OFAC Compliance

OFAC announces intent to terminate sanctions on Rusal and two other Russian companies

On December 19, 2018, the United States Treasury’s Office of Foreign Assets Control (OFAC) notified Congress of its intent remove sanctions on three Russian-based companies—En+ Group plc, UC Rusal plc, and EuroSibEnergo (ESE).

Sanctions are expected to wind down 30 days from the date of the announcement.

The companies’ sanctions came as a result of OFAC sanctions against seven Russian oligarchs for “worldwide malign activity” in the spring of 2018. Among the individuals was Oleg Deripaska, whose companies—En+, Rusal, and ESE—took steps to substantially decreases his ownership interest and sever his control in an effort to see sanctions lifted.

Significant restructuring measures taken
New, independent boards were instituted, with half the members of the board coming from the U.S. or U.K. Additionally, the three corporations agreed to open themselves up to ongoing certification and audits, which will help OFAC monitor compliance moving forward. Should OFAC find them to be in violation they may find themselves sanctioned again. This includes ensuring that Deripaska, who remains on OFAC’s Specially Designated Nationals (SDN) list—does not regain stakes that cumulatively reach or exceed a 50% controlling interest.

Open for business
As noted, it is expected that within 30 days of OFAC’s announcement, En+, Rusal, and ESE will no longer be debarred, and they will once again be legally open for business (though one must continue to pay heed to sanctions and embargoes related to Russia itself). This is substantial news for many companies around the globe, especially those reliant on aluminum. Case in point, aluminum prices “sank to a 16-month low” shortly after Treasury’s announcement. With Rusal the second largest manufacturer of aluminum in the world, one would not be going out on a limb by assuming the two events are related.

For those not affected by the removal of sanctions against these organization, it reinforces a message we discuss often on the Export Compliance Journal—that restricted, denied and debarred parties lists are constantly in flux. But rarely are additions or removals so widely publicized, so it simply highlights the importance of rescreening all your records on an ongoing basis just to be sure.


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