American Club Circular No. 3 8/14 1 DECEMBER 23, 2014 CIRCULAR NO. 38/14 TO MEMBERS OF THE ASSOCIATION Dear Member: ADDITIONAL US ECONOMIC SANCTIONS AGAINST RUSSIA/RUSSIAN ENTITIES Background On December 18, 2014, President Obama signed into law the Ukraine Freedom Support Act of 2014 (UFSA). UFSA gives the US administration legal authority for additional sanctions that could be imposed against Russia and certain Russian entities if circumstances warrant. UFSA authorizes (or requires) the imposition of additional U.S sanctions against Russia and the Russian energy and defense sectors. UFSA also authorizes (or requires) the imposition of sanctions against non-US financial institutions and other foreign persons who facilitate or support certain transactions with Russian sanctions targets. Foreign financial institutions engaging in significant transactions with Russian entities and individuals who have been designated by the US as ‘Specially Designated Nationals’ (SDNs) may also face sanctions under UFSA. On December 19, 2014, the US President issued an Executive Order (December 19 Executive Order) imposing additional sanctions with respect to the Crimea region of Ukraine. UFSA summary The Russian defense sector UFSA requires the President to impose three or more of the sanctions described in UFSA on Rosoboronexport, the Russian state agency responsible for the import and export of defense and dual-use products, technology and services. UFSA also requires the President to impose UFSA sanctions with respect to: • Any Russian entity (owned or controlled by the government of the Russian Federation or controlled by Russian nationals and companies) that: - knowingly manufactures or sells defense articles transferred into Syria or into the territory of a specified country (Ukraine, Georgia, Moldova, and any other countries designated as such) without the consent of the government of that country, - transfers defense articles into Syria or into the territory of a specified country without the consent of the government of that country, or - brokers or otherwise assists in the transfer of defense articles into Syria or into the territory of a specified country without the consent of the government of that country. American Club Circular No. 3 8/14 2 • Any foreign entity which knowingly assists, sponsors, or provides financial, material, or technological support for, or goods or services to or in support of a Russian entity, with respect to the activities described above. Members should note that providing insurance/reinsurance and transportation services in connection with or for the above activities could potentially trigger the imposition of sanctions against foreign insurers/reinsurers, foreign vessels and foreign vessel owners/managers. Facilitation of transactions with Russian SDNs UFSA also authorizes the imposition of sanctions on foreign financial institutions that ‘facilitate’ certain types of transactions, or engage in ‘significant transactions’ with Russian SDNs. It should be noted that insurers and reinsurers fall outside the definition of foreign financial institutions under UFSA. The Russian energy sector UFSA authorizes the President to impose UFSA sanctions with respect to a foreign person if it is determined that it knowingly makes a significant investment in a project intended to extract crude oil from Russia’s exclusive economic zone in waters more than 500 feet deep; Russian Arctic offshore locations; or shale formations located