February 12, 2024

OFAC imposes new price cap policy designations and issues determinations that ban the import of certain Russian diamonds

On February 8, 2024, the U.S. Department of the Treasury’s Office of Foreign Assets Control designated four entities and identified one vessel as blocked property, for their alleged involvement in a price cap violation scheme in late 2023.  OFAC reported that this is the second price cap policy enforcement action it has issued in 2024.  Brian Nelson, Under Secretary of the Treasury for Terrorism and Financial Intelligence, also indicated that Russia’s top energy official admitted that the price cap, and sanctions imposed to enforce the price cap, led to “widening discounts on Russian oil, limiting the revenue the Kremlin relies on for it illegal war.”  The designations and identification were made pursuant to Executive Order 14024 for operating in the marine sector of the Russian economy.  As a result of this designation, all property and interests in property of the designated persons within the United States or within the possession or control of a U.S. person are blocked, and U.S. persons are generally prohibited from engaging in transactions involving a designated person.  Entities owned 50 percent or more by one or more blocked persons are also blocked.

OFAC also issued two new determinations under EO 14068, as amended, to prohibit the importation of certain categories of diamonds mined in Russia, in an effort to meet G7 commitments made in December 2023 to impose phased restrictions on the importation of Russian diamonds.  One of the determinations will prohibit the importation of diamond jewelry and unsorted diamonds of Russian origin or unsorted diamonds that are exported from Russia, effective March 1, 2024.  The other will prohibit the importation of non-industrial diamonds that were mined, extracted, produced, or manufactured wholly or in part in Russia, notwithstanding whether they have been substantially transformed into other products in a third country.  On March 1, 2024, this determination will prohibit the import of non-industrial diamonds with weight of 1.0 carat or greater, while non-industrial diamonds with a weight of 0.5 carats or greater will be prohibited beginning in September 1, 2024.

In connection with the new designations and identification, OFAC issued General License 87 under the Russian Harmful Foreign Activities Sanctions Regulations (“RuHSR”), 31 CFR part 587.   GL 87 temporarily authorizes limited safety and environmental transactions involving the persons or vessels blocked on February 8, 2024.  The transactions are authorized until May 8, 2024 provided that payments made to blocked persons are deposited into blocked accounts in accordance with the RuHSR.

U.S. Department of Treasury Press Release | Determinations Pursuant to Sections 1(a)(i)(A) and 1(a)(i)(D) of EO 14068 | Deterination Pursuant to Section 1(a)(i)(B) of EO 14068 | General License 87