February, 2020 - Designation of Rosneft Trading S.A. to the SDN List
As of 18th February, 2020, Rosneft Trading SA has been designated as a Specially Designated National (“SDN”) for operating in the oil sector of the Venezuelan economy. The designation is subject to a wind down period, which expires on 20th May, 2020.
SDN designation
The designation has been made under Executive Order 13850 of 1st November, 2018 "Blocking Property of Additional Persons Contributing to the Situation in Venezuela" which provides (inter alia):
“1(a) Property in the US or within the possession or control of any US person of [ROSNEFT TRADING SA] is blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in…
4. The prohibitions in section 1 of this order include:
(a) the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of [ROSNEFT TRADING SA]; and
(b) the receipt of any contribution or provision of funds, goods, or services from [ROSNEFT TRADING SA].”
Wind down period
The US has simultaneously issued GENERAL LICENSE NO. 36 "Authorizing Certain Activities Necessary to the Wind Down of Transactions Involving Rosneft Trading S.A." which provides:
“(a) Except as provided in paragraph (b), all transactions and activities prohibited by EO 13850 that are ordinarily incident and necessary to the wind down of transactions involving Rosneft Trading S.A … are authorized through 12:01 a.m. eastern daylight time, May 20, 2020.
(b) This general license does not authorize:
(1) Any debit to an account of Rosneft Trading S.A., or any entity in which Rosneft Trading S.A. owns, directly or indirectly, a 50 percent or greater interest, on the books of a U.S. financial institution; or
(2) Any transactions or activities otherwise prohibited by the Venezuela Sanctions Regulations, or any other part of 31 C.F.R. chapter V, or any transactions or activities with any blocked person other than the blocked persons identified in paragraph (a) of this general license.”
Implications
OFAC FAQ 818 provides some clarification, as follows:
“After the expiration of the authorization [under General License 36] … U.S. persons will be prohibited from engaging in transactions with Rosneft Trading S.A… and must block property or interests in property of Rosneft Trading S.A. that are in, or come within, the United States, or the possession or control of a U.S. person.
Non-U.S. persons may wind down transactions with Rosneft Trading S.A. without exposure to sanctions under E.O. 13850, provided that such wind-down activity is: (i) consistent with General License 36; and (ii) completed prior to 12:01 a.m. eastern daylight time, May 20, 2020. Entering into new business involving Rosneft Trading S.A. will not be considered wind-down activity. Non-U.S. persons unable to wind down activities with Rosneft Trading S.A. before 12:01 a.m. eastern daylight time, May 20, 2020, may seek guidance from OFAC.”
It is understood that performance of charterparties entered into prior to 18th February, 2020 would come within this authorisation. Owners and operators must ensure that any existing business is fully completed (i.e. charterparties fully performed and/or terminated) by 12:01am EST on 20th May, 2020.
Rosneft remains subject to US sectoral sanctions under Directives 2 and 4 of US Executive Order 13662 (Russia/Ukraine sanctions) and EU sectoral and financial sanctions under Council Regulation 833/2014.
More information can be found here:
https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20200218.aspx