This is the second session of a three day course on economic sanctions related to Russia. It covers the financing restrictions from the US and EU sanctions generally.

1. ECONOMIC SANCTIONS‐ DAY 2
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2. REVIEW
 IN LIGHT OF WHAT COULD BE DONE, SANCTIONS AGAINST
RUSSIA ARE ACTUALLY QUITE MILD
 THE US IS THE MAIN CONCERN BECAUSE OF FINANCIAL
MARKETS AND EXTRATERRITORIAL REACH OF US SANCTIONS
 IN THE US THE DIFFICULTY LIES IN AUGUST 13
REINTERPRETATION OF THE 50% RULE AND THE INTERLINKED
STRUCTURES OF RUSSIAN BUSINESS
 ALWAYS THINK ABOUT:
Who, Against whom, What
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+ Why & How to comply

3. READ ANY EO (13660,13661 OR 13662)
AT SECTION 6(C).
US citizens
Permanent residents (green card
holders)
WHO
Entity organized under US law (for
example Delaware registered
corporations, where ever
headquartered)
Foreign branches
Any person/entity findable in the US
unless diplomatic immunity

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SUBSIDIARIES EXEMPT (BUT THIS COULD BE
CHANGED—IRAN SANCTIONS INCLUDE SUBSIDS)

4. AGAINSTWHOM
PERSONS AND ENTITIES NAMED BY TREASURY DEPARTMENT
IN CONJUNCTION WITH STATE DEPARTMENT TO BE (SEE
APPROPRIATE ORDER, SECTION 1(A)
Responsible for or complicit in . . .related to Ukraine
(EO 13660)
Officials of RF Govt, or owned or controlled by high
officials, or operating in the arms sector (EO 13661)
Operate in financial services, energy, metals & mining,
engineering and defense EO 13662) ( So far this is only
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restriction on long term financing and export controls.)
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5. AGAINSTWHOM
““THE DEVIL IS IN THE DETAILS””
BEWARE THE 50% RULE
THE 50% IS CUMULATIVE
SDN Papa 35% + SDN Mama 20% = blocked child
THE 50% RESETS TO 100% AT EACH LEVEL OF THE
SUBSIDIARY RELATIONSHIP
Parent is on SDN list and owns 50% of child
Therefore child is blocked
Child owns 50% of grandchild
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Grandchild also blocked

6. THE KEY IS IN THE LISTS
 SDN=blocked individuals and companies
SSI=Limited financing
• 30 days debt or equity for banks,
• 90 days debt for energy sector
WHAT
 DPL,EL, UVL=exports prevented or licensed
SCOPE OF A SANCTION
 Specified Prohibited Actions of course
+Facilitating (general legal advice needs license)
 +Conspiracies
Indirect facilitation (US “person” can’t pay a
foreign company to do what US “person” can’t)
 Transactions with “intent” or “effect” of evading
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intent effect sanctions

7. WHAT AGAINST WHOM NAMED . . . ON SDN LIST
Ch ft
April 11
• Chernomorneftegaz
• 7 Individuals –Crimean “separatists / officials
• 17 companies
April 28
• 7 More Individuals
May 20
• Magnitsky List‐12 individuals (but technically this was not connected with Ukraine
Sanctions)
June 20
• 7 Ukrainian “Separatists”
• 8 Arms • 4 July 16
companies entities/people from
• 4 government officials E. Ukraine (13660)
• United Shipbuilding Corporation
July 29
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• Aug 30 Asia Bank (a.k.a Chemeximbank): An Iranian‐owned bank in Russia for
Iranian sanctions reasons
7
Sept 12
• 6 Defense production companies

