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Archive for July, 2014

Jul

23

Comment Notifications

Posted by Clif Burns at 12:26 am on July 23, 2014

Category: General

For some reason, there was a period of about a week during which I was not getting notifications of comments pending approval, so there were a number that I just discovered and approved. I am trying to figure out why that happened and fix it. In the meantime my apologies to commenters who were stranded in the moderation queue.

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Jul

21

Strike That: We Actually Meant “For” for “Of”

Posted by Clif Burns at 6:16 pm on July 21, 2014

By Almonroth (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3AU.S._Treasury-3.jpg Last week, we reported that there was some confusion relating to the new Sectoral Sanctions Identifications List inasmuch as OFAC said, in one place, that the prohibitions extended to dealing in equity and 90-day debt “of” and, in another place, it said it extended to dealing in equity and 90-day debt “for” parties on the list. The difference was significant because “of” would seem to connote a narrower restriction and only prohibit U.S. persons from loaning money to or purchasing equity from the parties on the SSIL. On the other hand, “for” would seem to prohibit, in addition, a number of other transactions, such as borrowing money from the party on the SSIL or acting as a broker to purchase stock from third parties for the entity on the SSIL. The SSIL used “of,” whereas the directives issued relating to the SSIL entries used “for.”

Well, sometime within the past several days, someone at OFAC quietly changed “of” on the SSIL to “for.” Given that people can be subjected to massive civil penalties and even sent to jail for engaging in prohibited transactions with entities on the new SSIL, one might have expected OFAC to admit the mistake and provide some clarification for the changed language, rather than simply sneaking onto the list under cover of darkness, making the change, and hoping that no one would notice that there had ever been a problem.

In any event, the SSIL and the directives now use the same language. Â If we could only figure out exactly what that language means.

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Jul

17

That Depends On The Meaning Of Of

Posted by Clif Burns at 8:00 pm on July 17, 2014

Category: OFAC • Russia Sanctions

Putin and Vnesheconombank Chairman Dmitriev http://www.veb.ru/en/press/news/arch_news/index.php?id_19=30398 [Fair Use]
ABOVE: Russian President Putin Meets with Vnesheconombank Chairman V.A. Dmitriev

There is a significant ambiguity relating to the newly-announced Sectoral Sanctions Identifications List (“SSIL”) that we reported on yesterday and which placed Vnesheconombank and Gazprombank, among other Russian businesses, on the new list. There are two sections on the list. The first included financial institutions like Vnesheconombank and Gazprombank and prohibits U.S. persons from transactions covering debt in excess of 90 days and new equity involving these banks. The second included energy companies like the natural gas producer Novatek and prohibits dealings in debt in excess of 90 days but not in equity.

One source of confusion about the scope of these sanctions comes from a difference in wording between the directives issued yesterday by the President pursuant to his earlier Executive Order 13662 and the language on the SSIL which describes the restrictions on the listed entities. Â With respects to the banks, Directive No. 1 talks of “new debt of longer than 90 days maturity or new equity for these persons” and the SSIL refers to “new debt of longer than 90 days maturity or new equity of these persons.” With respect to the energy companies, Directive No 2 talks of new debt of longer than 90 days maturity for these persons and the SSIL refers to “new debt of longer than 90 days maturity of Â these persons.”

The difference between “for” and “of” in this context is significant. Dealing in equity for someone can include sales of third party equity to that person, unlike dealing in equity of someone, which can only be the equity issued by that person. The same issue occurs with respect to debt “for” and “of” the person, with the former covering not just extensions of credit to the person but also extensions of credit by the person. It is not clear which language controls.

Of course the losers here aren’t the companies on the SSIL; rather the losers are American businesses which lose business opportunities to European and other foreign competitors who are not subject to any restrictions under these sanctions. And the ambiguity about just what these sanctions cover only exacerbates the injury to U.S. businesses that may forego even more opportunities due to the ambiguous scope of the sanctions.

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Jul

16

One More List To Check . . . And Counting

Posted by Clif Burns at 8:10 pm on July 16, 2014

Category: OFAC • Russia Designations

Rosneft Moscow Headquarters http://www.rosneft.com/news/photogallery/About_Rosneft/3/ [Fair Use]
ABOVE: Rosneft Headquarters
Moscow

UPDATED (7/17/14): Â Post corrected below to indicate that not every entity on the SSIL is subject to the “new equity” prohibition.

Treasury today announced new Russia/Ukraine sanctions. All the sanctioned entities are listed at the end of this post.

Of particular significance is that today’s sanctions include s new list to check. Yes, that’s right. There’s a brand new list at OFAC, which will be called the Sectoral Sanctions Identifications List. (Try saying that as fast as you can ten times in a row.) Â And I wonder how long before the acronym, the SSIL, becomes simply the SILLY List.

