No, provided that (i) such funds are not specifically intended for new projects or operations in the Russian Federation and (ii) the entity located outside the Russian Federation derives less than 50 percent of its revenues from its investments in the Russian Federation.  

For the purposes of assessing the foregoing, U.S. persons, including U.S. financial institutions, may reasonably rely upon the information available to them in the ordinary course of business, including publicly available information such as an entity’s most recent quarterly or annual report.  For the purposes of determining the percentage of revenues derived from investments in the Russian Federation, revenues derived from the commercial sale of goods or services by an entity located outside of the Russian Federation to persons in the Russian Federation should not be included.  This approach is consistent with the guidance provided by the Office of Foreign Assets Control (OFAC) in FAQ 1049, which clarifies that OFAC does not consider the commercial sale of goods or services to persons in the Russian Federation by an entity located outside the Russian Federation to be new investment in the Russian Federation for purposes of the respective E.O. prohibitions. 

Unless exempt or otherwise authorized by OFAC, examples of transactions that OFAC considers to be “new investment” for the purposes of the respective E.O. prohibitions include:

• The lending of funds to a special purpose vehicle established outside of the Russian Federation by a Russian entity for the purpose of raising funds intended to support new or expanded physical operations in the Russian Federation. 
• The purchase (including on the secondary markets) of a debt or equity interest in an entity located outside of the Russian Federation that derives 50 percent or more of its revenues from its ownership of a subsidiary located in the Russian Federation (e.g., through dividends paid up by the Russian subsidiary to the non-Russian parent company).  
• The purchase (including on the secondary markets) of a debt or equity interest in an entity located outside of the Russian Federation that derives 50 percent or more of its revenues from its ownership of real estate, a mine, or other physical property located in the Russian Federation. 

OFAC notes, however, the new investment prohibitions of the respective E.O.s do not prohibit U.S. persons from selling or divesting debt or equity securities issued by such entities to a non-U.S. person.  Moreover, U.S. financial institutions may clear and settle, or otherwise serve as market intermediaries in, such divestment transactions on the secondary market — including transactions between non-U.S. persons.  For the purposes of assessing whether certain purchases of debt or equity of an entity are permissible, U.S. financial institutions, including securities exchanges and other market intermediaries and participants, may reasonably rely upon the information available to them in the ordinary course of business.  

Examples of transactions that OFAC does not consider to be “new investment” for the purposes of the respective E.O. prohibitions include:

• The purchase (including on the secondary markets) of a debt or equity interest in an entity located outside of the Russian Federation provided that the entity derives less than 50 percent of its revenues from its ownership of a subsidiary or physical operation located in the Russian Federation. 
• The purchase (including on the secondary markets) of a debt or equity interest in an entity located outside of the Russian Federation whose revenue is exclusively derived from the commercial sale of goods or services to persons located in the Russian Federation.
• Activities that would be considered “maintenance” pursuant to FAQ 1050.  

Date Updated: January 17, 2023

Yes, the respective E.O.s prohibit U.S. persons from purchasing both new and existing debt and equity securities issued by an entity in the Russian Federation.  However, the new investment prohibitions of the respective E.O.s do not prohibit U.S. persons from selling or divesting debt or equity securities issued by an entity in the Russian Federation to a non-U.S. person (see FAQ 1049), including purchases of such debt or equity securities if ordinarily incident and necessary to the divestment or transfer of the debt or equity securities to a non-U.S. person.  U.S. financial institutions may clear and settle, or otherwise serve as market intermediaries in, divestment transactions on the secondary market—including transactions between non-U.S. persons.  

Please note that U.S. persons are not required to divest such securities and may continue to hold such previously acquired securities.  Moreover, the conversion of depositary receipts to underlying local shares of non-sanctioned Russian issuers would not be considered a prohibited “new investment” in the Russian Federation under the respective E.O.s.  