8. WHAT AGAINSTWHOM——SSI LISTS
Directive 1
Finance Sector
currently applies to Directive 2
Sberbank VEB
currently applies to
energy companies
No financing or other
dealings in new debt
with maturity over
Energy Sector
No financing or other
dealings in new debt
with over
Sberbank, VEB,
VTB, Gasprombank,
Bank of Moscow,
Russian Agricultural
gy p
Gasprom Neft,
Novatek, Rosneft,
Transneft
90 30 days, and no
new equity.
maturity Bank. 90 days
Directive 3
Defense Sector
Directive 4
Energy Sector
currently
applies to
currently applies Gazprom
No financing or other
dealings in new debt
with maturity over
No exporting or reexporting
goods, services (except
financial) or tech for
deepwater Gazprom,
Gazprom Neft,
Lukoil,
Surgutneftegas
y pp
only to Rosneft
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30 days deepwater, Arctic offshore
or shale projects
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and Rosneft

9. WHAT AGAINSTWHOM—SSI LISTS
WHAT EFFECTS ON FINANCIAL TRANSACTIONS
Pre OFAC FAQ 371 Debt includes bonds, loans,
extensions of credit, loan guarantees, letters of credit,
drafts, bankers acceptances, discount notes or bills, or
commercial paper.
Equity includes stocks, share issuances, depositary
receipts, or any other evidence of title or ownership.
Includes all financing in support of prohibited new
debt or new equity; and any dealing in, including
provision of services in support of, such new debt or
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new equity.

10. WHAT AGAINSTWHOM—SSI LISTS
WHAT EFFECTS ON FINANCIAL TRANSACTIONS
Clearing operations, correspondent banking OK
Dealing in Depository Receipts still OK
• But does entity use same ISIN for new & old traunches?
OK to advise & confirm LOCs if SSI is beneficiary. (395)
OK if SSI continues to draw down on credits issued
before the sanction. (FAQ 394) Renegotiation not OK.
Generally OK to continue old contracts with credit.
Transactions in derivatives generally OK (Gen Lic 1(a))
OK if h SSI i h l d i d i
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the is the lender to non sanctioned entity

11. WHAT AGAINSTWHOM—SSI LISTS
WHAT EFFECTS ON FINANCIAL TRANSACTIONS
OK to deal securities of entity with SSI underwriter (405)
OK to engage in transactions to exit or replace partic. in
existing long‐term loan facilities to an SSI (FAQ 407)
OK to extend credit to a third party to buy goods from an
SSI, even if the term exceeds 90 days. (FAQ 408)
OK to extend a series of short‐term loans to an SSI entity
that exceed a cumulative period of 90 days as long as no
rollover. (FAQ 409)
NOT to extend payment terms over 90 days to an SSI
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OK under purchase agreement, even without interest. (410)

12. . . . OR IF YOUR FUNDS ARE
BLOCKED, APPLY FOR A LICENSE
 A “LICENSE” IS PERMISSION FROM OFAC TO DO
SOMETHING OTHERWISE PROHIBITED.
 GENERAL LICENSES APPLY TO EVERYONE SPECIFIC
IF YOU
EVERYONE, LICENSES—ONLY TO YOU.
 SEE TRADE SANCTIONS REFORM ACT
CAN’T DO
 FORM ON OFAC WEBSITE
HTTP://WWW.TREASURY.GOV/RESOURCE‐WHAT
YOU
CENTER/SANCTIONS/PAGES/LICENSING.ASPX
 GET LEGAL ADVICE—
 APPLICATIONS SHOULD BE WRITTEN CAREFULLY
WANT . . . AND VERY DETAILED
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 NO APPEAL FROM A DENIAL

13. LICENSE APPLICATION CONTAINS
FACT STATEMENT
JURISDICTION STATEMENT
POLICY ARGUMENT
SUGGESTED LANGUAGE FOR
APPLYING
FOR A
LICENSE
LICENSE CAN TAKE 2‐3 MONTHS
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14. DENIZBANK
ONE MONTH STOCK PERFORMANCE
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15. WHAT AGAINST WHOM‐EAR EL
Entity List‐All entities on SDN List
Plus Directive 4 Companies Plus 5 Defense Contractors for
• all end uses:
Gazprom;
• Gazpromneft;
• Almaz‐Antey Air Defense Concern
p Main • Lukoil;
• Rosneft; and
System Design Bureau;
• Tikhomirov Scientific Research
; Institute of Instrument Design;
• Surgutneftegas.
Provided end use could be
• Mytishchinski Mashinostroitelny
Zavod
• Kalinin Machine Plant, JSC;
Deepwater/Artic Oil or Shale
, ;
• Dolgoprudny Research Production
Enterprise.
15 Plus any export with military end uses or end users.

