On December 17, 2014, the U.S. government announced a significant relaxation of the U.S. embargo against Cuba, which has been in effect for over 50 years. Just two days later, on November 19, President Obama announced a broadening of sanctions against Russia. Such changes may have major implications for both U.S. and non-U.S. persons seeking to engage in dealings with Cuba, and U.S. persons with Russia.

Cuba: Changes Afoot

The announcement by the U.S. with respect to Cuba signals the U.S.’s intention to reestablish diplomatic relations with Cuba. According to the White House, substantial changes to the current U.S. Cuba economic sanctions and export controls program are forthcoming. The U.S. is even considering removing Cuba from the State Department’s list of State Sponsors of Terrorism.

While Congressional authorization would be required for a complete removal of U.S. sanctions and export controls against Cuba, many of the changes may be implemented through the amendment of regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) and the U.S. Commerce Department’s Bureau of Industry and Security (“BIS”). In furtherance of the U.S.’s new Cuba policy, OFAC has expressed that it expects to amend its Cuban Assets Control Regulations in the next few weeks. The Department of Commerce made a similar announcement with respect to amending its Export Administration Regulations.

Proposed amendments to the foregoing regulations include the following:

• Foreign vessels will be authorized to enter the U.S. after engaging in certain humanitarian trade with Cuba.
• U.S. financial institutions will be permitted to open correspondent accounts for authorized transactions at Cuban financial institutions.
• U.S.-owned or controlled entities in third countries will be permitted to provide services to and engage in financial dealings with Cuban individuals in third countries.
• General licenses will be issued that authorize support for the development of private business in Cuba, support for the Cuban people, humanitarian remittances and remittance forwarders.
  Items authorized for export from the U.S. to Cuba will include certain building materials for private residential construction, agricultural equipment for small farmers, goods for use by private sector Cuban entrepreneurs and certain communications devices, related software, applications, hardware and services.
• U.S. persons will be authorized to engage in third-country professional meetings and conferences related to Cuba.

Russia: No Business in Crimea

On November 18, the President signed the Ukraine Freedom Support Act of 2014 into law, authorizing (but not mandating) additional economic sanctions on weapons companies and investors in high-tech oil projects. In signing the new law, President Obama announced that while he did not intend to issue sanctions under the law, he called on Russia to “end its occupation and attempted annexation of Crimea, cease support to separatists in eastern Ukraine, and implement the obligations it signed up to under the Minsk agreements.”¹

The very next day, the U.S. authorized sanctions against individuals and entities operating in Crimea. More specifically, the President issued an Executive Order prohibiting the export of goods, technology, or services to Crimea, as well as the import of goods, technology, or services from Crimea, and new investments in Crimea. According to the President, the latest Executive Order is “intended to provide clarity to U.S. corporations doing business in the region and reaffirm that the United States will not accept Russia’s occupation and attempted annexation of Crimea.”

What This Means

The announced changes to the Cuban sanctions regime will not take effect until officially implemented by OFAC and BIS. For that reason, individuals and entities should continue to comply with the current embargo. We expect further policy developments in the upcoming weeks and future alerts will be forthcoming as these developments arise.

As for recent events relating to Russia, we note that the scope of U.S. and E.U. sanctions continues to grow. Given the noticeable effects these sanctions have had on the Russian economy, we have no reason to believe the sanctions will be relaxed anytime soon. Given the rapidly evolving landscape, we recommend adopting a thorough due diligence process to ensure that none of your operations, investments or transactions run afoul of applicable law.

If you have any questions or concerns about the subject of this client alert or U.S. sanctions generally, please contact Bruce G. Paulsen (212-574-1533) or Michael W. Broz (212-574-1272) at Seward & Kissel.

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¹Crimea is the Ukrainian peninsula annexed by Russia earlier this year.