The US is continuing its sanctions push against Russia with ramifications not just for US persons but also for non-US companies and persons.
The Defending American Security from Kremlin Aggression Act ("DASKAA") was first put forward in the US Senate in August 2018. Whilst this legislation never received a vote, a new version of DASKAA has now been introduced for deliberation in the US Senate.
DASKAA has been described as the "sanctions bill from hell". If introduced it would impose tough new sanctions including prohibitions on dealings with the Russian oil and gas sector as well as dealings with Russian sovereign debt. It would also impose new sanctions on political figures, oligarchs and other persons (including their family members) who facilitate illicit and corrupt activities, directly or indirectly, on behalf of President Putin. The act would also potentially introduce secondary sanctions against non-US companies and persons, including those supporting the Russian energy sector or dealing with certain oligarchs.
The renewed focus on sanctions against Russia follows the US announcement at the end of last year that a further 18 Russian individuals and 4 Russia-based entities were now subject to sanctions in response to "Russia's continued disregard for international norms". It is not only companies and individuals who fall under the jurisdiction of the US who should be on top of these developments. Given the extra-territorial effect of some US Russia sanctions, all companies and individuals worldwide who have any dealings with Russian entities or individuals need to keep up with the changing world of Russian sanctions.
Some of the new US sanctions were introduced under "CAATSA" – the Countering America's Adversaries Through Sanctions Act – which entered into law in August 2017. It was introduced as a result of the situation in Crimea, alleged US and European election meddling and Russia's involvement in Syria. It broadened and toughened existing US sanctions against Russia and new sanctions continue to be introduced under it.
In addition to the 22 new individuals and entities sanctioned in December 2018, the US also added 12 individuals and entities to its List of Specified Persons under Section 231 of CAATSA. Although the individuals and entities on the list under Section 231 of CAATSA are not subject to sanctions themselves, any person who knowingly engages in a "significant transaction" with any individual/entity on the list will be subject to mandatory sanctions (including non-US persons and entities). By way of example, in September 2018, sanctions were imposed by the US against a Chinese military agency and its directors for the purchase of fighter aircraft from a Russian entity on the Section 231 list.
Non-US persons also face potential sanctions risk if they enter into or facilitate "significant" transactions for or on behalf of sanctioned Russian individuals or entities. Foreign financial institutions risk losing US correspondent account banking access if they knowingly facilitate a "significant financial transaction" on behalf of any person subject to US sanctions.
The sanctions introduced by the US in the past 12 months follow the Treasury Department's January 2018 report to Congress under Section 241 of CAATSA ("the Section 241 Report"). In conjunction with national intelligence the US Treasury was required to issue this report setting out Russia's senior political figures, oligarchs and parastatal entities by reference to their closeness to the Russian regime and their net worth. The unclassified version of the report identified 96 Russian oligarchs together with 114 senior political figures and entities. The list of oligarchs is widely said to have been taken from the Forbes Russian rich list. The classified part of the report contained details of their income and assets (including family members), and laid out the likely effect of imposing debt and equity restrictions on the Russian parastatal entities and of imposing sanctions on those individuals identified. It also identified the names of further Russian oligarchs not listed in the unclassified part of the report.
The US Office of Foreign Assets Control ("OFAC") stated at the time that inclusion of a name in the Section 241 Report shouldn't be taken to mean a decision had been made to impose sanctions on those identified. However, the list is widely considered to be a starting point for the imposition of further sanctions against Russia, which is reflected in the fact that some of those identified have indeed been subsequently sanctioned by the US. There are reports that some individuals have since been restructuring their assets to shield them from potential future US sanctions. If DASKAA comes into force, the act would require the Section 241 Report containing the list of senior political figures, oligarchs and parastatal entities to be updated, suggesting the list in the Section 241 Report will be a focal point for sanctions under DASKAA.
The developments over the past 12 months concerning US sanctions against Russia have widened the gap between EU and US sanctions against the country despite the US saying previously that it intends to engage and co-ordinate closely with the EU. With Brexit looming, and the UK taking a more forceful stance on potential future sanctions against Russia compared to the EU, the UK may end up adopting a half-way house between the sanctions imposed by the EU and the increasingly extensive measures adopted by the US.
The complexity and extra-territoriality of US sanctions, the uncertainty posed by Brexit and the ever changing political climate reflects the need for businesses to understand the sanctions sphere and to seek advice where necessary to ensure compliance, but also to ensure that potential business opportunities do not go to waste as a result of any misunderstanding of what the sanctions actually prohibit.