The United States and the United Kingdom impose new sanctions against the Russian energy sector

On January 10, 2025, the United States and the United Kingdom imposed additional sanctions against Russia, with a focus on its energy sector. The new U.S. sanctions measures against Russia include (i) the designation of more than 200 persons on the Specially Designated Nationals and Blocked Persons (“SDN”) List by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) and the U.S. Department of State pursuant to Executive Order (“EO”) 14024 and/or EO 13662; (ii) the identification of more than 180 vessels as blocked property; (iii) the revocation of Russia-related General License (“GL”) 93 which relates to vessels owned by Joint Stock Company Sovcomflot (“Sovcomflot”); (iv) the U.S. designation of Russia’s “energy sector” under EO 14024 (creating U.S. secondary sanctions risks even if activities have no U.S. nexus); (v) the prohibition under EO 14071 of “petroleum services” provided directly or indirectly by U.S. persons, with a carve-out for wind-down or divestiture of an entity in Russia that is not Russian owned, as well as a related GL authorizing petroleum services related to three specific projects through end of day June 27, 2025; and (vi) the issuance of various GLs as set forth in the “Other OFAC GLs” subsection of “U.S. Sanctions Developments” below. 

Of note, the newly designated SDNs include Public Joint Stock Company Gazprom Neft (“Gazprom Neft”), Surgutneftegas, the subsidiaries of Gazprom Neft or Surgutneftegas (including Joint Stock Company Surgutneftegasbank (“SNGB”)), Ingosstrakh Insurance Company (“Ingosstrakh”), and Alfastrakhovanie Group (“Alfastrakhovanie”).

Further, the UK has also designated both Gazprom Neft and Surgutneftegas and issued two related GLs. 

We note that Gazprom Neft was already subject to “transaction ban” in the EU pursuant to being listed in Annex XIX of Regulation 833/2014 (meaning EU persons are prohibited from entering into direct or indirect transactions with Gazprom Neft and other listed entities).

Please see below for further details.

U.S. sanctions developments

SDN designations by OFAC and the State Department

On January 10, 2025, OFAC designated more than 150 persons as SDNs and identified 183 vessels as blocked property, and the U.S. Department of State designated approximately 80 persons as SDNs, with the main goal of targeting Russia’s energy sector, the primary source of revenue fueling Russia’s war against Ukraine.

The main categories of OFAC’s designations are (i) Gazprom Neft, Surgutneftegas, and their subsidiaries; (ii) oil-carrying vessels (many of which are part of the “shadow fleet”); (iii) Ingosstrakh and Alfastrakhovanie; (iv) opaque traders of Russian oil; (v) Russia-based oilfield service providers; and (vi) Russian energy officials. 

The main categories of the State Department’s designations are (i) senior officials of State Atomic Energy Corporation Rosatom (“Rosatom”) and members of Rosatom’s Management Board; (ii) entities engaged in the active production and export of liquified natural gas (“LNG”) from Russia; (iii) entities engaged in the provision of material support to Limited Liability Company Arctic LNG 2 (“LLC Arctic LNG 2”); (iv) entities engaged in the circumvention of U.S. sanctions on U.S.-designated Joint Stock Company Sovcomflot (“Sovcomflot”); (v) entities engaged in attempts to expand Russia’s oil production capacity; and (vi) entities involved in Russia’s metals and mining industry. 

Some of the newly designated SDNs are located outside of Russia (e.g., China, India, and Kazakhstan). 

OFAC also issued a number of general licenses related to these SDN designations, including Russia-related GL 117 (“Authorizing the Wind Down of Transactions Involving Gazprom Neft, Surgutneftegas, and Certain Additional Entities Blocked on January 10, 2025”) authorizing transactions that are “ordinarily incident and necessary to the wind down of any transactions involving” Gazprom Neft and its subsidiaries, as well as other entities listed in the Annex to GL 117, until the end of day on February 26, 2025. However, GL 117 does not authorize payments to any of these sanctioned entities (receipt of payments from them is not prohibited during the validity period of GL 117). 