16. WHY COMPLY?
Mens rea knowing or reason to know
Must do reasonable due diligence depending on the
circumstances (will discuss later)
At absolute minimum, you must look at the lists & owners
Can’t be intentionally stupid or try to avoid knowledge
Sanctions are very high.
• Can be up to $250,000 or 2xtransaction, per transaction
For Wilful violations can include up to 20 years jail time for
individuals or $1 million per transaction per entity
Per Transaction means each occurrence occurrence, each item etc
etc.
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Can lose export licenses, right to make govt tenders

17. EU ““RESTRICTIVE MEASURES”” THEORY
SINCE LISBON TREATY, EU HAS BEEN MOST ACTIVE
“WHO YA GONNA CALL?” PROBLEM
IMPLEMENTATION LEFT TO MEMBER STATES
Varying penalties and varying legal details
No financing assistance from EU
Varying abilities and political will
Varying speeds of implementation
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18. STEP BACK TO A LITTLE BASIC EU LAW
EU IS GOVERNED BY THE EUROPEAN COUNCIL, THE
COUNCIL OF MINISTERS, THE COMMISSION AND THE
PARLIAMENT.
 Don’t be confused:
• European Council—heads of state or government of all member states
(highest body of EU)
• The Council of Ministers (generally just called the Council)—ministers of
all the member states.
– People vary depending on the issues being discussed
• Council of Europe—a quasi separate, human rights body.
The Commission—executive branch‐initiates and
enforces laws. (President is Jose Barroso)
The Parliament—the legislative branch
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19. EU RESTRICTIVE MEASURES THEORY CONT
CONT.
 TREATY OF ROME ORIGINALLY KEPT FOREIGN AND SECURITY
POLICY FOR THE MEMBER STATES.
1992 MAASTRICHT TREATY STARTED IDEA OF COMMON
FOREIGN & SECURITY POLICY (CFSP)
 1999 AMSTERDAM TREATY APPOINTED A HIGH
REPRESENTATIVE FOR FOREIGN & SECURITY POLICY (“HR
CFSP”) HELD BY JAVIER SOLANO UNTIL 2009
 2009 LISBON TREATY‐QUAL. QUALIFIED MAJORITY VOTING ON
SOME ISSUES + HR CFSP GIVEN MORE POWER, NOW CHAIRS
THE COUNCIL & SITS AS VP OF COMMISSION.
Post held by Catherine Ashton. 19

20. EU RESTRICTIVE MEASURES THEORY CONT
CONT.
UNDER JOSE SOLANO, 1999 WAS 1ST TIME EU THOUGHT
SERIOUSLY ABOUT CFSP AND POWER TO SANCTION.
2004‐Basic Principles on the Use of Restrictive
Measures 10198/1/04
2005‐2009 Council of the European Union, Guidelines
on Implementation and Evaluation of Restrictive
Measures (Sanctions) in the Framework of the EU
Common Foreign and Security Policy, 16967/09 PESC
1656 FIN 551 (Dec. 15, 2009).
2004‐2008 Restrictive Measures‐‐Update of the EU
Best Practices for the Effective Implementation of
Restrictive Measures, 8666/1/08 (Apr. 24, 2008) 20

