OFAC issues licences extending Rusal trade permissions

The US Office of Foreign Assets Control (OFAC) and the US State Department have backtracked slightly from their April 6th ruling that added seven Russian oligarchs – inluding Oleg Deripaska – to the list of Specially Designated Nationals (SDNs) together with 12 companies which they control, and 17 senior Russian officials.

By virtue of it having sanctioned Deripaska, one of the companies on the list was United Company Rusal PLC, Russia’s largest aluminium producer and the second-largest primary producer of the metal in the world, but which also had Deripaska as its major shareholder.

That ruling caused considerable confusion and disruption in the aluminium trades, because Rusal is a major shipper of both raw and finished commodities.

OFAC has now issued two licences which effectively permit parties to continue trading with Rusal until October 23rd 2018, rather than the previous deadline of June 5th, enabling them to wind down their activities and contractual commitments. The US also stated that it would consider lifting sanctions against Rusal if Deripaska ceded control of the company.

Aluminium prices, which had spiked on the earlier decision, fell by approaching 10% on the news of the backtrack.

West of England Club told members on April 18th that, so long as the trade did not involve a deceptive practice, trade with entities that were only on the US Sectoral Sanctions Identification (SSI) list would not be considered “significant” and therefore not in breach of the latest US restrictions on trading with SDNs. The Club said this week that it had been advised that this meant in practice that, provided Members who were carrying cargoes for entities on the SSI List were completely straightforward in their description of the cargoes, ports, shippers and receivers then the transaction would not be classified as “significant”.

West of England therefore advised Members to ensure that all carriage documentation properly and accurately represented the correct parties to the transaction and the nature of the cargo concerned.

For trade with parties other than Rusal who were on the SDN list, the Club said that attempts were still being made to clarify more precisely what was meant by a “significant” transaction.

The recently designated companies include:

Agroholding Kuban

Basic Element Limited

B-finance ltd.

En+ group

Gaz Group

Gazprom Burenie

JSC Eurosibenergo

Ladoda Menedzhment

NPV Engineering OJSC

PLC Renova Group

Russian Machines

United Company Rusal plc

US Banks cannot process any payments to or from the above entities, or the newly listed individuals.

The amended Section 10 makes it mandatory that sanctions be imposed on any foreign person who is determined to have knowingly facilitated a significant transaction for or on behalf of any person subject to US sanctions against Russia, which would include all of those individuals and entities designated on April 6th. Legal firm Freehill Hogan & Mahar observed that “obviously, of critical importance is what is meant by ‘facilitates’ and ‘significant transaction.'”