The four entities on the SSIL are not blocked and all transactions with them by United States persons are not forbidden. Instead, certain specific transactions are not permitted as stated on the list itself, although the precise scope of these restrictions is not carefully defined. The list indicates that U.S. persons and persons in the United States are prohibited from “transacting in, providing financing for, or otherwise dealing in new debt of longer than 90 days maturity” with the listed persons. For some of the entities on the list, the prohibition also extends to dealing in “new equity” for those entities. Â Needless to say, lawyers in Washington are going to be very busy for quite some time trying to figure out what sorts of transactions constituted “new equity.”

Here are the new listings:

Specially Designated Nationals List Update

In addition, the following individuals have been added to OFAC’s SDN List:

BESEDA, Sergey (a.k.a. BESEDA, Sergei; a.k.a. BESEDA, Sergei Orestovoch); DOB 1954; Commander of the Fifth Service of the FSB; Commander of the Service for Operational Information and International Communications of the FSB; FSB Colonel General; Colonel-General (individual) [UKRAINE2].

BORODAI, Aleksandr (a.k.a. BORODAI, Alexander); DOB 25 Jul 1972; nationality Russia (individual) [UKRAINE].

NEVEROV, Sergei Ivanovich (a.k.a. NEVEROV, Sergei; a.k.a. NEVEROV, Sergey); DOB 21 Dec 1961; POB Tashtagol, Russia; Deputy Chairman of the State Duma of the Russian Federation; Member of the State Duma Committee on Housing Policy and Housing and Communal Services (individual) [UKRAINE2].

SAVELYEV, Oleg Genrikhovich; DOB 27 Oct 1965; POB St. Petersburg, Russia; Minister for Crimean Affairs (individual) [UKRAINE2].

SHCHEGOLEV, Igor (a.k.a. SHCHYOGOLEV, Igor Olegovich); DOB 10 Nov 1965; POB Vinnitsa, Ukraine; alt. POB Vinnytsia, Ukraine; Aide to the President of the Russian Federation (individual) [UKRAINE2].

The following entities have been added to OFAC’s SDN List:

DONETSK PEOPLE’S REPUBLIC, Donetsk Region, Ukraine [UKRAINE].

FEDERAL STATE UNITARY ENTERPRISE STATE RESEARCH AND PRODUCTION ENTERPRISE BAZALT (a.k.a. FEDERAL STATE UNITARY ENTERPRISE, STATE RESEARCH AND PRODUCTION ENTERPRISE BAZALT; a.k.a. FSUE SRPE BAZALT; a.k.a. STATE RESEARCH AND PRODUCTION ENTERPRISE BAZALT), 32 Velyaminovskaya, Moscow 105318, Russia; Website www.bazalt.ru; Email Address [email protected] [UKRAINE2].

FEODOSIYA ENTERPRISE (a.k.a. FEODOSIA OIL PRODUCTS SUPPLY CO.; a.k.a. FEODOSIYA ENTERPRISE ON PROVIDING OIL PRODUCTS; a.k.a. FEODOSIYSKE COMPANY FOR THE OIL; a.k.a. THEODOSIYA OIL TERMINAL), Feodosiya, Geologicheskaya str. 2, Crimea 98107, Ukraine; Feodosia, Str. Geological 2, Crimea 98107, Ukraine [UKRAINE].

JOINT STOCK COMPANY CONCERN RADIO-ELECTRONIC TECHNOLOGIES (a.k.a. CONCERN RADIO-ELECTRONIC TECHNOLOGIES; a.k.a. “KRET”), 20/1 Korp. 1 ul. Goncharnaya, Moscow 109240, Russia; Website http://www.kret.com; Registration ID 1097746084666 [UKRAINE2].

JOINT STOCK COMPANY CONCERN SOZVEZDIE (a.k.a. JSC CONCERN SOZVEZDIE), 14 Plekhanovskaya Street, Voronezh, Russia; 14 ul. Plekhanovskaya, Voronezh, Voronezhskaya obl. 394018, Russia; Registration ID 1053600445337 [UKRAINE2].

