EU Extends Sanctions Six Months: On July 26, 2022, the EU renewed restrictions on specific sectors of Russia’s economy until January 31, 2023. This includes restrictions on finance, energy, technology and dual-use goods, industry, transport and luxury goods.
UK Designates 41 More Individuals and One Additional Entity: On July 26, 2022, the UK designated a number of additional parties, including Syrian and Palestinian individuals involved in recruiting mercenaries to support Russia’s fighters in Ukraine, regional governors in Russia, Russian officials, officials of the so-called Donetsk People’s Republic and Luhansk People’s Republic, a British video blogger, and a Syrian entity that has recruited mercenaries to fight in Ukraine.
UK Sanctions Time Frame Update: The UK Office of Financial Sanctions Implementation (“OFSI”) sent an email on July 28, 2022, stating that OFSI is unable to respond to specific licenses for four weeks due to “exceptionally high demand.” OFSI noted that it is prioritizing “cases where there are issues of personal basic needs and/or wider humanitarian issues at stake which are of material impact or urgency, or which are deemed to be of particular strategic, economic or administrative importance.” The agency also issued updated financial sanctions guidance.
UK Issues General License for Certain Insurance Payments: On July 22, 2022, the UK published General License INT/2022/2009156, which allows UK designated individuals and entities to pay UK insurers for insurance premiums and broker commissions related to the provision of building and engineering insurance for UK properties. It also permits UK insurers to make payments to UK designated parties for successful claims made against an insurance policy, or for refunds for any over-payments made pursuant to the license. The license includes authorization to process and receive such payments.
U.S. Sanctions General Licenses: On July 22, 2022, OFAC issued two new general licenses (“GLs”), and two new “Frequently Asked Questions” (“FAQs”), clarifying the “new investment” prohibitions under Executive Order (“E.O.”) 14071, and updated two FAQs relating to E.O. 14071.
- GL 45: permits “all transactions” in debt or equity issued by an entity in the Russian Federation (a “Russian Entity”) ordinarily incident to the wind-down of financial agreements entered into on or before June 6, 2022 (“Covered Contracts”), through October 19, 2022, notwithstanding the new investment prohibitions in E.O. 14071 § 1(a)(i). GL 45 expressly permits (1) U.S. persons to purchase Russian Entity debt or equity to the extent the purchase is necessary to wind down Covered Contracts, and (2) U.S. persons to facilitate, clear, and settle such purchases, to the extent necessary to wind down Covered Contracts.
- GL 46: permits “all transactions related to the establishment, administration, participation in, and execution of an auction process” as announced by the EMEA Credit Derivatives Determination Committee (the “Auction”), to settle credit derivative transactions with a reference entity of “the Russian Federation.” GL 46 permits U.S. persons to purchase or receive debt obligations of the Russian Federation, to the extent prohibited by E.O. 14071 § 1(a)(i), “for the period beginning two business days prior to the announced date of the auction and ending eight business days after the conclusion of the auction.” GL 46 also permits transactions ordinarily incident and necessary to facilitate, clear, and settle such transactions. There is no expiration date for the authorizations in GL 46.
- OFAC issued FAQ 1071, explaining that GL 45 permits U.S. persons to purchase, or facilitate purchases of, Russian Entity debt or equity to cover or close out a short position, pursuant to a securities lending agreement, if the agreement was entered into on or before June 6, 2022.
- OFAC issued FAQ 1072, explaining that GL 45 permits Auction participants and their customers to submit and accept bids and offers of physical settlement requests, or delivery of Russian Federation debt obligations and corresponding settlement amounts. While U.S. persons may purchase or receive Russian Federation debt obligations within certain periods (two business days prior to the announced Auction date, and ending eight days after the conclusion of the Auction), there is no deadline to clear and settle such transactions. GL 46 presumably should allow the restart of the credit default swap market relating to Russian Federation-bonds, which had been substantially frozen following the issuance of OFAC’s FAQs 1053 and 1054, which had established that the prohibition on “new investment” in E.O. 14071 prohibited the purchase or sale of Russian Entity debt or equity by U.S. persons.
- OFAC updated FAQs 1053 and 1054 to note the authorizations provided by GLs 45 and 46, and explained that the purpose of GL 45 is to “authorize the close out of financial contracts entered into on or before June 6, 2022 that might not otherwise be considered a divestment of debt or equity securities issued by entities in the Russian Federation.”
G7 Plans to Implement Russian Oil Price Cap by December 5: According to media reports, the G7 plans implement a price cap mechanism for Russian oil by December 5, the date on which the EU ban on Russian oil sea imports takes effect. The G7 has discussed this with the Indian and Chinese governments, and reports indicate that they will publicize the set price. Media reports suggest that the price cap will be above the cost of production but below the current market rate.
U.S. Senators Introduce Bill to Sanction Chinese Purchases of Russian Energy: On July 26, 2022, three Republican senators introduced a bill that would sanction any entity insuring or registering tankers shipping Russian oil or liquified natural gas to China. According to media reports, there is scepticism that the bill would be put up for a vote in the Democrat-controlled Senate.