SANCTIONS AGAINST RUSSIANS LOOPHOLES

In spite of sanctions against Russia, it’s back to business again.

Under sanctions, the U.S. Treasury definition of ‘U.S. persons’ does not include ‘foreign incorporated subsidiaries of U.S. companies’. This leaves open the possibility of American business links with SSS (Sectoral Sanctions Identifications-listed firms) through foreign subsidiaries. In the EU, EU sanctions prohibit EU entities from direct provision of oil and gas services but do not specifically address technology transfer.

So there you have it:

1. General Electric and Russian energy firm Rosneft have announced a long-term cooperation programme for joint manufacturing of marine, oil and gas and electrical equipment. Rosneft and many of its subsidiaries are on the United States Treasury Department's Sectoral Sanctions Identifications (SSI) List, which prohibits certain types of business activities between American firms and their Russian counterparts. But no problem, GE has an oil and gas subsidiary in Florence Italy, and a Russian subsidiary based in business.
2. Some EU oil and gas companies are creating new agreements with Russian energy firms regardless of prohibitions. Last year Shell, Gazprom, E-ON and OMV signed a joint venture deal for a massive Russia-EU gas pipeline project, capable of 55 billion cubic meters per year, bigger than existing Nord Stream line.
3. Boeing and Volga-Dnepr Group, a world leader in transportation of unique, oversize and heavy cargo signed a Memorandum of Understanding last June in Paris to further the Group’s fleet expansion with 20 additional 747-8 Freighters, valued at $7.4 billion at list prices. These additional 20 airplanes will be acquired through a mix of direct purchases and leasing over the next seven years.
4. The Pentagon has been lobbying hard for the US Congress to ease trade restrictions imposed on Russian-manufactured space rockets. A joint venture between Boeing and Lockheed Martin needs to purchase 14 RD-180 Russian engines in order to power Lockheed’s Atlas V space rocket programme.

Bottom Line 

It is the EU that has suffered the most from sanctions against Russian, while Americans are finding all sorts of loopholes to skirt those same sanctions on Russia when it suits them. Europe’s strongest economy Germany, for example, has reportedly seen its exports plummet by up to 20 per cent, largely as a result of the sanctions with Russia. German farmers are believed to have lost over $600 million in revenues from being shut out of the Russian market. The Europeans are indeed caught in a sanctions trap that they are foolishly self-perpetuating. Time has definitely come to adopt a new game plan!