JOINT STOCK COMPANY MILITARY-INDUSTRIAL CORPORATION NPO MASHINOSTROYENIA (a.k.a. JOINT STOCK COMPANY MILITARY INDUSTRIAL CONSORTIUM NPO MASHINOSTROYENIA; a.k.a. JSC MIC NPO MASHINOSTROYENIA; a.k.a. MIC NPO MASHINOSTROYENIA JSC; a.k.a. MIC NPO MASHINOSTROYENIYA JSC; a.k.a. MILITARY INDUSTRIAL CORPORATION NPO MASHINOSTROENIA OAO; a.k.a. OPEN JOINT STOCK COMPANY MILITARY INDUSTRIAL CORPORATION SCIENTIFIC AND PRODUCTION MACHINE BUILDING ASSOCIATION; a.k.a. VOENNO-PROMYSHLENNAYA KORPORATSIYA NAUCHNO-PROIZVODSTVENNOE OBEDINENIE MASHINOSTROENIYA OAO; a.k.a. VPK NPO MASHINOSTROENIYA), 33, Gagarina St., Reutov-town, Moscow Region 143966, Russia; 33 Gagarin Street, Reutov, Moscow Region 143966, Russia; 33 Gagarina ul., Reutov, Moskovskaya obl 143966, Russia; Website www.npomash.ru; Email Address [email protected]; alt. Email Address [email protected]; Registration ID 1075012001492 (Russia); Tax ID No. 5012039795 (Russia); Government Gazette Number 07501739 (Russia) [UKRAINE2].

JOINT-STOCK COMPANY CONCERN ALMAZ-ANTEY (a.k.a. ALMAZ-ANTEY CORP; a.k.a. ALMAZ-ANTEY DEFENSE CORPORATION; a.k.a. ALMAZ-ANTEY JSC; f.k.a. OTKRYTOE AKTSIONERNOE OBSHCHESTVO KONTSERN PVO ALMAZ ANTEI), 41 ul.Vereiskaya, Moscow 121471, Russia; Website almaz-antey.ru; Email Address [email protected] [UKRAINE2].

KALASHNIKOV CONCERN (a.k.a. CONCERN KALASHNIKOV; a.k.a. IZHEVSKIY MASHINOSTROITEL’NYI ZAVOD OAO; f.k.a. IZHMASH R&D CENTER; f.k.a. JSC NPO IZHMASH; f.k.a. NPO IZHMASH OAO; a.k.a. OJSC CONCERN KALASHNIKOV; f.k.a. OJSC IZHMASH; f.k.a. SCIENTIFIC PRODUCTION ASSOCIATION IZHMASH JOINT STOCK COMPANY), 3, Derjabin Pr., Izhevsk, Udmurt Republic 426006, Russia; Registration ID 1111832003018 [UKRAINE2].

KONSTRUKTORSKOE BYURO PRIBOROSTROENIYA OTKRYTOE AKTSIONERNOE OBSHCHESTVO (a.k.a. INSTRUMENT DESIGN BUREAU; a.k.a. JSC KBP INSTRUMENT DESIGN BUREAU; a.k.a. KBP INSTRUMENT DESIGN BUREAU; a.k.a. KBP INSTRUMENT DESIGN BUREAU JOINT STOCK COMPANY; a.k.a. “KBP OAO”), 59 Shcheglovskaya Zaseka ul., Tula 300001, Russia; Website www.kbptula.ru; Email Address [email protected]; Registration ID 1117154036911 (Russia); Government Gazette Number 07515747 (Russia) [UKRAINE2].

LUHANSK PEOPLE’S REPUBLIC (a.k.a. LUGANSK PEOPLE’S REPUBLIC; a.k.a. PEOPLE’S REPUBLIC OF LUHANSK), Luhansk Region, Ukraine [UKRAINE].

URALVAGONZAVOD (a.k.a. NAUCHNO-PROIZVODSTVENNAYA KORPORATSIYA URALVAGONZAVOD OAO; a.k.a. NPK URALVAGONZAVOD; a.k.a. NPK URALVAGONZAVOD OAO; a.k.a. OJSC RESEARCH AND PRODUCTION CORPORATION URALVAGONZAVOD; a.k.a. RESEARCH AND PRODUCTION CORPORATION URALVAGONZAVOD; a.k.a. RESEARCH AND PRODUCTION CORPORATION URALVAGONZAVOD OAO; a.k.a. URALVAGONZAVOD CORPORATION; a.k.a. “UVZ”), 28, Vostochnoye shosse, Nizhni Tagil, Sverdlovsk region 622007, Russia; 28 Vostochnoe shosse, Nizhni Tagil, Sverdlovskaya oblast 622007, Russia; 40, Bolshaya Yakimanka Street, Moscow 119049, Russia; Vistochnoye Shosse, 28, Nizhny Tagil 622007, Russia; Website http://www.uvz.ru/; alt. Website http://uralvagonzavod.com/; Email Address [email protected] [UKRAINE2].

