On January 10 and January 15, 2025, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced sweeping sanctions targeting Russia’s oil production and exports, military-industrial base, and other entities identified as sanctions evaders.

New Designations

OFAC issued hundreds of new designations, including:

• Public Joint Stock Company Gazprom Neft (Gazprom Neft) and Surgutneftegas, two of Russia’s most significant oil producers and dozens of their respective subsidiaries.
• Ingosstrakh Insurance Company and Alfastrakhovanie Group, two Russia-based maritime insurance providers.
• 183 vessels, including oil tankers that are part of the “shadow fleet” and oil tankers owned by Russia-based fleet operators, including vessels owned by Joint Stock Company Sovcomflot (Sovcomflot) that were previously covered by General License 93, which was simultaneously revoked.
• A dozen leading Russian energy officials and executives, including the CEOs of a number of Russian oil producers.
• Over 30 Russia-based oilfield service providers.
• Dozens of “opaque” oil traders that OFAC has determined have exported or purchased Russian oil in the wake of Russia’s invasion of Ukraine.
• Over 150 individuals and entities connected to Russia’s defense industry or who otherwise support Russia’s military industrial base.
• Dozens of companies from multiple jurisdictions identified as having supported Russia’s efforts to evade U.S. sanctions, including efforts to target “regional clearing platforms” (RCPs) in Russia and China that facilitate non-cash mutual settlement for payments for sanctioned goods.
• Kyrgyz Republic-based OJSC Keremet Bank.

New Russian Energy Sector Determination

OFAC issued a new determination, pursuant to Section 1(a)(i) of E.O. 14024, which authorizes the imposition of sanctions on persons who operate or have operated in the energy sector of the Russian Federation economy.

OFAC anticipates publishing regulations defining the term “energy sector of the Russian Federation economy” to include activities such as the procurement, exploration, extraction, drilling, mining, harvesting, production, refinement, liquefaction, gasification, regasification, conversion, enrichment, fabrication, manufacturing, testing, financing, distribution, purchase or transport to, from, or involving the Russian Federation, of petroleum, including crude oil, lease condensates, unfinished oils, natural gas, liquefied natural gas, natural gas liquids, or petroleum products, or other products capable of producing energy, such as coal, wood, or agricultural products used to manufacture biofuels; the development, production, testing, generation, transmission, financing, or exchange of power, through any means, including nuclear, electrical, thermal, and renewable, to, from, or involving the Russian Federation; and any related activities, including the provision or receipt of goods, services, or technology to, from, or involving the energy sector of the Russian Federation economy.

New Prohibition on U.S. Petroleum Services

Additionally, OFAC also issued another determination, pursuant to E.O. 14071, in consultation with the U.S. Department of State which prohibits the provision of petroleum services, either directly or indirectly, from the U.S. or by U.S. persons, wherever located, to persons located in the Russian Federation. The prohibition will take effect beginning at 12:01 a.m. eastern standard time on February 27, 2025.

OFAC expects to issue regulations defining “petroleum services” to include services related to the exploration, drilling, well completion, production, refining, processing, storage, maintenance, transportation, purchase, acquisition, testing, inspection, transfer, sale, trade, distribution, or marketing of petroleum, including crude oil and petroleum products, as well as any activities that contribute to Russia’s ability to develop its domestic petroleum resources, or the maintenance or expansion of Russia’s domestic production and refining.

OFAC noted that its definition of “petroleum services” would also include services related to natural gas as a byproduct of oil production in Russia.

The determination does contain exemptions for the provision of U.S. petroleum services in certain specified circumstances, including for the provision of services in connection with products that are purchased at or below the specified price caps.

Increased Secondary Sanctions Risks due to Redesignation of Certain Entities

OFAC re-designated almost 100 entities operating in the financial services, energy, and defense and related materiel sectors pursuant to E.O. 13662 which were previously designated pursuant to E.O. 14024.

As a result of these entities’ re-designation pursuant to E.O. 13662, foreign persons, including foreign financial institutions, that knowingly facilitate significant transactions for or on behalf of any of these entities could be subject to mandatory secondary sanctions under the Ukraine/ Russia-related sanctions program.

General Licenses

In connection with the actions taken on January 10 and January 15, OFAC issued a series of general licenses authorizing the wind down of transactions with certain blocked entities, the provision of specified services to blocked vessels, and the authorization of the provision of U.S. petroleum services to certain specified projects.

Conclusion

Individuals and entities located in the U.S. and abroad with connections to Russia’s energy sector should act immediately to evaluate their potential exposure so they can take any necessary actions during the applicable wind-down periods. OFAC noted that these actions “substantially increase the sanctions risks associated with the Russian oil trade.”

Further, in light of OFAC’s re-designations under E.O. 13662, individuals and entities located in the U.S. and abroad should similarly evaluate their potential exposure to any impacted sectors or entities.

If you have any questions regarding the matters covered in this e-mail, please contact Bruce Paulsen (212) 574-1533, Brian Maloney (212) 574-1448, Carmella O’Hanlon (212) 574-1351, or your primary Seward & Kissel attorney.