Another newly issued GL is Ukraine-/Russia-related GL 26 (“Transactions Authorized Pursuant to the Russian Harmful Foreign Activities Sanctions Regulations”), which states, in part:

[A]ll transactions prohibited by Executive Order (E.O.) 13662 involving one or more blocked persons listed in the Annex to this general license, or any entity in which those blocked persons own, directly or indirectly, individually or in the aggregate, a 50 percent or greater interest, that are authorized or exempt under the Russian Harmful Foreign Activities Sanctions Regulations, 31 CFR part 587 (RuHSR), including transactions authorized by a general or specific license, are authorized (emphasis added).

In other words, a transaction that involves an SDN that is designated under both EO 14024 and EO 13662 will need to rely on a license issued under the Russian Harmful Foreign Activities Sanctions program (e.g., Russia-related GL 6D or a specific license obtained through an application) and this Ukraine-/Russia-related GL 26 (assuming that its conditions are met) because a GL or a specific license typically only covers one sanctions program, which is sufficient for an SDN that is only designated under that program but not for an SDN that is designated under multiple programs. 

In terms of U.S. primary sanctions, a U.S. person would be prohibited from engaging in virtually any transaction directly or indirectly involving any of these SDNs (and entities owned at 50% or more, directly or indirectly, by them) unless otherwise authorized. Further, interacting with any of these designated entities and individuals would lead to the risk of exposure to U.S. secondary sanctions (including designation as an SDN itself) if OFAC determined that the interaction provides “material support” to the designated entity or individual. This is a highly discretionary, fact-specific determination.

Please see this OFAC webpage for a full list of designations from January 10, 2025, this OFAC webpage for the associated press release, this U.S. Department of State webpage for the Fact Sheet in connection with its designations from January 10, 2025, and this U.S. Department of State webpage for Secretary Antony Blinken’s press statement. 

Revocation of Russia-related GL 93 

Sovcomflot was designated as an SDN on February 23, 2024 under the authority of EO 14024, and on January 10, 2025, OFAC re-designated Sovcomflot under EO 13662. On this day, OFAC also revoked GL 93, which previously authorized all transactions involving any vessel that was blocked solely due to a property interest of Sovcomflot or any entity in which Sovcomflot owns, directly or indirectly, a 50 percent or greater interest, provided that such vessel is not identified on the SDN List. As a result, such transactions with a U.S. nexus will now require an OFAC specific license.

Designation of Russia “energy sector” under EO 14024 (U.S. secondary sanctions risk)

On January 10, 2025, OFAC issued a determination pursuant to EO 14024 that designates the “energy sector of the Russian Federation economy,” effective on the day of issuance. This action does not place sanctions on any particular persons but instead creates secondary sanctions risks for any activities without U.S. nexus that are viewed by OFAC as “operating in” such sector.  Under this determination, OFAC is authorized to take adverse sanctions action, up to and including designation as an SDN, against any person determined to be “operating in” the energy sector of the Russian economy. 

Due to a broad definition of “energy sector” in newly-issued OFAC FAQ 1213, activities in support of exploration, extraction, distribution or procurement, among others, of various petroleum products can create risks for non-U.S. persons to become designated as SDNs even if their activities in Russia do not involve SDNs such as Gazprom Neft.

Prohibition on U.S. person provision of “petroleum services” under EO 14071 (U.S. primary sanctions)

On January 10, 2025, OFAC issued a determination pursuant to EO 14071, effective February 27, 2025, prohibiting U.S. persons from the direct/indirect provision of “petroleum services” to any person in Russia. Newly-issued OFAC FAQ 1216 broadly defines “petroleum services” to include activities that contribute to Russia’s ability to develop domestic petroleum resources or maintain/expand its domestic production and refining, among other listed activities.

