In the aftermath of Russia’s recognition of the Donetsk and Luhansk people’s republics as independent states, and subsequent deployment of what Russia calls “peacekeepers” into those territories, the United States and the EU today released the first of several tranches of sanctions against Russia.
President Biden directed that full-blocking sanctions be imposed against two Russian banks—Vnesheconombank (VEB) and Promsvyazbank (PSB)—and their subsidiaries. According to the White House fact sheet, these entities collectively hold more than $80 billion in assets and finance the Russian defense sector and economic development. Designations include 25 subsidiaries of VEB, 17 subsidiaries of PSB, and five vessels owned by one of the Promsvyazbank subsidiaries. These measures have frozen any assets in the United States that belong to these entities, prohibited US persons and entities from transacting with them, and effectively shut them off from the US dollar and the global financial system.
OFAC also sanctioned three sons of US-designated Russian elites, whose assets in the United States are now frozen and with whom US persons and firms cannot transact.
- Denis Aleksandrovich Bortnikov is the son of Aleksandr Vasilievich Bortnikov, Russia’s FSB Director who was designated by OFAC last year. Denis Bortnikov is a Deputy President of Russian-state owned financial institution VTB Bank Public Joint Stock Company (VTB Bank) and a Chairman of the VTB Bank Management Board.
- Petr Mikhailovich Fradkov is the son of former Russian Prime Minister and former Director of the Russian Foreign Intelligence Service (SVR), Mikhail Fradkov, who was designated by OFAC in 2018. Petr Fradkov is the Chairman and CEO of PSB.
- Vladimir Sergeevich Kiriyenko, is the son of Sergei Vladilenovich Kiriyenko, who was sanctioned last year. Sergei Kiriyenko is the First Deputy Chief of Staff of the Presidential Office and reportedly responsible for President Putin’s domestic policy. Vladimir Kiriyenko, previously worked as a vice president at the Russian state-controlled company, Rostelecom, and is presently the CEO of VK Group, the parent company of Russia’s top social media platform, VKontakte.
In addition, the United States expanded sovereign debt prohibitions, restricting US individuals and firms from participation in secondary markets for new debt issued by Russia’s Central Bank, the National Wealth Fund of the Russian Federation, and Russia’s Finance Ministry, denying Russia access to key US markets and investors.
President Biden warned that more elites in Russia will be designated tomorrow.
FiveBy recommends that all US firms and financial institutions doing business in Russia examine their current relationships with these individuals and entities to ensure they are in compliance with US sanctions. Further, thorough research into any additional subsidiaries and monitoring of possible changes in ownership and control, as well as name changes to these entities and vessels is also recommended.
- In 2018, several months before being sanctioned by OFAC, Russian oligarch Oleg Deripaska handed control of his real estate firm, Terra Services, to his cousin Pavel Ezubov. Terra Services came under scrutiny in connection with Special Counsel Robert Mueller’s investigation into Russia’s meddling in US elections.
- In 2014, before OFAC’s designation, Russian oligarch Gennady Timchenko sold his share of global commodities trader Gunvor to the company’s chief executive Torbjorn Tornqvist. After his designation, Timchenko also sold his shares of Russian petrochemicals company, Sibur, to Putin’s then-son-in-law, Kirill Shamalov, because financial institutions and business partners hesitated to engage with Sibur due to Timchenko’s inclusion on the SDN list.
- North Korean vessels have been known to change names and owners to evade international sanctions. The Jin Teng, sanctioned by the United States in March 2016 changed its name twice after its designation. Another vessel, the Jin Tai 7, that was also sanctioned that month, also changed its name twice to avoid detection.
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