On November 21, 2024, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) took further action to restrict Russia’s access to the international financial system by designating Gazprombank Joint Stock Company (“Gazprombank”), Russia’s largest remaining non-designated bank, and dozens of other Russian financial institutions including internationally connected Russian banks and Russian securities registrars.

In connection with these designations OFAC has issued the following general licenses:

• General License 53A authorizes all transactions ordinarily incident and necessary to the official business of diplomatic or consular missions of the Government of the Russian Federation, including the payment of salaries and reimbursement of expenses for employees of Russian missions, which involve Gazprombank and any entity in which Gazprombank owns a 50 percent or greater interest.
• General License 55C authorizes transactions related to the maritime transport of crude oil originating from the Sakhalin-2 project provided that the Sakalin-2 byproduct is solely for importation into Japan through 12:01 a.m. eastern daylight time, June 28, 2025. This general license specifically permits transactions involving Gazprombank or any entity in which Gazprombank owns, directly or indirectly, a 50 percent or greater interest, that are related to the Sakhalin-2 project.
• General License 113 authorizes the wind down of transactions with enumerated entities blocked on November 21, 2024 and any entities owned directly or indirectly, individually or in the aggregate, a 50 percent or greater interest by such blocked persons through 12:01 a.m. eastern standard time, December 20, 2024.
• General License 114 authorizes all transactions that are ordinarily incident and necessary to the divestment or transfer, or the facilitation of the divestment or transfer, of debt or equity issued for guaranteed by the Gazprombank Joint Stock Company, Interstate Bank, or any entity in that Gazprombank or Interstate Bank own a 50 percent or greater interest to a non-U.S. person through 12:01 A.M. eastern standard time, December 20, 2024. The general license also authorizes all transactions that are ordinarily incident and necessary to: (i) facilitating, clearing, and settling trades of Covered Debt or Equity that were placed prior to 4:00 P.M. eastern standard time, November 21, 2024, and (ii) the wind down of derivative contracts entered into prior to 4:00 P.M. eastern standard time, November 21, 2024 that include a blocked person described in the general license as a counterparty or are linked to Covered Debt or Equity.

OFAC also issued an alert highlighting the sanctions risks for foreign financial institutions that join Russian financial messaging system, Sistema Peredachi Finansovykh Soobscheniy or “System for Transfer of Financial Messages” (SPFS).

The alert clarifies that OFAC considers SPFS to be part of the financial services sector of the Russian economy due to its role in promoting communication between financial institutions within Russia’s financial system. Therefore, foreign financial institutions that are part of SPFS or join SPFS risk designation by OFAC for operating or having operated in the Russian financial services sector pursuant to E.O. 14024

OFAC stated that, following publication of the alert, it views a foreign financial institution’s participation in SPFS as a red flag and that it is prepared to more aggressively target those foreign financial institutions that participate.

Lastly, OFAC warned that non-participating foreign financial institutions should be cautious of their exposure to foreign financial institutions that do participate in SPFS because such banks may be conduits for Russian sanctions evasion.

In light of OFAC’s recent actions, financial institutions located in both the United States and abroad should evaluate their potential exposure to impacted institutions.

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.