The determination excludes (1) any petroleum services related to isotopes derived from petroleum manufacturing that are used for medical, agricultural, or environmental purposes, such as Carbon-13; (2) certain covered services related to the maritime transport of crude oil and petroleum products of Russian Federation origin, provided that such crude oil or petroleum products are purchased at or below the relevant determined price caps, as specified in various OFAC determinations under EO 14071; and (3) any service in connection with wind-down/divestiture of an entity in Russia that is not owned or controlled, directly or indirectly, by a Russian person.

Additionally, Russia-related GL 121 carves out three projects from the prohibitions of the petroleum services determination, through end of day June 27, 2025: Caspian Pipeline Consortium, Tengizchevroil, and Sakhalin-2.

Other OFAC GLs

On January 10, 2025, OFAC also issued several other GLs related to the new sanctions actions:

• Russia-related GL 8L (“Authorizing the Wind Down of Transactions Related to Energy”), which now imposes an end date for authorized activities involving listed SDN banks when transactions are related to energy (previously, this GL did not have an expiration date);
• Russia-related GL 115A (“Authorizing Certain Transactions Related to Civil Nuclear Energy”);
• Russia-related GL 118 (“Authorizing Certain Transactions Related to Debt or Equity of, or Derivative Contracts Involving, Gazprom Neft, Surgutneftegas, and Certain Additional Entities Blocked on January 10, 2025”);
• Russia-related GL 119 (“Authorizing Certain Transactions Involving Public Joint Stock Company Gazprom Neft Related to Diplomatic and Consular Mission Operations Outside of the Russian Federation”); and
• Russia-related GL 120 (“Authorizing Limited Safety and Environmental Transactions and the Unloading of Cargo Involving Certain Persons or Vessels Blocked on January 10, 2025”).

New and amended OFAC FAQs

On January 10, 2025, OFAC issued five new Russia-related Frequently Asked Questions (“FAQs”) (i.e., FAQs 1213 - 1217; as noted above, FAQs 1213 and 1216 are particularly relevant) and amended fourteen Russia-related FAQs (i.e., FAQs 967, 976, 977, 978, 999, 1011, 1012, 1017, 1117, 1126, 1182, 1183, 1201, and 1203).

UK sanctions developments

Effective January 10, 2025, the UK has designated both of Gazprom Neft and PJSC Surgutneftegas for the purposes of its asset freezing and trust services sanctions set out under the Russia (Sanctions) (EU Exit) Regulations 2019 (S.I. 2019/855) (as amended) (the “Russia Regulations”). In tandem with these designations, the UK has issued two general licences as follows:

1. General Licence: Russian Oil Exempt Projects INT/2025/5635700: This permits the continuance of business operations with Gazpromneft-Sakhalin LLC and any entity owned or controlled, directly or indirectly, by Gazpromneft-Sakhalin LLC within the meaning of regulation 7 of the Russia Regulations to the extent they are in relation to the Sakhalin-2 Project between 10 January 2025 and 28 June 2025.
2. General Licence: Russian Oil Majors Wind Down INT/2025/5635701: This permits the winding down or divestment from any transactions involving Gazprom Neft or PJSC Surgutneftegas, including the closing out of any positions, and any activities reasonably necessary to effect the same. This general licence expires at 05:01 on 27 February 2025.

Client implications

Companies should review their business relationships and compliance procedures to ensure that they are not engaged in transactions with any newly designated entities. Furthermore, the OFAC designation of the entire Russian energy sector raises significant secondary sanction risks, up to designation as an SDN, for any companies that conducts any of a broad range of transactions with businesses in the Russian energy sector. Such risks apply to even to non-U.S. companies engaging in activities without a U.S. nexus. Hogan Lovells lawyers can assist you with assessing the potential impact of these and other trade restrictions on the global operations of your company.

Please contact any of the listed Hogan Lovells lawyers for further information or assistance.

Aleksandar Dukic, Ajay Kuntamukkala, Beth Peters, Ashley Roberts, Deborah Wei, Julia Diaz, Hao-Kai Pai, and Mark Ye.