21. TWO KEY BACKGROUND DOCUMENTS
THE GUIDELINES 16967/09
Aimed at EU regulators
THE BEST PRACTICES 8666/1/08
Aimed at member states
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22. GUIDELINES
PURPOSE TO CHANGE POLICY—NOT ECONOMIC MOTIVES
SHOULD BE DIRECTED AT PEOPLE WHOSE POLICIES/ACTIONS
CAUSED
MUST COMPLY WITH HR, ECHR & STATE CONSTITUTIONS.
Right to go to the European Court of Justice.
MUST SET OUT CLEAR CRITERIA
IF TARGETING FAMILY, SHOULDN’T TARGET CHILDREN
SHOULD HAVE HUMANITARIAN NEED EXEMPTIONS.
DECISION EXPIRATION SHOULD TRIGGER RECONSIDERATION
 Regulations should continue until repealed 22

23. GUIDELINES
SETS OUT DEFINITIONS THAT APPLY TO ALL RESTRICTIVE
MEASURES:
technical assistance,
funds,
freezing of funds,
economic resources,
freezing of economic resources,
dual use goods.
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24. EUROPEAN UNION BEST PRACTICES
WHAT TO DO IN CASES OF MISTAKEN IDENTITY
WHEN DE‐LISTING IS APPROPRIATE
STATES MUST IMPLEMENT PROMPTLY
FREEZING TRUMP ALL PREEXISTING CONTRACTS
SANCTIONS SHOULD TARGET ASSETS “BELONGING TO OR
CONTROLLED BY” DESIGNATED PERSON
Explains what “economic resources belonging to or
controlled by”” means
DISCUSSES HOW TO CONSIDER EXEMPTION REQUESTS
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25. HOW EU SANCTIONS ARE PASSED
HIGH REP FOR CFSP PROPOSES TO COUNCIL
COUNCIL “DECISION” (UNANIMOUS)
Binding legislation that can apply to individuals or to
member states.
Decision sets forth basic provisions and usually
contains a sunset date.
Can be recognized by CFSP in the citation
COUNCIL DECISION IS FOLLOWED CLOSELY AFTER BY
COUNCIL REGULATION THAT IMPLEMENTS THE DECISION
Usually has no sunset, needs to be repealed.
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26. HOW EU SANCTIONS END
THEORETICALLY: DECISION CAN EXPIRE ON DATE
MENTIONED AND THEN REGULATIONS MUST BE
REPEALED
But realistically this might not happen because the
Council is charged with regularly reviewing them
SCHOLARS DIFFER ON WHETHER THEY WILL HAVE TO BE
UNANIMOUSLY VOTED ON TO END‐‐PROBABLY
Regs can be amended with qualified majority vote
But in RF case this doesn’t include removing targets.
BUT ANYWAY STATES CAN PASS A QUALIFIED ABSTENTION
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27. Sanctions Chronology
United States • p
European Union
 March 6 E.O. 13660
 March 16 E O 13661
 March 17 Council Decision
2014/145/CFSP & Reg. 269/2014 E.O.  3/21, 4/28, 5/28‐ adds people
 June 23 D 386 , CR 692‐ Cr. goods officials, co s.)
 March 20 E.O. 13662 (SSI)
 April 28 (7 officials 17 co’s )
 July 29 Joint US/EU Ann’cem’t
 July 30‐31 & 2, SSI  May 8, 31 CFR 589
 July 16 Directives 1 2 List
 July 29 Joint US/EU Ann’cem’t
 Aug 13 OFAC Guidance (50%)
 Annex I to CR 428/2009 (dual use)
 CR 833/2014 (finance sanctions)
13‐ Annex to 833/2014 (shale etc)
 Sept 12 Amend Directive 1
 Directives 2 CR  CR 825/2014 (Crimea investment)
 CR 826/2014 more officials) 3 and 4
 General License 1(a)
 S t17A dEAR 744 21
/ ( )
 Sept 8 Decision 2014/658‐9/CFSP
&CR 959‐961/2014, & Amendmt
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Sept 17 Amend EAR 744.21 to CR 428/2009
 Coming Soon‐‐Guidance