Additionally, the purchase of shares in a U.S. fund would not be considered a prohibited “new investment” under the respective E.O.s, unless the fund’s holdings of debt or equity securities issued by entities in the Russian Federation represent a 50 percent or more share by value of the fund.  Generally, the fund may also divest itself of these prohibited holdings.   

Date Updated: January 17, 2023

Yes.  Transactions related to the divestment or the facilitation of divestment of a pre-existing investment in a project or operation in the Russian Federation are not prohibited by the new investment prohibitions of the respective E.O.s.  Such transactions may not involve a blocked person or otherwise prohibited transactions unless exempt or authorized by the Office of Foreign Assets Control (OFAC).

The respective E.O.s prohibit any approval, financing, facilitation, or guarantee by a United States person, wherever located, of a transaction by a foreign person where the transaction by that foreign person would be prohibited if performed by a United States person or within the United States.  Such provisions do not prohibit U.S. persons from facilitating the wind down or divestment of an existing investment  in a project or operation in the Russian Federation.  For example, a U.S. financial institution is not prohibited from advising a client that seeks to divest from a project or operation in the Russian Federation (i.e., the seller in a transaction).  However, a U.S. person is prohibited from providing any approval, financing, facilitation, or guarantee to a non-U.S. person that seeks to invest in a project or operation in the Russian Federation (i.e., the buyer in such a transaction).  

Such provisions also do not prohibit U.S. persons from advising on the requirements of U.S. sanctions laws consistent with OFAC’s Guidance on the Provision of Certain Services Relating to the Requirements of U.S. Sanctions Laws.

For guidance related to divestment transactions in the secondary market involving debt or equity securities issued by an entity in the Russian Federation, please see FAQ 1054.

Updated: July 22, 2022

Yes, provided that the use of the funds by the subsidiary or affiliate is consistent with maintenance, as described in FAQ 1050.  “Maintenance” does not include the expansion of pre-existing projects or operations beyond those in effect prior to the effective dates of the respective E.O. prohibitions.  Therefore, U.S. persons may not fund new or expanded projects or operations undertaken by their subsidiaries and affiliates located in the Russian Federation after the effective dates of the respective E.O. prohibitions.

The prohibitions on “new investment” pursuant to the respective E.O.s do not prohibit the export or import of goods, services, or technology, or related sales or purchases, to or from the Russian Federation, provided that such transaction is made pursuant to ordinary commercial sales terms (e.g., a payment of an invoice for goods made within the contracted time period, where such payment does not involve ongoing participation in royalties or ongoing profits) (see FAQ 1049).  Such transactions can be supported through traditional trade finance products, including commercial letters of credit and documentary collections.  U.S. persons are not prohibited pursuant to the respective E.O.s from entering into new contracts or agreements for such transactions.

However, please note that U.S. persons are prohibited or restricted from exporting, reexporting, or importing certain goods and services involving the Russian Federation, as described by law (see, for example, section 1(a)(i) of E.O. 14068; see also FAQ 415).

For the purposes of the respective E.O. prohibitions, “new investment” generally excludes the maintenance of investments in the Russian Federation that were made prior to the effective dates of the respective E.O. prohibitions (“pre-existing projects or operations”).  “Maintenance” of investments includes:  

• Transactions to ensure continuity of pre-existing projects or operations located in the Russian Federation, including payments to employees, suppliers, landlords, lenders, and partners;
• The preservation and upkeep of pre-existing tangible property in the Russian Federation; and
• Activities associated with maintaining pre-existing capital investments or equity investments. 

As a general matter, “maintenance” includes all transactions ordinarily incident to performing under an agreement in effect prior to the effective date of the respective E.O. prohibitions (“pre-existing agreement”), provided that such transactions are consistent with previously established practices and support pre-existing projects or operations.  However, “maintenance” does not include the expansion of pre-existing projects or operations beyond those in effect prior to the effective dates of the respective E.O. prohibitions, even if pursuant to a pre-existing agreement, where such expansion occurs on or after the effective dates of the respective E.O. prohibitions.  Nor does “maintenance” include commitments pursuant to the exercise of rights under a pre-existing agreement where such commitment is made on or after the effective dates of the respective E.O. prohibitions.

