OFAC to lift sanctions on three Russian companies

On April 6, 2018, OFAC designated seven Russian oligarchs, including Oleg Deripaska, and 12 companies they own or control for their role in furthering the Kremlin’s global activities, including its attempts to subvert Western democracy; its support for the Assad regime; its malicious cyber activities; its occupation of Crimea; and its instigation of violence in Ukraine. OFAC’s action also targeted 17 senior government officials, as well as a state-owned Russian weapons trading company and its subsidiary, a Russian bank.

Specifically, OFAC designated En+ for being owned or controlled by, directly or indirectly, Deripaska and other entities he owns or controls. In that same action, OFAC designated Rusal for being owned or controlled by, directly or indirectly, En+. ESE, a wholly owned subsidiary of En+, was also designated.

Within 30 days of Dec. 19, OFAC said it will terminate sanctions imposed on En+, Rusal, and ESE. In its letter to Congress, OFAC stated that En+, Rusal, and ESE have agreed to undertake “significant restructuring and corporate governance changes to address the circumstances that led to their designation.”

These changes include:

• Reducing Deripaska’s direct and indirect shareholding stake in those entities to below 50 percent;
• Overhauling the composition of those entities’ boards of directors;
• restrictive steps related to their corporate governance; and
• Agreeing to unprecedented transparency by undertaking extensive, ongoing auditing, certification, and reporting requirements.

“As part of this agreement, half of En+’s restructured board of directors will be comprised of U.S. or U.K. nationals, and Rusal’s current board chairman will step down,” the letter states. “Deripaska will remain sanctioned. All of Deripaska’s property and interests in property, including entities in which he owns a fifty percent or greater interest, will remain blocked, and foreign persons will continue to be subject to secondary sanctions should they knowingly facilitate a significant transaction for or on behalf of Deripaska or entities in which he owns a fifty percent or greater interest.”

“Treasury sanctioned these companies because of their ownership and control by sanctioned Russian oligarch Oleg Deripaska, not for the conduct of the companies themselves,” Treasury Secretary Steven Mnuchin said in a statement. “These companies have committed to significantly diminish Deripaska’s ownership and sever his control.”

“The companies will be subject to ongoing compliance and will face severe consequences if they fail to comply,” Mnuchin added. “OFAC maintains the ability under the terms of the agreement to have unprecedented levels of transparency into operations.”

U.S. persons will continue to be prohibited from dealing, directly or indirectly, with Deripaska or any other designated person.