On March 12, 2020, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued sanctions against a second affiliate of PJSC Rosneft Oil Company (Rosneft) related to its activities with Venezuela. OFAC added TNK Trading International S.A. of Switzerland (TNK) to the Specially Designated Nationals and Blocked Persons List (SDN List), and the Sectoral Sanctions Identifications List (SSI List) under Directives 2 and 4, pursuant to Executive Orders 13850 and 13662. Previously, on February 18, 2020, OFAC placed Rosneft Trading S.A. (Rosneft Trading), a Swiss subsidiary of Rosneft, on the SDN List for purchasing, transferring, brokering, and otherwise facilitating the shipment of crude oil from PdVSA. OFAC has authorized a wind down period for both companies through 12:01 a.m. U.S. Eastern Time on May 20, 2020.
The designations are part of U.S. efforts to apply pressure on the regime of Nicholas Maduro and Russia’s ongoing support for the Venezuela’s energy sector. The Treasury Department stated that after Rosneft Trading was added to the SDN List, cargoes of Venezuelan oil allocated to Rosneft Trading were transferred to TNK to evade U.S. sanctions. However, thus far the U.S. government only has targeted affiliates supporting the Venezuelan energy sector, and Rosneft itself has not been added to the SDN List or subjected to broader sanctions (beyond its longstanding SSI List designations under Directives 2 and 4).
Impact of Sanctions for TNK and Rosneft Trading
U.S. persons are prohibited from dealing with TNK and Rosneft Trading, or any entity owned 50 percent or more, directly or indirectly, by either company. For non-U.S. companies, commercial activity with TNK and Rosneft Trading, or their blocked affiliates, will carry the risk of potential U.S. secondary sanctions, including where there is material assistance, sponsorship, or financial, material, or technological support provided to these entities. Vessel charter companies, insurance carriers and others involved in transactions with TNK, Rosneft Trading, or their blocked affiliates also may be exposed to U.S. primary or secondary sanctions. Although TNK and Rosneft Trading were sanctioned pursuant to the Venezuela sanctions programs, the prohibitions on dealing with them are not limited to transactions involving the Venezuelan oil sector.
Rosneft, TNK and Rosneft Trading are subject to U.S. sectoral sanctions for Russia under Directives 2 and 4. These are partial sanctions which involve limitations on new debt of longer than 60 days maturity (Directive 2), and the provision of goods, services other than financial services, or technology in support of certain deepwater, Arctic offshore or shale projects involving Rosneft (Directive 4).
Wind Down Period Under General License 36A
OFAC issued General License 36A, which authorizes U.S. persons to engage in certain activities prohibited by Executive Order 13850 that are necessary for the wind down of transactions involving TNK and Rosneft Trading, or any entity in which TNK or Rosneft Trading owns, directly or indirectly, a 50 percent or greater interest. General License 36A does not, however, authorize any debit to an account of TNK or Rosneft Trading held by a U.S. financial institution. Per the general license, such activities are permitted until 12:01 a.m. U.S. Eastern Time, on May 20, 2020. U.S. persons must ensure that wind-down activities conducted pursuant to General License 36A do not violate sectoral sanctions prohibitions under Directives 2 or 4.
Additional Updates to OFAC General License
OFAC also issued General License 15C, which removes the deadline in General License 15B and makes it indefinite. General License 15B permitted transactions through certain prohibited Venezuelan banks through March 22, 2020, if ordinarily incident to the activities of MasterCard, Visa, American Express, Western Union, or MoneyGram.
OFAC issued General License 16C, which removes the deadline in General License 16B and makes it indefinite. General License 16B authorized certain transactions ordinarily incident and necessary to maintaining, operating, or closing accounts of U.S. persons in Banco de Venezuela, Banco Bicentenario del Pueblo, and Banco del Tesoro through March 22, 2020.