On September 29, 2017, pursuant to the Countering America’s Adversaries Through Sanctions Act (“CAATSA”) (see our prior memorandum) signed into law by President Trump on August 2, 2017, the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) amended the preexisting Russia Sectoral Sanctions by shortening the maturity terms for dealings in new debt. These changes will become effective November 28, 2017.
The Sectoral Sanctions, initially imposed in 2014, restrict the ability of U.S. persons from transacting in, providing financing for, or otherwise dealing in debt issued by named persons on the Sectoral Sanctions Identifications List (the “SSI List”). The new changes modify Directive 1, targeting the financial sector, such that U.S. persons will be prohibited from transacting in, providing financing for, or otherwise dealing in new debt or equity with a maturity of longer than 14 days, if issued by entities designated under Directive 1 (reduced from 30 days). Directive 2, which targets Russia’s energy sector, has now been modified such that U.S. persons will be prohibited from transacting in, providing financing for, or otherwise dealing in debt longer than 60 days, if issued by entities designated under Directive 2 (reduced from 90 days). The restrictions apply to issuances by SSI-designated persons as well as entities owned 50 percent or more by an SSI-designated person.
In conjunction with the amendments, the Treasury Department released updated FAQs with the following explanatory tables to highlight the applicable maturity limitations under the recent changes:
Directive 1:
| Period when the debt was issued | Applicable tenor of prohibited debt |
| On or after July 16, 2014 and before September 12, 2014 | Longer than 90 days maturity |
| On or after September 12, 2014 and before November 28, 2017 | Longer than 30 days maturity |
| On or after November 28, 2017 | Longer than 14 days maturity |
Directive 2:
| Period when the debt was issued | Applicable tenor of prohibited debt |
| On or after July 16, 2014 and before November 28, 2017 | Longer than 90 days maturity |
| On or after November 28, 2017 | Longer than 60 days maturity |
CAATSA also requires the Treasury Department to modify Directive 4, which targets Russian deepwater, Arctic offshore, and shale projects, by October 31, 2017. No changes have yet been made. The amendments will prohibit the provision, exportation, or reexportation by U.S. persons or persons within the U.S. of goods, services (except for financial services), or technology in support of exploration or production for new deepwater, Arctic offshore, or shale projects that have the potential to produce oil and that involve any person designated under Directive 4 or where the designated entity has a controlling interest or a substantial non-controlling ownership interest in such a project (defined as not less than a 33 percent interest). When implemented, this change will broaden Directive 4 insofar as it previously applied to projects involving entities owned 50 percent or more by an entity designated under Directive 4 and was previously limited in geographic scope to projects in Russia.
If you have any questions or concerns about U.S. sanctions against Russia, please contact one of the attorneys listed below.
