Archive for the ‘Russia Sanctions’ Category


May

20

The First Thing We Do, Let’s (Not) Kill All the Lawyers


Posted by at 7:59 pm on May 20, 2014
Category: Economic SanctionsOFACRussia DesignationsRussia Sanctions

By VOA [Public domain], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ASergei_Magnitsky.jpg

ABOVE: Sergei Magnitsky


Today the Office of Foreign Assets Control (“OFAC”) announced more Russia designations, this time under the Magnitsky sanctions. The Sergei Magnitsky Rule of Law Accountability Act of 2012 (H.R. 4405) authorizes sanctions on those individuals responsible for the death and detention of Sergei Magnitsky. Mr. Magnitsky was a Russian lawyer who was investigating corruption and fraud by certain Russian tax officials. The act also authorizes designations of individuals involved in human rights violations against anyone seeking to expose illegal activity by Russian officials or seeking to promote human rights in Russia.

Eighteen people have already been sanctioned under the Act, mostly mid-level law enforcement and tax officials. Those designated under the Magnitsky sanctions are not eligible to enter the United States and their assets must be blocked if they come into the hands of U.S. Persons

Among the newly designated officials, according to the AP, are “four prison officials, a judge, [a] court official, a law enforcement investigator and alleged co-conspirators in the fraud case.”  Dmitry Kratov, who is on the list, was previously acquitted in Russia of charges of negligence brought against him in connection with Magnitsky’s death

The newly designated individuals are the following:

ALISOV, Igor Borisovich; DOB 11 Mar 1968 (individual) [MAGNIT].

GAUS, Alexandra Viktorovna (a.k.a. GAUSS, Alexandra); DOB 29 Mar 1975 (individual) [MAGNIT].

KHLEBNIKOV, Vyacheslav Georgievich (a.k.a. KHLEBNIKOV, Viacheslav); DOB 09 Jul 1967 (individual) [MAGNIT].

KLYUEV, Dmitry Vladislavovich (a.k.a. KLYUYEV, Dmitriy); DOB 10 Aug 1967 (individual) [MAGNIT].

KRATOV, Dmitry Borisovich; DOB 16 Jul 1964 (individual) [MAGNIT].

KRECHETOV, Andrei Alexandrovich; DOB 22 Sep 1981 (individual) [MAGNIT].

LITVINOVA, Larisa Anatolievna; DOB 18 Nov 1963 (individual) [MAGNIT].

MARKELOV, Viktor Aleksandrovich; DOB 15 Dec 1967; POB Leninskoye village, Uzgenskiy District, Oshkaya region of the Kirghiz SSR (individual) [MAGNIT].

STEPANOV, Vladlen Yurievich; DOB 17 Jul 1962 (individual) [MAGNIT].

SUGAIPOV, Umar; DOB 17 Apr 1966; POB Chechen Republic, Russia (individual) [MAGNIT].

TAGIYEV, Fikret (a.k.a. TAGIEV, Fikhret Gabdulla Ogly; a.k.a. TAGIYEV, Fikhret); DOB 03 Apr 1962 (individual) [MAGNIT].

VAKHAYEV, Musa; DOB 1964; POB Urus-Martan, Chechen Republic, Russia (individual) [MAGNIT].

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May

19

There’s More Than One Way to Sanction a Russian under U.S. Sanctions


Posted by at 9:09 pm on May 19, 2014
Category: Economic SanctionsOFACRussia SanctionsSanctionsSDN ListSyria

By Rakkar at en.wikipedia (Transferred from en.wikipedia) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ABashar_and_Asmaa_al-Assad_in_Moscow.jpg
ABOVE: Assad in Moscow

OFAC recently announced the designation of Russian bank Tempbank and one of its Russian officials, Mikhail Gagloev, to its Specially Designated Nationals List “for providing material support and services to the Government of Syria.”  According to OFAC, Tempbank “arranged to deliver millions of dollars in cash” to a Russian airport for pickup by “cash couriers” for the Central Bank of Syria and Gagloev “personally travelled to Damascus to make deals with the Syrian regime on behalf of Tempbank.”  Six senior officials of the Syrian government and two Syrian companies were also designated for apparently unrelated reasons.

Not surprisingly, the Russian Foreign Ministry responded that Russia believes the designations of Tempbank and Gagloev are “absolutely unacceptable” and “would like to remind the U.S. side yet again that the language of sanctions is useless and counterproductive.”  To the Russian government, the basis for which a Russian individual or entity is designated as a U.S. sanctions target is, of course, irrelevant.  Russia can, moreover, understandably disregard the reason behind OFAC’s designations because the resulting sanctions against the identified Russians are effectively the same.

