Are ‘Best efforts’ good enough?

As former hosts of RAO conferences in both London & New York, we have first hand experience of A&O Shearman’s capacity to take on global issues then summarise them succinctly. Here is their latest view of what is going on in the world, although, as it was first published 24 hours ago, things may since have changed in Washington…..

Widening the sanctions net in uncertain times: latest developments in the U.S., EU, and U.K.'s sanctions targeting Russia

In the context of the third anniversary of Russia’s invasion of Ukraine, the U.S., EU, and U.K. continue to implement new measures to stifle Russia’s war efforts.

The Biden administration continued to escalate sanctions targeting Russia ahead of the change in presidential administration. President Trump has subsequently intervened actively on the international stage as regards the broader conflict in Ukraine. Since taking office, he has raised the possibility of both loosening the Russian sanctions regime and introducing more comprehensive sanctions. The future direction of travel is therefore highly uncertain.

At the same time, in the last nine months, the EU has further enhanced its sanctions against Russia through the adoption of its 14th, 15th, and 16th sanctions packages. In parallel, the U.K. has placed a renewed emphasis on its enforcement of trade sanctions, widening the scope of reporting requirements and clamping down on sanctions circumvention. In February 2025, it imposed its largest package yet, with over 100 new designations. This note looks into the latest sanctions requirements in the U.S., EU, and U.K. and their implications for businesses. These changes significantly alter the landscape for compliance. The situation remains highly dynamic. 

U.S. sanctions: continuing escalation and change in administration

Overview

In early 2025, under President Biden’s outgoing regime, the United States issued sweeping new rounds of sanctions targeting Russia, particularly the Russian petroleum sector and the broader energy sector, all of which still remain in place at the time of writing (11/3/25)

Energy sector sanctions

Executive Order 14024 (EO 14024) authorizes the imposition of blocking (i.e., freezing) sanctions on various categories of persons meeting the detailed criteria, including, as relevant here, on any person determined by the U.S. Secretary of the Treasury, in consultation with the U.S. Secretary of State, to operate or have operated in the technology sector, the defense and related material sector, or any other sector of the Russian Federation’s economy as determined by the U.S. Secretary of the Treasury (in consultation with the U.S. Secretary of State). Prior to January 10, 2025, 16 sectors of the Russian economy had been targeted under EO 14024.

On January 10, 2025, the U.S. Secretary of the Treasury issued a determination identifying the energy sector of the Russian Federation under EO 14024. Notably, this determination targeting the Russian energy sector mirrors a previously issued determination introduced in 2014 pursuant to Executive Order 13662 (EO 13662) as part of the Ukraine-/Russia-Related Sanctions program.

In connection with the new determination pursuant to EO 14024, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) has stated in public guidance that it intends to publish regulations, defining the term “energy sector of the Russian Federation” to include “activities such as the procurement, exploration, extraction, drilling, mining, harvesting, production, refinement, liquefaction, gasification, regasification, conversion, enrichment, fabrication, manufacturing, testing, financing, distribution, purchase or transport to, from, or involving the Russian Federation, of petroleum, including crude oil, lease condensates, unfinished oils, natural gas, liquefied natural gas, natural gas liquids, or petroleum products, or other products capable of producing energy, such as coal, wood, or agricultural products used to manufacture biofuels; the development, production, testing, generation, transmission, financing, or exchange of power, through any means, including nuclear, electrical, thermal, and renewable, to, from, or involving the Russian Federation; and any related activities, including the provision or receipt of goods, services, or technology to, from, or involving the energy sector of the Russian Federation economy.” 

Any person identified by the U.S. Secretary of the Treasury, in consultation with the U.S. Secretary of State, as operating in the Russian energy sector may now be targeted with blocking (i.e., freezing) sanctions. U.S. persons1 will be generally prohibited from engaging in any transactions or dealings with or for the benefit of any persons so targeted, and non-U.S. persons engaging in any such transactions or dealings will risk becoming sanctioned themselves.

Petroleum services sanctions

Executive Order 14071 (EO 14071) (concerning “new investment” in, and the provision of certain services to, Russia) prohibits the exportation, re-exportation, sale, or supply, directly or indirectly, from the United States or by a U.S. person (wherever located) of any category of services as determined by the U.S. Secretary of the Treasury (in consultation with the U.S. Secretary of State) to any person located in Russia.

