U.S. exporters should become aware of the potential far-reaching impacts of the latest OFAC sanctions against Russian shipyards.
U.S. exporters of technologies used in the construction of ships overseas should gain a clear understanding of the potential impacts from the latest round of Treasury Department sanctions imposed on a handful of Russian companies located in the Black Sea region.
Last week, Treasury’s Office of Foreign Assets Control (OFAC) added Yaroslavsky Shipbuilding Plant, Zelenodolsk Shipyard Plant, AO Kontsern Okeanpribor, PAO Zvezda, AO Zavod Fiolent and GUP RK KTB Sudokompozit to its Specially Designated Nationals (SDN) List.
These designations block all property and interests in property of those individuals and entities, and U.S. persons are generally prohibited from transacting with them. Any entities with an owned aggregate of 50 percent or more by these designated persons also are blocked.
The companies were added to SDN List for their alleged role in supporting Russia’s recent attacks against the Ukraine navy in the Kerch Strait.
While it might be easy for a U.S. exporter to avoid any future business with these newly sanctioned shipyard operators, they may not realize just how deep the financial tentacles of these companies may reach globally to other shipyards outside Russia. Any entities with an owned aggregate of 50 percent or more by those designated companies and individuals are also blocked.
Shipyard technology and equipment suppliers quickly discovered this in 2014 when United Shipbuilding Corp., which designs and constructs ships for the Russian navy and is the largest shipbuilding company in Russia. The company also has financial interests in shipyards outside Russia, including a 100 percent ownership in Finnish passenger vessel builder Arctech Helsinki Shipyard.
Not doing one’s detailed homework on the financial holdings of overseas shipyards prior to exporting could lead to a boatload of U.S. compliance headaches and penalties.
