As discussed in our previous client alert, En+ was initially designated in April 2018 for being owned/controlled by Oleg Deripaska, an influential Russian oligarch who was also sanctioned as an individual, pursuant to Executive Orders 13661 and 13662. Simultaneously, OFAC designated Rusal for being owned/controlled by En+ and ESE for being owned/controlled by En+. OFAC issued a number of General Licenses authorizing certain transactions necessary to maintain or wind down operations or existing contracts with these companies, the last of which, Ukraine General License No. 14E, was due to expire on January 28, 2019.
The decision to delist these entities was taken pursuant to the “Terms of Removal”, which required Rusal, EN+, and ESE to reduce Oleg Deripaska’s direct and indirect shareholding stake and sever his control over the companies. Both U.S. and non-U.S. persons are now free to transact with Rusal, En+, ESE, and their subsidiaries. In response, the London Metal Exchange (“LME”) lifted its suspension on storing metals produced by Rusal in LME-approved warehouses.
While this action by OFAC reduces the number of Russian entities sanctioned by the United States, companies engaging in Russia-related transactions should continue to conduct enhanced due diligence into the ownership structure of their counterparties. Mr. Deripaska remains sanctioned and transactions with him and any entities in which he has an ownership stake of 50 percent or more are prohibited for U.S. and non-U.S. persons.
How Reed Smith can help
Reed Smith’s Sanctions Team has experience representing companies before OFAC. A global firm, Reed Smith is particularly well positioned to provide guidance on U.S. sanctions and to represent your company before OFAC and other federal agencies implementing U.S. sanctions, such as the U.S. Department of Commerce and the U.S. Department of State, with highly experienced sanctions lawyers from both the United States and the EU available to you, 24/7. Contact one of the authors listed above, or your usual Reed Smith lawyer, and we will be more than happy to help you navigate the implications of these significant events for your business.
Client Alert 2019-023