On February 18, 2020, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) designated Rosneft Trading S.A. (Rosneft Trading), the Swiss-based brokerage arm of the Russian oil company major pursuant to Executive Order 13850 (Blocking Property of Additional Persons Contributing to the Situation in Venezuela), for operating in the oil sector of the Venezuelan economy. This high profile action by OFAC follows Rosneft Trading's continued brokerage of the sale and transport of oil from Petróleos de Venezuela, S.A. (PdVSA) after months of warning by the U.S. government.
Scope of the sanctions
As a result of this designation, U.S. persons are now prohibited from engaging in virtually all transactions with Rosneft Trading or any entity that is owned 50 percent or more (directly or indirectly) by Rosneft Trading, unless an exception applies. It follows that anyone continuing to do business with Rosneft Trading should not use U.S. dollars because U.S. dollar payments are generally processed through the United States financial system.
These sanctions are also relevant to non-U.S. persons. Specifically, non-U.S. persons will be exposed to a risk of blocking sanctions if it is determined that they have "materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of" Rosneft Trading or any entity owned 50 percent or more by Rosneft Trading. These terms are subject to broad interpretation, which gives OFAC substantial authority to sanction non-U.S. persons doing business with Rosneft Trading. This could include transporting cargo owned by Rosneft Trading or purchasing commodities from Rosneft Trading. OFAC has indicated that there is sanctions potential for non-U.S. persons doing business with Rosneft Trading. See, for example, OFAC FAQ 818.
These blocking sanctions do not apply to Open Joint-Stock Company Rosneft Oil Company (Rosneft Oil Company), Rosneft Trading's ultimate parent. Rather, the sanctions are limited to Rosneft Trading, as well as any entity in which it owns, directly or indirectly, 50 percent or more.