In connection with maintenance activity, U.S. persons also may modify or alter pre-existing agreements, or enter into new contracts or agreements, provided that any transaction under such contracts or agreements are consistent with previously established practices and support pre-existing projects or operations.  For example, a pre-existing agreement may be modified, or new contract established, to substitute suppliers, conduct maintenance or repairs, or comply with new environmental or safety standards.  In assessing whether activity is consistent with past practice, the Office of Foreign Assets Control (OFAC) will consider all relevant facts and circumstances, including the transaction history between contract parties prior to the effective date of the respective E.O.s.

Note that maintenance activities must not involve blocked persons or other prohibited transactions unless exempt or otherwise authorized by OFAC.

For the purposes of the respective E.O.s, the Office of Foreign Assets Control (OFAC) views “investment” as the commitment of capital or other assets for the purpose of generating returns or appreciation.  OFAC interprets “new” investment as such a commitment made on or after the effective date of the respective E.O. prohibitions.  As a general matter, new investment includes such commitments that are pursuant to an agreement entered on or after the effective dates of the respective E.O. prohibitions.  New investment also includes such commitments pursuant to the exercise of rights under an agreement entered into before the effective dates of the respective E.O. prohibitions, where such commitment is made on or after the effective dates of the respective E.O. prohibitions.  We note, however, that new investment does not include the maintenance of an investment made prior to the applicable effective dates of the respective E.O. prohibitions (see FAQ 1050). 

Unless exempt or otherwise authorized by OFAC, transactions that OFAC considers to be “new investment” for the purposes of the respective E.O. prohibitions include:

• The purchase or acquisition of real estate in the Russian Federation, other than for noncommercial, personal use; 
• Entry into an agreement requiring the commitment of capital or other assets for the establishment or expansion of projects or operations in the Russian Federation, including the formation of joint ventures or other corporate entities in the Russian Federation;
• Entry into an agreement providing for the participation in royalties or ongoing profits in the Russian Federation;
• The lending of funds to persons located in the Russian Federation for commercial purposes, including when such funds are intended to be used to fund a new or expanded project or operation in the Russian Federation;
• The purchase of an equity interest in an entity located in the Russian Federation (see FAQs 1054 and 1055); and
• The purchase or acquisition of rights to natural resources or exploitation thereof in the Russian Federation.

Examples of transactions that OFAC does not consider to be “new investment” for the purposes of the respective E.O. prohibitions include:

• Entry into, performance of, or financing of a contract, pursuant to ordinary commercial sales terms, to sell or purchase goods, services, or technology to or from an entity in the Russian Federation (e.g., a payment of an invoice for goods, where payment is made within the contracted time period and such payment does not involve participation in royalties or ongoing profits);
• Maintenance of an investment in the Russian Federation, where the investment was made prior to the effective date of the respective E.O. prohibitions, including maintenance of pre-existing entities, projects, or operations, including associated tangible property, in the Russian Federation (see FAQ 1050); and
• Wind down or divestment of a pre-existing investment, such as a pre-existing investment in an entity, project, or operation, including any associated tangible property, located in the Russian Federation (see FAQs 1053 and 1054).

Even if a transaction is not a prohibited form of “new investment” pursuant to the respective E.O.s, U.S. persons engaging in the transaction must comply with all other relevant sanctions prohibitions, including those pursuant to Ukraine-/Russia-Related Sanctions Regulations and Russian Harmful Foreign Activities Sanctions Regulations (see, e.g., FAQ 415).  For example, the respective E.O.s include provisions prohibiting any approval, financing, facilitation, or guarantee by a United States person, wherever located, of a transaction by a foreign person where the transaction by that foreign person would be prohibited if performed by a United States person or within the United States.  For more information, see FAQ 1053.