In light of the designations of Tempbank and Gagloev, it is reasonable to suspect that OFAC may start designating more Russians to the SDN List for reasons unrelated to Ukraine to augment the U.S. sanctions target range.  Indeed, it is peculiar that no one had been designated to the SDN List under sanctions against Syria for almost a year until this latest development.

Perhaps, OFAC is changing course from designating Russians to the SDN List for shaky reasons like being part of Putin’s “Inner Circle,” as was the justification given for targeting the likes of Gennady Timchenko, Arkady Rotenberg and Boris Rotenberg.  Targeting someone for sanctions just because he is a Putin crony may be enough under IEEPA’s broad authorization to the President, but doing so has not been met with the same enthusiasm by others, namely the EU.  The EU has, for sure, its own reasons not to tread into designating Russian businesses and businessmen with substantial ties and influence on European markets.  However, the result, which we recently pointed out, is that U.S., EU and even Canadian sanctions relating to Russia are becoming quite the confusing patchwork to follow.

 

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May

13

Russian Sanctions Creep


Posted by at 6:39 pm on May 13, 2014
Category: Economic SanctionsEURussia SanctionsSanctionsSDN List

By President of Russia [CC-BY-3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File:Volodin_V_V.jpeg?uselang=ru
ABOVE: Vyacheslav Volodin


The EU yesterday added new names to its sanctions list.  The latest additions include Russian President Putin’s deputy chief of staff, Vyacheslav Volodin, and Vladimir Shamanov, the commander of the paratroop unit that allegedly took part, despite Russian denials, in the annexation of Crimea.

Also added were a number of Crimean companies:  One is Chernomorneftegaz, a Crimean gas company; another is Feodosia, a Crimean oil supplier.

Volodin but not Shamanov and Chernomorneftegaz, but not Feodosia, are on the U.S. sanctions list. Differences like these suggest incoherence and, at the least, create compliance challenges for multinationals.

Being on a U.S. or EU sanctions list means that the assets of the listed person are frozen and dealings with them by those subject to U.S. or EU jurisdiction are prohibited.

Whether these sanctions will deter further Russian involvement in the Ukrainian crisis is anyone’s guess.  The reluctance to impose so-called sectoral sanctions, that is, prohibitions on dealings with anyone in a given sector like oil and gas, exposes concerns about the double-edged sword of sanctions:  They truly cut both ways.

Individuated sanctions are, nonetheless, a headache for companies subject to U.S. and EU law because of the broad-based shadow lists of those subject to sanctions under the U.S. rule freezing the assets of any company that is 50% or more owned by a designated person and the EU rule  freezing any assets “controlled by” a designated person.

Shadowing the shadow list means that simple screening of listed persons is not enough.

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Apr

29

Bad Times for Timchenko


Posted by at 9:45 pm on April 29, 2014
Category: BISEntity ListOFACRussia SanctionsSanctionsSDN List

Gennady Timchenko via http://www.timchenkofoundation.org/en/about/trustees/1/ [Fair Use]The Bureau of Industry and Security (“BIS”) yesterday added thirteen companies to the Entity List as part of new sanctions against Russia. Many of these companies are connected to Gennady Timchenko who was added to the SDN List in the first round of sanctions and whom we have discussed previously on this blog. Under the Export Administration Rules, licenses are required for exports of all items “subject to the EAR” (i.e., U.S. origin items or foreign produced items with specified percentages of U.S. content) to anyone placed on the Entity List. BIS has said that there will be a presumption of denial for license applications to export items to the thirteen companies newly added to the list.

The companies added to the entity list are the following:

Stroytransgaz Holding, located in Cyprus; Volga Group, located in Luxembourg and Russia; and Aquanika, Avia Group LLC, Avia Group Nord LLC, CJSC Zest, Sakhatrans LLC, Stroygazmontazh, Stroytransgaz Group, Stroytransgaz LLC, Stroytransgaz-M LLC, Stroytransgaz OJSC, and Transoil, all located in Russia.

The Volga Group is owned by Timchenko and itself owns Aquanika, Avia Group, Avia Group Nord, Transoil, Sakhatrans and Stroytransgaz. The only company on the list not connected to Timchenko is CJSC  Zest, which is a leasing company owned by Rossiya Bank.

