added to the Entity List are subject to a license requirement when the exporter, reexporter or transferor knows those items will be used directly or indirectly in:

  • exploration for, or production from, deepwater, Arctic offshore, or shale projects in Russia. License applications for such transactions will be reviewed with a presumption of denial when for use directly or indirectly for exploration or production from deepwater, Arctic offshore, or shale projects in Russia that have the potential to produce oil.

Notably, it appears that licenses for natural gas projects will be reviewed on a case-by-case basis; therefore, exporters, reexporters, and parties seeking in-country transfers to the listed companies should be sure to obtain specific end-use information and document the stated end-use for potential licensing application purposes.   It should be further noted that this latest action is in addition to and does not replace export controls imposed by BIS on August 1 that designated certain items used in used in Russia’s energy sector, including exploration and production from deepwater, Artic offshore, and shale projects.  In its 1 August rule, BIS designated those items by specific Schedule B (export classification) numbers and other by the Export Commodity Control Number (ECCN).  A prior post explains those controls, http://bit.ly/1y4s9JN.

The Russian defense sector parties added to the Entity List include:

  • Almaz-Antey Air Defense Concern Main System Design Bureau, JSC; Tikhomirov Scientific Research Institute of Instrument Design; Mytishchinski Mashinostroitelny Zavod, OAO; Kalinin Machine Plant, JSC; and Dolgoprudny Research Production Enterprise.

Similar export controls as those imposed on the energy sector companies apply to the defense sector companies, with a License Review Policy of “Presumption of Denial.”

BIS and OFAC action continue to be largely coordinated.  OFAC updated the Sectoral Sanctions Identifications (SSI) List by adding Russian energy sector and financial services companies (and other names by which the companies operate or are known), AK Transneft OAO, Lukoil OAO, OJSC Gazprom Neft, Gazprom OAO, Rostec, Sberbank of Russia, Surgutneftgas, Bank of Moscow, as well as other financial services companies.  Additionally, OFAC added each of the defense sector parties to the SSI List that BIS placed on the Entity List.

For assistance with understanding and complying with the latest BIS action, Ukraine-related and other economic sanctions laws, regulations, and Executive Orders, as well as representation before BIS and OFAC in investigations, civil penalty, and voluntary self-disclosures, please contact Jon P. Yormick, Attorney and Counsellor at Law, jon@yormicklaw.com or by calling +1.866.967.6425 (Toll free in Canada & U.S.) or +1.216.269.5138 (mobile). 

Yormick to Discuss U.S. Economic Sanctions at October Global Conference in Baltimore

Buffalo, NY and Cleveland, OH (8 September 2014) – International business and trade attorney, Jon Yormick, will discuss U.S. economic sanctions at the 25th Annual FCIB Global Conference on 12-14 October 2014 in Baltimore, Maryland.  He will be joined for a panel discussion by a Special Agent, U.S. Department of Homeland Security Investigations, Counter-Proliferations Investigations, and a Vice President, Structured Trade Advisory, of JPMorgan Chase Bank, N.A.

Yormick’s presentation, “Navigating Economic Sanctions … Successfully,” will cover compliance with complex and ever-changing U.S. economic sanctions and Executive Orders, how they apply to U.S. and foreign parties, and how companies may find legitimate business opportunities available under sanctions programs.  He will also use recent civil penalty settlements to examine how companies can avoid violations and costly penalties.

The event will take place at the Sheraton Inner Harbor in downtown Baltimore.  More information about the conference, including how to register, can be found at http://bit.ly/1urehUS.

Yormick regularly advises and represents publicly-traded and privately-held companies on matters such as compliance programs, due diligence reviews, investigations, penalty proceedings, export licensing of defense and “dual use” items and technologies, economic sanctions and trade embargoes, export licensing of foods, medicine and medical devices under the Trade Sanctions Reform and Export Enhancement Act (TSRA), prior and voluntary self-disclosures of violations, and ruling requests.  His clients include those in the advanced manufacturing, advanced materials, aerospace and defense, distribution, electronics, energy, medical device, oil/gas, pharmaceuticals, professional services, steel, textiles and apparel, and transportation/logistics sectors.

With a membership of over 1,100 global credit and trade finance professionals in 55 countries around the world, FCIB is internationally recognized as the premier association of executives in finance, credit and international business, providing export credit and collections insight, practical advice, and intelligence to companies of all sizes – from Fortune 500 multinationals to medium and small private companies.