Introduction

According to the official notice on the website of the Office of Foreign Assets Control of the US Department of the Treasury (OFAC), the founders of Alfa Group M. Fridman, P. Aven, G. Khan and A. Kuzmichev, as well as the Russian Union of Industrialists and Entrepreneurs (RSPP) were included in the OFAC SDN List on August 11, 2023.

Reasons for Imposing US Sanctions on the Founders of Alfa Group

The reasons why the founders of Alfa Group ended up on the OFAC list are clear. They are representatives of the top echelon of Russian business, who have powerful lobbying connections in the Kremlin and who have enriched themselves to a large extent thanks to these connections. Earlier, all of them were included in the sanctions lists of Australia, Canada, the EU, New Zealand, and the UK. The consequences for them will be the same as for other Russian oligarchs included in the OFAC SDN List earlier.

Reasons for Including the Russian Union of Industrialists and Entrepreneurs (RSPP) in the OFAC List

It is much more interesting to trace the causes and consequences of the Russian Union of Industrialists and Entrepreneurs (RSPP) inclusion into the OFAC sanctions list. As indicated on the OFAC website, the RSPP got under the US sanctions as an organization “involved in the technology sector of the economy of the Russian Federation”, as well as for its “activities related to Russian response to the imposed sanctions…”.

The US sanctions on RSPP were imposed based on the Decree of the US President No. 14024 dated April 15, 2021, aimed at blocking the property of individuals and organizations associated with the “harmful activities of the Russian government in relation to other countries”. In other words, the RSPP was added to the OFAC SDN List for its lobbying activities, as well as for taking part in Russian countermeasures to US sanctions.

Only One Out of Two RSPP Entities Is on the OFAC SDN List

There is an interesting detail in this story. As indicated on the website of the Russian Union of Industrialists and Entrepreneurs, this organization operates through two legal entities – the All-Russian Association of Employers (OOR “RSPP”) and the All-Russian Public Organization (RSPP). It is noteworthy that only one organization was included in the OFAC SDN List – with the name “RSPP” and registration data of the All-Russian Association of Employers (OOR “RSPP”): OGRN 1067746348427, INN/KPP 7710619969, registration date – March 6, 2006.

The situation is quite ambiguous. On the one hand, the OFAC official notice dated August 11, 2023, refers to the Russian Union of Industrialists and Entrepreneurs. On the other hand, the OFAC SDN List includes only one of the two legal entities through which the Russian Union of Industrialists and Entrepreneurs operates. Does this mean that the other organization, namely the All-Russian Public Organization (RSPP), can safely continue its activities, despite the US sanctions?

No, it doesn’t. Seems like an OFAC oversight. Although the registration data on the OFAC site refers to the All-Russian Association of Employers, the abbreviation is not “OOR “RSPP” (as it’s supposed to be), but “RSPP,” which refers to both the Russian Union of Industrialists and Entrepreneurs and its public organization.

Consequences for the RSPP, its Management, and Members

The consequences of including OOR “RSPP” in the OFAC SDN List are as follows. Firstly, it is the blocking of all assets in all entities controlled by any US person (individual or organization) and a ban on any transaction with OOR “RSPP” for all US persons, as well as foreign persons located in the United States. In addition, under the 50 Percent Rule, any entity in which OOR “RSPP” owns 50 percent or more  “individually or in the aggregate, directly or indirectly” also falls under US sanctions.

The question of whether the assets of the All-Russian Public Organization (RSPP) will be blocked, remains open. On the one hand, even if this happens, an experienced US attorney , will probably be able to unblock them, appealing to the fact that the OFAC SDN List contains the registration data of a different entity. On the other hand, it is highly likely that OFAC will correct this nuance, and soon both RSPP legal entities will be on the US sanctions list.

The implications for the leadership of the Russian Union of Industrialists and Entrepreneurs can also be severe. There are many cases when OFAC first places a certain Russian organization on the SDN List, and then its top management also gets there on the grounds that they are involved in the activities of an organization under US sanctions.

In addition, all organizations that are members of the Russian Union of Industrialists and Entrepreneurs become potential candidates for US sanctions based on their affiliation with a structure that is on the OFAC SDN List.

Conclusion

Thus, there is every reason to expect the inclusion in the OFAC SDN list of new individuals from among the leadership of the Russian Union of Industrialists and Entrepreneurs (RSPP), as well as legal entities members of this union.