Sectoral Sanctions Identifications List Update

The following entities have been added to OFAC’s Sectoral Sanctions Identifications List:

GAZPROMBANK OAO (a.k.a. GAZPROMBANK GAS INDUSTRY OJSC; a.k.a. GAZPROMBANK OJSC; a.k.a. GAZPROMBANK OPEN JOINT STOCK COMPANY; a.k.a. GAZPROMBANK OTKRYTOE AKTSIONERNOE OBSHCHESTVO; a.k.a. GPB, OAO; a.k.a. GPB, OJSC), 16, Building 1, Nametkina St., Moscow 117420, Russia; 63, Novocheremushkinskaya St., Moscow 117418, Russia; SWIFT/BIC GAZPRUMM; Website www.gazprombank.ru; Email Address [email protected]; Registration ID 1027700167110; Tax ID No. 7744001497; Government Gazette Number 09807684 [UKRAINE-EO13662].

OAO NOVATEK (a.k.a. FINANSOVO-INVESTITSIONNAYA KOMPANIYA NOVAFININVEST OAO; a.k.a. NOVATEK), 2, Udaltsova Street, Moscow 119415, Russia; 22 A, Pobedy Street, Tarko-Sale, Yamalo-Nenets Autonomous District 629580, Russia; 22a Pobedy ul., Tarko-Sale, Purovski raion, Tyumenskaya Oblast 629850, Russia; Email Address [email protected]; Registration ID 1026303117642 (Russia); Government Gazette Number 33556474 (Russia) [UKRAINE-EO13662].

OPEN JOINT-STOCK COMPANY ROSNEFT OIL COMPANY (a.k.a. OAO ROSNEFT OIL COMPANY; a.k.a. OIL COMPANY ROSNEFT; a.k.a. OJSC ROSNEFT OIL COMPANY; a.k.a. ROSNEFT; a.k.a. ROSNEFT OIL COMPANY), 26/1 Sofiyskaya Embankment, Moscow 115035, Russia; Website www.rosneft.com; alt. Website www.rosneft.ru; Email Address [email protected]; Registration ID 1027700043502 (Russia); Tax ID No. 7706107510 (Russia); Government Gazette Number 00044428 (Russia) [UKRAINE-EO13662].

VNESHECONOMBANK (a.k.a. BANK FOR DEVELOPMENT AND FOREIGN ECONOMIC AFFAIRS (VNESHECONOMBANK) STATE CORPORATION; a.k.a. BANK RAZVITIYA I VNESHNEEKONOMICHESKOI DEYATELNOSTI (VNESHEKONOMBANK) GOSUDARSTVENNAYA KORPORATSIYA; a.k.a. “VEB”), 9 Akademika Sakharova prospekt, Moscow 107996, Russia; SWIFT/BIC BFEA RU MM; Website http://www.veb.ru; Email Address [email protected]; BIK (RU) 044525060 [UKRAINE-EO13662].

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Jul

15

Who Sang First, Kraaipoel or Fokker?

Posted by Clif Burns at 6:36 pm on July 15, 2014

Category: Criminal Penalties • Iran Sanctions • OFAC

Rob Kraaipoel Back in the early days of this blog in 2007, we reported on the case of Robert Kraaipoel, a Dutch businessman who was indicted for selling U.S. origin items to Iran, even though Mr. Kraaipoel had never set foot in the United States and even though the sales were completely legal under Dutch law. We challenged the notion that under international law, the U.S. origin of the items was enough of a basis to assert criminal jurisdiction over Mr. Kraaipoel.

In 2009, we reported that Mr. Kraaipoel had voluntarily flown to the United States to face the music. We expressed some surprise that he had done this and expressed even more surprise that the court let him fly back to the Netherlands after a guilty plea. At the time we noted that this was likely because he had agreed to cooperate with the government in indicting other bigger fish. Â Indeed, the sentencing memorandum filed by the U.S. Attorney in 2012 cited substantial and extensive cooperation by Mr. Kraaipoel dating back to 2007. Â The court ultimately sentenced Mr. Kraaipoel to sixty months of probation and no prison time, no doubt because of Mr. Kraaipoel’s cooperation with U.S. authorities vis-Ã -vis his dealings with Iran.

Now it appears that one of the companies that got snared by Kraaipoel’s cooperation may have been the Dutch company Fokker Services BV, about which we reported last month. Â Fokker agreed to pay $21 million to OFAC and to the DOJ under a deferred prosecution agreement. Â Interestingly, Kraaipoel’s role in the Fokker case may derail the deferred prosecution agreement itself.

The federal court judge charged with approving the deferred prosecution agreement was concerned that the agreement for lenient treatment was premised on Fokker’s voluntary disclosure in 2010. Â Because Kraaipoel began talking with prosecutors back in 2007, there was some concern, and some sources who told Bloomberg News, that the government knew about Fokker’s misconduct well before the voluntary disclosure, which would, of course, substantially detract from the credit that Fokker should receive for having voluntarily disclosed the matter.

A hearing on the deferred prosecution agreement to resolve these issues is scheduled for July 24.

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