Trade Compliance Flash: United States Names Russian Oligarchs; Promises Additional Sanctions Required by CAATSA

International Alert
02.01.2018

January 29, 2018 was a critical date under the Countering America's Adversaries Through Sanctions Act (CAATSA). Signed into law on August 2, 2017, CAATSA required the administration to provide Congress with certain reports, including a report on Russian oligarchs and senior political figures that was due on January 29 (the "Section 241 Report"). Section 231 of CAATSA also required the administration to impose certain mandatory sanctions, beginning on January 29, against persons engaging in significant transactions with the Russian defense and intelligence sectors. Although the U.S. Department of the Treasury issued both a classified and an unclassified version of the Section 241 Report on January 29, no new sanctions were issued against persons named in the report. In addition, while several additional individuals and entities were added to the List of Specially Designated Nationals and Blocked Persons (SDN List) and the Sectoral Sanctions Identification List (SSI List) in the days leading up to January 29 under previously issued executive orders relating to Russia and Crimea, no new sanctions were imposed under Section 231 of CAATSA. However, on January 30, Secretary of the Treasury Steven Mnuchin assured the Senate Banking Committee that sanctions would be forthcoming in the next several months, perhaps as early as within the next month.

Section 231

Section 231 of CAATSA requires the president, on or after January 29, 2018, to impose five or more of the sanctions set forth in Section 235 against persons who engage in significant transactions with persons who are part of, or operate for or on behalf of, Russia's defense or intelligence sectors. However, Section 231 also authorizes the president to delay the sanctions if the person is substantially reducing the number of such transactions in which is engaged. In addition, sanctions may be waived if the president determines that waiver is in the vital national security interests of the United States and certifies to Congress that significant efforts to reduce the number and intensity of cyber intrusions conducted by Russia have been made. As discussed in a previous alert, the sanctions provided for in Section 235 include:

  • denial of Ex-Im Bank credit and services;
  • denial of export licenses;
  • denial of loans or credit from U.S. financial institutions in the amount of $10 million in any 12-month period;
  • opposition to loans from international financial institutions;
  • prohibition from designation of a primary dealer;
  • prohibition from service as a repository of U.S. government funds;
  • ineligibility for U.S government procurement;
  • ineligibility for foreign exchange transactions;
  • prohibition of banking transaction;
  • prohibitions related to acquiring or dealing in property subject to U.S. jurisdiction;
  • bans on investment in equity or debt of the sanctioned person;
  • exclusion of corporate officers from the United States; and
  • imposition of Section 235 sanctions against the principal executive officers of the sanctioned person.

On October 27, 2017, the U.S. Department of State (DOS) published guidance listing the persons that it believes are part of, or operate for or on behalf of, the defense or intelligence sectors of the Russian government, and with whom significant transactions would result in sanctions under Section 231. In addition, DOS published guidance in the form of a frequently asked questions document that, among other things, provided an answer to the question "what is a 'significant transaction'?" The guidance provides that it is a multivariable determination that "may include, but [is] not limited to, the significance of the transaction to U.S. national security and foreign policy interests ... ; the nature and magnitude of the transaction; and the relation and significance of the transaction to the defense or intelligence sector of the Russian government." The guidance made clear that there would be no sanctions for transactions with the listed persons and entities that are not considered significant.

Despite speculation that sanctions would be imposed under Section 231 on January 29, on January 30 DOS held a press conference in which it took the position that January 29 was not a deadline, but rather a "start date" on or after which it can impose sanctions. A spokesperson for DOS said that DOS is engaging with partners and allies around the world, but declined to say whether or when sanctions would be imposed under Section 231.

Section 241

Section 241 of CAATSA required the Department of the Treasury to produce a report to Congress that detailed Russian senior foreign political figures, oligarchs, and parastatal entities. The report was to contain an assessment of the net worth of such "senior foreign political figures and oligarchs," their closeness to Vladimir Putin and other senior political figures, any indications of corruption, information on their immediate families, and any non-Russian business affiliations. The report was also to include an assessment of Russian parastatal entities, the exposure of U.S. economic sectors to these listed individuals and entities, and the potential effects of imposing sanctions, including secondary sanctions, on the listed individuals and entities. The statute did not provide specifics as to how to identify "oligarchs" and there was uncertainty as to who would be listed in the report.

On January 29, the Department of the Treasury released an unclassified version of the Section 241 Report that included lists of senior political figures (Appendix A) and oligarchs in Russia (Appendix B), and explained the basis for inclusion on the lists. Political leaders and executives of state-owned enterprises were listed based on rank; in the case of oligarchs, the threshold for inclusion was a net worth of over $1 billion. However, the report states that the classified annex to the report may include additional persons not listed in the appendices to the unclassified report. In addition, the unclassified report did not list parastatal entities but rather described them as entities with state ownership of at least 25 percent and 2016 revenues of $2 billion or more.

The report expressly stated that the lists in Appendices A and B are "not a sanctions list" and do not constitute designation of the listed individuals under any U.S. sanctions program (although the listed individuals already subject to U.S. sanctions are denoted on the list with an asterisk). These statements were reiterated in an FAQ issued by the Office of Foreign Assets Control (OFAC).

However, on January 30, Secretary of the Treasury Mnuchin advised the Senate Banking Committee that "[t]here will be sanctions that come out of this report ... in the next several months" – perhaps as early as within the next month. In the meantime, caution should be taken by persons who are engaged in dealings with the political figures and oligarchs listed in the report or with Russian parastatal entities meeting the ownership and revenue criteria identified in the report to ensure that they do not become involved in transactions from which they cannot extricate themselves quickly if sanctions that impact their activities are imposed in the future.


For more information, please contact:

Collmann Griffin, cgriffin@milchev.com, 202-626-5836

Barbara D. Linney*

Patrick M. Stewart*

*Former Miller & Chevalier attorney


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