On October 29, 2015, the U.S. and the EU took separate actions to ease their respective Belarus-related sanctions programs for six months. These measures follow the October 11, 2015 reelection of Alexander Lukashenko as President of Belarus, the regime’s decision to release certain political prisoners and hopes for an improvement of the political and economic relationship between Western countries and Belarus. While currently temporary in nature, the sanctions relief provided affords Western companies opportunities to engage in certain transactions in Belarus.
The U.S. Department of Treasury, Office of Foreign Assets Control (“OFAC”) issued General License No. 2 (“GL 2”), which effective October 30, 2015 permits “U.S. persons” to engage in transactions with nine Belarus-based entities that have been designated as Specially Designated Nationals (“SDNs”). Designation as an SDN means that all property and interests in property of a designated party is considered “blocked” and may not be dealt in, broadly prohibiting transactions, trade, services and investment. This restriction extends to any entity in which one or more blocked parties holds, directly or indirectly, a 50 percent or greater ownership interest.
GL 2 authorizes transactions with Belneftekhim, the state-owned petrochemical conglomerate, as well as its U.S. subsidiary and seven (7) other companies linked to this entity:
- Belarusian Oil Trade House;
- Belneftekhim USA, Inc.;
- Belshina OAO;
- Grodno Azot OAO;
- Grodno Khimvolokno OAO;
- Lakokraska OAO;
- Naftan OAO; and
- Polotsk Steklovolokno OAO.
Importantly, the entities identified in the GL remain SDNs. This means that funds of the listed entities previously frozen by U.S. persons remain blocked and cannot be dealt in. GL 2 does not permit transactions, directly or indirectly, with any other SDNs or blocked parties sanctioned in Belarus. The terms of GL 2 specify that indirect transactions with SDNs are not permitted via the nine (9) parties authorized in the general license.
GL 2 is temporary in nature and will expire on April 30, 2016, unless OFAC extends the authorization. There is no provision for the “grandfathering” of transactions or agreements initiated during the effective period of GL 2. Thus, unless new OFAC guidance indicates otherwise, companies should assume that all aspects of a transaction involving an above-listed entity must be concluded by April 30, 2016 barring any OFAC extension of the GL.
Additionally, GL 2 contains a reporting requirement for U.S. persons engaging in authorized transactions. No later than 15 days after the execution of a transaction with any of the newly authorized entities (or companies owned at least 50% by such entities), a U.S. person must file a report with OFAC. The report need only be filed if the transaction is in excess of $10,000, or there is any series of transactions exceeding $10,000. The report must contain: (1) the estimated or actual dollar value of the transaction(s), (2) the parties involved, (3) the type and scope of activities conducted, and (4) the dates or duration of the activities.
On October 30, 2015, the EU published regulations suspending for four months the asset freezes and travel bans on 171 individuals (including President Lukashenko), as well as the asset freeze of 10 entities. These individuals and entities fell under the Belarus regime by Council Regulation 765/2006. The suspension, beginning October 31, 2015 through Council Decision 2015/1957 and Council Regulation 2015/1948, is effective until February 29, 2016.
The entities no longer subject to sanctions are:
- Beltech Holding;
- CJSC Dinamo-Minsk;
- CJSC Prostor-Trade;
- JCJSC Quartzmelprom;
- JLLC Aquatriple;
- JSC Berezovsky KSI;
- LLC Rakowski Browar;
- LLC Triple; and
Notably, the arms embargo against Belarus remains in place, and four individuals (members of President Lukashenko’s security service) will remain under sanctions.
In addition to the sanctions suspensions discussed above, following the judgment of the General Court (First Chamber) on October 6, 2015 in Case T-276/12, the following four (4) entities were released from asset freezes implemented by Article 4(1) of Decision 2012/642/CFSP. These entities were de-listed by way of Council Regulation 2015/1949:
- LLC Triple Metal Trade;
- JV LLC Triple-Techno;
- MSSFC Logoysk; and
- Triple-Agro ACC.
These entities are all subsidiaries of LLC Triple, a holding company of Iury Chyzh, who provides financial support to the Lukashenka regime through this company.
* * * *
At this point, the sanctions relief identified above is temporary in nature. If relations with Belarus continue to improve, more extensive and permanent sanctions relief may be issued. In the interim, companies should account for the short-term nature of the sanctions relief as well as the differences in U.S. and EU sanctions policies in any potential dealings with the identified Belarus-based entities and individuals.