OFAC to Terminate Sanctions against Designated Russian Oligarch's Companies

James Treanor Commentary by James Treanor

The U.S. Treasury Department ("Treasury") Office of Foreign Assets Control ("OFAC") intends to terminate sanctions imposed on En+ Group plc, UC Rusal plc and JSC EuroSibEnergo (collectively, the "companies") in 30 days. According to Treasury Secretary Steven T. Mnuchin, OFAC initially sanctioned these companies because of their ownership by sanctioned Russian oligarch Oleg Deripaska, and not for the companies' conduct.

Under the "Terms of Removal" entered into with OFAC, the companies agreed that, in return for their removal from the Specially Designated Nationals and Blocked Persons List ("SDN List"), they would "undertake significant restructuring and corporate governance changes to address the circumstances that led to their designation, including significantly reducing [Mr.] Deripaska's direct and indirect shareholding stake . . . ; overhauling the composition of their boards of directors; taking other restrictive steps related to their corporate governance; and agreeing to undertake extensive, ongoing auditing, certification, and reporting requirements."

OFAC simultaneousy imposed additional sanctions onto other Russian operatives to which Mr. Deripaska was connected. OFAC emphasized that "[a]ll of [Mr.] Deripaska's property and interests in property, including entities in which he holds a fifty percent or greater interest, will remain blocked."

Commentary

James Treanor

The agreement to remove En+, Rusal and EuroSibEnergo from the SDN List is the culmination of months of negotiations to "dis-entangle" the companies from Mr. Deripaska in a manner acceptable to OFAC. In particular, the Terms of Removal prohibit the transfer of any funds to Mr. Deripaska in return for his relinquished shares in the companies, and provide OFAC with adequate assurances that the oligarch will not continue to exercise control over the companies, e.g., through contacts on their boards of directors. For example, OFAC states that it "has vetted the current slate of directors for Rusal's board, will review any future independent director candidates, and will monitor all director appointments to ensure Rusal's ongoing compliance with the Terms of Removal." In addition to the delisting of En+, Rusal and EuroSibEnergo, OFAC's action is also likely to bring to an end the serial extensions of numerous General Licenses related to these companies.

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