Russian metals magnate Oleg Deripaska attends Independence Day celebrations at Spaso House,what is dynamike on a cb radio the residence of the American Ambassador, in Moscow, Russia. Photo: AP/Alexander Zemlianichenko

American companies and their general counsel should not expect a general easing of U.S. trade sanctions on Russia, even though the federal government plans to terminate sanctions against three Russian companies by mid-January if they implement certain reforms, according to attorney

James Treanor

.

The U.S. Treasury Department's Office of Foreign Assets Control

said Dec. 19

—in what Treanor called the first of its kind notice to Congress—that it intends to end the sanctions imposed on United Company Rusal, En+ Group and JSC EuroSibEnergo within 30 days.

Rusal is one of the world's largest aluminum producers; En+ is an international company that operates in five segments, including generating and distributing energy; and EuroSibEnergo is one of the largest independent power companies in Russia. According to the Treasury Department, the three companies are owned or controlled by Russian oligarch Oleg Deripaska, who himself is under sanction.

OFAC

imposed the sanctions

April 6, 2018, against seven Russian oligarchs, including Deripaska, and 12 companies they own or control. Eight of the 12 companies are, or were, Deripaska’s. The names of the individuals and companies were published in OFAC’s list of Specially Designated Nationals and Blocked Persons, known as SDNs. U.S. sanctions regulations

prohibit

any transactions with SDNs wherever they are located.

The U.S. has accused Deripaska of supporting the Kremlin in its attempts to subvert Western democracies, commit cybercrime and engage in other misconduct.

OFAC said that all “of Deripaska's property and interests in property, including entities in which he holds a 50 percent or greater interest, will remain blocked.”

The agency said it would “continue to aggressively enforce its sanctions on Deripaska, including by closely monitoring these companies’ compliance ... OFAC reserves the right to relist one or all of these companies should they fail to comply with the agreement. “

Under the deal, OFAC said the three companies “agreed to undertake significant restructuring and corporate governance changes to address the circumstances that led to their designation, including reducing Oleg Deripaska's direct and indirect shareholding stake in those entities to below 50 percent; overhauling the composition of those entities' boards of directors; taking restrictive steps related to their corporate governance; and agreeing to unprecedented transparency by undertaking extensive, ongoing auditing, certification and reporting requirements.”

As part of the agreement, OFAC said half of En+'s restructured board of directors will be composed of U.S. or U.K. nationals and Rusal's current board chairman will step down.

Treanor, an associate with

Cadwalader, Wickersham & Taft

in Washington, D.C., said the notice to Congress of intent to lift the sanctions was the first such notice under a new law enacted in 2017 to deal specifically with sanctions against Russia, North Korea and Iran. The law,

Countering America’s Adversaries Through Sanctions Act

, requires OFAC to notify Congress of its intent to lift the sanctions, which it did in a

letter

to Senate Majority Leader Mitch McConnell (R.-Kentucky). Under the law, Congress has 30 days to object if it disagrees.

The letter describes eight months of negotiations between OFAC and the three companies, who were represented by

Lord Gregory Barker,

the former minister of state for energy and climate change for the United Kingdom.

“The letter is lengthy and detailed,” Treanor noted. “The overriding message is this action does not represent a weakening of sanctions against Russia or Deripaska. I’m sure OFAC will be scrutinizing the companies very closely.”

Treanor added, “It’s notable that OFAC is stepping into the boardroom of these companies. It’s a sign of just how serious OFAC is” about changing company behavior.

While general counsel whose companies do business with the three companies can feel some relief about the lifting of sanctions, Treanor advised caution.

“In a sense this action sanction lifting removes a cloud of uncertainty,” he said. “But given the inevitable scrutiny, and the fact that sanctions could be reimposed, there still is some uncertainty to be aware of and to be managed.”

General counsel need to realize that OFAC remains very focused on Russia, Treanor added. He noted that on the same day it announced the intent to lift sanctions, OFAC also imposed sanctions on eight more Russian individuals and four Russia-controlled media entities—Economy Today, Federal News Agency, Nevskiy News, and USA Really,

all based in St. Petersburg, Russia

.

“There is no signal that anyone should expect sanctions on Russia will be softened going forward,” Treanor concluded

Read more:

Amid Sanctions, Global Law Firms Face Russian Reckoning

What New Russia Trade Sanctions Mean for US Companies and Investors

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