Interestingly, if you are on pins and needles about whether Justin Timberlake will perform at Hartwall Arena in Finland, the Volga Group, owned by Timchenko, is the vehicle by which Timchenko owns 50 percent of Hartwell Arena. Volga Group, like all of the thirteen companies listed above that have been added to the Entity List, was added yesterday by the Office of Foreign Assets Control to the SDN List. So Justin Timberlake fans planning on heading to Helsinki might want to see if they can get refunds.

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Apr

16

Music of My Hartwall Arena


Posted by at 10:29 pm on April 16, 2014
Category: OFACRussia Sanctions

By Paul Holloway from Birmingham, United Kingdom (The Hartwall Arena  Uploaded by Fæ) [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3AThe_Hartwall_Arena_(100452288).jpgYesterday, my colleague George Murphy posted an analysis on the potential impact (or lack thereof) of the Russia/Ukraine sanctions on a series of concerts by U.S. artists such as Justin Timberlake at Hartwall Arena in Helsinki, Finland. The post noted that the performances would still go on despite the ownership interests by three newly-designated SDNs in Hartwall Arena: Boris and Arkady Rotenberg and Gennady Timchenko. The post speculated that this was because none of the three named individuals had a fifty percent interest or greater in the venue. Under current rules as interpreted by OFAC, a company would not be blocked even if owned entirely by blocked individuals if no single blocked individual owned 5o percent or more of the company.

That post generated an email to us from an official at Live Nation, the concert promoter for the events at Hartwall, taking issue with the post.

I wanted to reach out because there has been quite a bit of erroneous information out in the public domain about the ownership of the Helsinki venue. The shows are going to continue because the venue is not subject to the US sanctions, not “despite” the sanctions.

I replied that the post had said the concert would go on “despite” the ownership of the venue by the three SDNs, not “despite” the sanctions, a very different thing, particularly since the post speculated that the venue wasn’t subject to the sanctions due to the 50 percent rule.

This led to another response:

They do not own 100% of the venue, there several dozen owners. Based on the best information available to Live Nation they own 100% of an entity which owns only a minority interest in the venue itself, which is the reason the sanctions do not apply.

That was certainly not what numerous new sources (such as The Guardian) were reporting as to the ownership of Hartwall Arena, and the official did not respond to my request to document the assertion about the Rotenberg and Timchenko interests in Hartwall . I did a little digging myself and sent to the Live Nation official this presentation made by Roman Rotenberg, the son of Boris Rotenberg and chairman of the Hartwall Arena. That presentation contains a slide that helpfully diagrams the precise ownership of the Arena. It states that the “owners” of Hartwall Arena are Gennady Timchenko and “Rotenberg family via LÃ¥ngvik Capital.” The organizational diagram shows a “company based in Luxembourg” owned by Timchenko that owns 50 percent of Arena Events Oy that, in turns, owns the Hartwall Arena. It also shows that “Oy LÃ¥ngvik Capital Ltd (Finland)” — owned by the Rotenberg family — owns the other 50 percent of the Arena Events Oy.

If Live Nation is trying to assert that Arena Events only owns a minority interest in Hartwall Arena, that is not consistent with what Roman Rotenberg says. The organizational chart shows that Arena Events Oy owns Helsinki Halli Oy (Hartwall Arena) and owns 49% of Jokerit Hockey Club Oy, the company that owns the  hockey team based at Hartwall Arena. It is not clear why the chart would indicate the 49% minority interest in Jokerit but not a corresponding minority interest in Helsinki Halli Oy if, in fact, that was also a minority interest as the Live Nation official asserts.

I also checked the records relating to Arena Events Oy on the Finnish Trade Register which is the official source for corporate records maintained by the Government of Finland. Those records do not indicate the stock ownership of Arena Events Oy and, thus, nothing in those publicly available corporate records contradicts Roman Rotenberg’s charts and statements showing that Timchenko and the Rotenberg family each own 50 percent of Hartwall Arena.

This information, if true, raises the possibility that concerts by Americans at Hartwall Arena might be problematic. Timchenko’s ownership of the Luxembourg holding company would mean that this holding company is blocked, and the Luxembourg holding company’s 50 percent in Helsinki Halli would result in Helsinki Halli being blocked as well. If Helsinki Halli is blocked, no U.S. person or company can be involved in events there. Whether or not Oy LÃ¥ngvik Capital is blocked is not clear, since we don’t know the ownership interests of Boris and Arkady Rotenberg in that company, but this does not matter if Helsinki Halli is blocked by virtue of Timchenko’s 50 percent stake.

So if Justin Timberlake sings a few songs at Hartwall he better hope that Live Nation is right and Roman Rotenberg is wrong about the ownership of the concert venue. Otherwise, he may be the next Dennis Rodman.

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