Recent developments around Rosneft, the Russian state-backed oil giant and its ventures in Venezuela have shed new light on the company and its ties to Vladimir Putin's ambitions in South America. Rosneft makes for an ideal case study of the eco-system of US sanctions - and reminds us of the nuances between Sectoral Sanctions Identifications and Specifically Designated Nationals.

Rosneft Oil Company - the Parent Company and Sectoral Sanctions

In 2014 US sanctions against Russia introduced Sectoral Sanctions Identifications (SSIs). Unlike most sectoral sanctions regimes, they target specific actors within specific sectors, instead of a blanket limitation on all trade for one sector.

Executive Order 13662 allows OFAC (Office for Foreign Asset Control) to determine specific individuals and entities from those industries[1] as covered under sectoral sanctions. This is referred to as Sectoral Sanctions Identifications (SSIs) and sectoral sanctions will only apply to those entities and individuals on this list. They permit transactions with other entities in the targeted sector, or with targeted entities outside of the targeted activities.

The US Treasury has passed four separate directives under EO 13662, which target certain activities for certain entities. OFAC added Rosneft Oil Company (as well as a few subsidiaries) to the Sectoral Sanctions Identifications list for Directive 2 and 4.

• Directive 2: prohibits new financing and equity investment services (other than 60-day lending) to identified Russian Energy firms - Rosneft and a number of subsidiaries are identified under this Directive.
• Directive 4: prohibits activities related to specific Unconventional Oil Projects-related goods and services to specifically determined entities, which now includes Rosneft Oil Company, in Russia and around the world.

Trading with Rosneft Oil Company is delicate, but the prohibitions are limited to the specific activities referred to in Directive 2 and Directive 4. Rosneft as a whole is not covered by full ?blocking sanctions?, however, two subsidiaries have been designated under the SDN sanctions regime.

?Naughty Children? - the SDNs around Rosneft

In recent months, two Swiss subsidiaries of Rosneft (including its trading arm) were targeted by OFAC as Specially Designated Nationals (SDNs) under the Venezuela sanctions regime due to their continued involvement with the local oil industry and President Nicolas Maduro's disputed regime[3][4]. Rosneft Trading SA and TNK Trading International SA were also added as SDNs to the Ukraine-Russia sanctions list, though they were already covered by sectoral sanctions under the 50 per cent rule. It can also be noted that Igor Sechin, CEO of Rosneft Oil Company, is an SDN under the Ukraine-Russia sanctions list. However, Rosneft Oil Company is not an SDN pursuant to the 50 per cent rule as Sechin is not the principal owner.

These ?blocking sanctions? cause targeted individuals and entities to have their US-based assets and funds frozen, and individuals will suffer travel bans and immigration measures. The US dollar is also used here as a nexus asserting US jurisdiction over transactions which do not involve US companies or citizens.

SDNs bear a much heavier load than SSIs. After initially vowing to maintain operations there[5], Rosneft announced at the end of March that it would be selling its assets in Venezuela[6]. At the end of April, the Financial Times reported that Rosneft Trading SA was winding down its operations in Geneva[7]. If designations seem to have had a significant impact on Rosneft's activities, perhaps more so than SSIs they have also caused a significant blow to the Venezuelan oil industry and the whole regime. As heads roll for directors and ministers[8], Russia's continued support for Maduro remains clear. The new fully state-owned unnamed entity taking over Rosneft's Venezuelan assets is likely to reinforce Russian influence in the South American country and its crumbling economy[9].