28. SIMPLIFICATION
DECISION 145 AND REG 269 AND AMENDMENTS
THERETO —ASSET FREEZES AND TRAVEL BANS (SDN
LIST EQUIVALENT)
Not actual ban on doing business but ban on
providing any funds and economic resources
benefitting directly or indirectly to.
Directly or indirectly benefitting a target is
presumed if
• Asset More than 50% owned (note difference from US)
• Asset controlled by target
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29. SIMPLIFICATION 2
SECTORAL SANCTIONS (SSI LIST EQUIVALENT) IN
DECISION 2014/512 & REG 833/2014. IN SEPT.
EXPANDED BY DECISION 2014/659 & REG 960/2014.
Prohibit EU citizens and EU‐incorporated companies
from dealing in bonds and other securitized debt and
money‐market instruments with maturity over 30
days issued by named finance institutions and
companies in energy and defense sectors.
Includes Investment Services!
And now also prohibits loans over 30 days in finance
sector (but doesn’’t apply to trade credits or liquidity
crises for EU company subsidiaries of RF targets) 29

30. THE SAME SECTORAL SANCTIONS REGS (DECISION
2014/512 & REG 833/2014, DECISION 2014/659 &
REG 960/2014) ALSO PROHIBIT.
Export of (listed in Reg 833) oil related technologies
Export of oil related services.
To ANY person or company in Russia or
elsewhere but for use in Russia
Exception for “binding authorization” (ie license)
Presumption of denial for artic, deep water or shale
NO EXPORT OF ITEMS WITH MILITARY END USE OR USER
NO DUAL USE EXPORTS TO 9 ENTITIES LISTED IN REG 960
Dual use exports listed in Annex 1 to Reg 428/200930

31. SIMPLIFICATION 3
CRIMEA & SEVASTOPOL INVESTMENT SANCTIONS DECISION
386 AND REGULATIONS 692/2014 AND 825/2014
Basically a boycott on EU investment and exports to
Crimea, covering
• import into EU of goods originating in Crimea or Sevastopol;
– providing, directly or indirectly, financing or financial assistance,
insurance or reinsurance related to the import of such goods
•• Export of goods from EU equipment and tech for
– infrastructure projects in the transport, telecommunications, and
energy sectors
– exploitation of oil, gas, and minerals
• Investment in or providing financing for the same
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32. TO SUM UP
EU SANCTIONS DO EVERYTHING THE US ONES DO,
Asset freezes
Targeted sanctions on long term capital for named
banks and entities
Export controls
PLUS MORE—TRAVEL BANS
FAIRLY THOROUGH BAN ON DOING BUSINESS WITH
CRIMEA
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33. Some US EU Differences
United States
 Lists differ—Sanctions more
European Union
differ  Sanctions more businessmen & businesses,
and different goods
government
officials and military
 Certain individuals in Crimea
 50% rule differs—
 Entire Crimea is prohibited
 in possession of over 50% or
 owns directly or indirectly.
 50% not OK
p
in position to exercise
dominant influence
 Scope of SDN differs‐‐Must
have a license to collect on
such contracts it’s
 Allow collection from SDNs
of payments on contracts
contracts, although it s t d i t d f d
likely to be granted
 Sunset—under NEA –one
entered into and performed
before sanctions
Sunset  Sunset as stated in year unless continued by Pres
each
Council Decision 33

34. PLUS
EU HAS HUMAN RIGHTS PROTECTIONS
EU HAS MORE EXCEPTIONS.
INDIRECT BENEFIT PRESUMPTION REVERSES THE BURDEN
OF PROOF.
EU FACILITATING OR CIRCUMVENTION –MENS REA IS
“INTENT”
FINANCING BAN SPECIFICALLY INCLUDES REINSURANCE.
STATES CAN ADD THEIR OWN QUIRKS
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35. The End
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