On January 10, 2025, the U.S. Secretary of the Treasury issued a determination identifying “petroleum services” as a category of prohibited services under EO 14071.

 OFAC has stated in public guidance that it intends to publish regulations defining the term “petroleum services” for these purposes as “services related to the exploration, drilling, well completion, production, refining, processing, storage, maintenance, transportation, purchase, acquisition, testing, inspection, transfer, sale, trade, distribution, or marketing of petroleum, including crude oil and petroleum products, as well as any activities that contribute to Russia’s ability to develop its domestic petroleum resources, or the maintenance or expansion of Russia’s domestic production and refining. This would include services related to natural gas as a byproduct of oil production in Russia.”

Three types of service are specifically excluded: (i) petroleum services related to isotopes derived from petroleum manufacturing that are used for medical, agricultural, or environmental purposes; (ii) certain authorized services related to the maritime transport of crude oil and petroleum products of Russian origin (provided such products are purchased at or below relevant price caps); and (iii) services in connection with the wind down or divestiture of an entity located in Russia that is not owned or controlled, directly or indirectly, by a Russian person. OFAC has also issued a new general license which authorizes all otherwise prohibited transactions which relate to the Caspian Pipeline Consortium, Tengizchevroil, or Sakhalin-2 projects until June 28, 2025.

Subject to the above and unless otherwise authorized by OFAC, U.S. persons are now generally prohibited from, directly or indirectly, providing petroleum services to any person in Russia.

Additional sanctions designations

Since early 2022, OFAC has continued to target Russian individuals and entities with sanctions, as well as non-Russian entities targeted for engaging in transactions with or in support of the Russian defense sector or other targeted sectors of the Russian economy.

Concurrently with the new sanctions targeting the energy sector and petroleum services, and again on January 15, 2025, the U.S. imposed blocking (i.e., freezing) sanctions on dozens of persons engaged in Russia’s energy sector by identifying such persons on OFAC’s List of Specially Designated Nationals and Blocked Persons (the SDN List, and persons identified thereon, SDNs). It is noteworthy that many of these new sanctions designations were imposed pursuant to both EO 14024 and EO 13662 and, in many cases, OFAC re-designated previously sanctioned persons under EO 13662. Unlike EO 14024, EO 13662 is a covered authority pursuant to the Countering America’s Adversaries Through Sanctions Act (CAATSA). CAATSA mandates the imposition of sanctions in certain circumstances and includes: (i) mandated procedures for the removal of sanctions in some cases; and (ii) provisions for the legislative override of sanctions terminations. Consequently, the double designation of persons pursuant to EO 14024 and EO 13662 and/or re-designation of certain already sanctioned persons to add designation pursuant to EO 13662 may have the effect of making it more difficult for the Trump administration to unilaterally remove these sanctions.

Those targeted include a number of oil-carrying vessels, traders of Russian oil, and Russia-based oilfield service providers, as well as increased sanctions on two major Russian oil producers - PJSC Gazprom Neft and OJSC Surgutneftegas, and various of their respective subsidiaries and affiliates.

These sanctions generally prohibit (absent authorization from OFAC) transactions or dealings with a U.S. nexus (i.e., any U.S. persons or conduct occurring from, through, or within the United States) in or involving: (i) such SDNs or any entities in which such SDNs own an interest of 50% or more (directly or indirectly, individually or in the aggregate) (such persons, Blocked Persons); and (ii) any property or interests in the property of such persons.

Additionally, non-U.S. persons may face some risk of being targeted with so-called “derivative designation” sanctions (which include, among others, blocking sanctions) for materially assisting, sponsoring, or providing “financial, material, or technological support” for, or goods or services to, any SDNs or Blocked Persons targeted under EO 14024 and/or EO 13662. Note that “financial, material, or technological support” is broadly defined under U.S. Russia Sanctions and includes, among other things, “any transmission of value.”

Also on January 10, 2025, OFAC issued several general licenses authorizing otherwise prohibited transactions, subject to certain conditions, for varying periods of time. Among other authorizations, OFAC has licensed the wind down of existing transactions involving certain newly sanctioned persons as of January 10, 2025, until February 27, 2025.

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