American sanctions against Russia have been in effect for more than four years and are constantly expanding. Political tensions between Russia and the United States create new risks, and new Russian businessmen may enter the following sanctions lists, and, as a result, the largest industry companies that belong to them will fall under sanctions.
On September 3, 2018, the Cyprus company Lanebrook Ltd, through which previously Roman Abramovich, Alexander Abramov, Alexander Frolov and Eugene Shvidler jointly owned the majority stake in Evraz plc, completely alienated its shares. After the restructuring, the largest shareholders of Evraz Plc were Cyprus Crosland Global Limited (31.37%), whose beneficiaries are Alexander Abramov and Alexander Frolov, and Greenleas International Holdings Ltd. (30.52%), registered in the British Virgin Islands and controlled by Roman Abramovich.
Changes in the composition of shareholders did not affect the percentage of voting shares of the current beneficiaries. Now the largest beneficiaries of Evraz plc are still Roman Abramovich (30.52%), Alexander Abramov (20.92%), Alexander Frolov (10.45%), Gennady Kozlov (5.80%), Alexander Vagin (5.74) and Eugene Shvidler (2.97%).
The media have repeatedly suggested that such a restructuring is aimed at protecting Evraz plc from possible sanctions against its beneficiaries from the US. Nevertheless, both the pre-existing and new ownership structures of shares do not allow Evraz plc to completely avoid sanctions risks in case sanctions are imposed against its beneficiaries.
In addition to the US President and the US Congress, the Office of Foreign Assets Control under the US Department of Treasury (OFAC) and other US executive bodies have wide discretionary powers to expand the lists of persons under sanctions. Thus, at their discretion, a person can be included in the sanctions list.
Sanction regulation in the United States has changed after Donald Trump signed on Aug. 2, 2017, the Law on Countering America's Enemies through Sanctions (CAATSA). This law introduced additional sanctions against Russia and a number of other countries, as well as granted new powers of OFAC. Now, the agency can, at its discretion, impose additional sanctions on sectors such as railways, maritime transport, metallurgy and mining. CAATSA also obliged the US Treasury Department, in conjunction with the US Department of State and the Director of the US National Intelligence, to prepare a report on higher-level Russian politicians and oligarchs.
As part of the implementation of CAATSA on January 29, 2018, the US Treasury Department issued the so-called Kremlin report, or a report on "Significant foreign policy figures and oligarchs in the Russian Federation and companies with state participation." In fact, the list of businessmen listed in the Kremlin report is completely copied from the Russian part of the global Forbes list - it includes all Russians whose fortune exceeds $ 1 billion. Under such formal criteria, the three largest beneficiaries of Evraz plc - Roman Abramovich, Alexander Abramov and Alexander Frolov.
The Kremlin report is not a "sanctions list". The inclusion of individuals or legal entities in it should in no way be interpreted as imposing sanctions on these individuals or organizations and is not an official confirmation that any of these persons meet the criteria for applying the sanctions regime. Moreover, the inclusion of individuals in the report does not in itself create any prohibitions or restrictions on relations with them for citizens, residents and companies in the United States or for foreigners.
Thus, it turns out that the inclusion of a person in the report has no legal consequences. Probably, the main goal of the report was to create among the Russian businessmen and politicians fears and tensions connected with the fact that at any moment sanctions can be imposed on the persons mentioned in the report.
Of the 96 billionaires listed in the report, only six were sanctioned in April 2018 - Vladimir Bogdanov F 55, Oleg Deripaska F 19, Suleiman Kerimov F 20, Kirill Shamalov F 75, Andrei Skoch F 23 and Viktor Vekselberg F 9 In this regard, getting into the Kremlin report and the subsequent imposition of sanctions against several persons from the report caused a number of Russian businessmen to think about preventive measures to prevent damage to their business by the unpredictable US sanctions policy.
Despite the fact that at the moment neither Evraz plc, nor its shareholders and beneficiaries are included in the list of persons subject to sanctions, it can not be ruled out that in the future the situation may change, as the company works in the metallurgical sector, and its largest beneficiaries figure in the Kremlin report.
The Rule of fifty
The sanctions regime automatically extends to companies with 50% or more of the authorized capital of which in aggregate directly or indirectly belong to one or more persons included in the sanctions lists. At the same time, indirect ownership means the company owns one or several persons included in the sanctions lists through another company or other companies, 50% or more of its authorized capital in aggregate belongs to such persons.
For example, after the introduction of April sanctions against Viktor Vekselberg F 9 and his company JSC Renova, Swiss Sulzer AG, owned by Renova by 63.4%, automatically became subject to the sanctions regime. In this regard, Viktor Vekselberg reduced the share of Renova to 48.8%, selling a 14.6% stake in Sulzer AG to one of the company's structures (Sulzer Ltd).
The other regime applies to companies controlled by persons included in the sanctions lists, but not directly or indirectly by 50% or more. The sanctions regime for such companies can be imposed only at the discretion of OFAC and is not automatically established.
This happened with Oleg Deripaska and his companies AgroHolding Kuban, Basic Element Limited, B-Finance Ltd, En + Group Plc, GAZ Group, EuroSibEnergo, Russian Machines and United Company Rusal Plc, which together with him were are included in the sanctions list. At the moment, Deripaska is trying to obtain exemption from sanctions of En + Group plc, UC Rusal plc and GAZ Group by negotiating with OFAC. For this, the Barker Plan was developed, according to which Oleg Deripaska left the board of directors of En + and UC Rusal and should reduce his stake in En + to below 50%. To implement these agreements, OFAC extended until October 23, 2018 the deadline for completion of operations with shares and debt obligations of these companies, and also obliged US citizens and companies to complete all contracts and cease interaction with them in the specified period.
Taking into account the 50% rule, if sanctions are imposed simultaneously against the main beneficiaries of Evraz plc (Abramovich, Frolov and Abramov), the sanctions regime will also be extended to Evraz plc, since in aggregate they indirectly own more than 50% of the shares of Evraz plc, namely 61 , 89%. However, if sanctions are imposed only on one of the beneficiaries or two of them with a cumulative possession of less than 50%, Evraz plc will not automatically be sanctioned. However, the above opportunities to avoid the application of the 50% rule appeared not as a result of recent restructuring, as it did not affect the beneficiaries' shares in Evraz plc.