On June 6, 2022, the US Department of the Treasury’s Office of Foreign Assets Control published several new Frequently Asked Questions (FAQs 1049 – 1055) and amended two others (FAQs 1005 and 1019) in order to clarify certain provisions in the Russian Harmful Foreign Activities Sanctions related to the prohibitions on new investments, imports/exports, and certain services provided to the Russian Federation respectively in EO 14066, EO 14068 and EO 14071 (the respective EOs), all of which were issued in response to the Russia’s aggression against Ukraine.
In the newly-issued FAQ 1049, OFAC defines the term “new investment” referenced in the respective EOs; clarifies the types of transactions that are considered to be “maintenance” activities in FAQ 1050; and provides an overview of the types of goods, services, or technology that are not prohibited as “new investments” under the new respective EOs, in FAQ 1051. In FAQ 1052, OFAC indicates that US persons are permitted to fund their subsidiaries and affiliates with projects and operations located in Russia if the projects/operations were in force prior to the effective dates of the new investment provisions in the respective EOs. FAQ 1053 provides that US persons can also engage in certain transactions related to the divestment of pre-existing investments, including investments involving projects, operations, and entities in Russia, as long as the project/operation/entity is not a blocked person or otherwise subject to OFAC sanctions. OFAC also confirms in FAQ 1054 that US persons are prohibited from purchasing debt or equity securities issued by entities within Russia, but are permitted to lend funds to or purchase an equity interest in entities outside of Russia according to FAQ 1055.
OFAC amended FAQ 1019 to discuss the meaning of the term “Russian Federation origin” as used in the respective EOs. In the amendment to FAQ 1005, OFAC discusses Directive 4 under EO 14024, which prohibits transactions involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation (the Directive 4 entities), and provides that US persons are not prohibited from trading in the secondary markets for debt or equity of Directive 4 entities as long as a Directive 4 entity is not a counterparty to the transaction.