The media has repeatedly suggested that such restructuring is aimed at protecting Evraz plc from possible sanctions against beneficiaries on the part of the United States. However, as previously existed, and the new ownership structure of shares of Evraz plc does not allow to completely avoid the risk of sanctions in the case of sanctions against its beneficiaries.
Changes in the composition of the shareholders did not affect the percentage of the voting stock of existing beneficiaries. Now the biggest beneficiaries of Evraz plc are still Roman Abramovich (30.52%), Alexander Abramov (20.92%), Alexander Frolov (of 10.45%), Gennady Kozlov (5,80%), Alexander Vagin (5,74) and Eugene Shvidler (2,97%).
In addition to the U.S. President and the U.S. Congress wide discretion to expand the list of individuals subject to the sanctions, has the Office for foreign assets control at the U.S. Treasury Department (OFAC) and other Executive agencies in the US. Thus, at their discretion, a person may be included in the sanctions list.
Sanctionnee regulation in the US changed after Donald trump signed on 2 August 2017, the Law on counteraction to opponents of America through sanctions (CAATSA). This law introduced additional sanctions against Russia and several other countries as well as the new powers OFAC. Now the Agency has discretion to impose additional sanctions against sectors such as Railways, Maritime transport, metallurgy and mining. CAATSA also obliged the US Treasury Department in cooperation with the U.S. Department of State and the Director of National intelligence to prepare a report for the higher Russian political figures and oligarchs.
In the framework of CAATSA 29 January 2018, the US Treasury Department issued a so-called the Kremlin report, or report “On important foreign policy figures and the oligarchs in the Russian Federation and the companies with state participation”. In fact, the list of business is given in the Kremlin’s report is completely copied from the Russian part of the global list of Forbes – it includes all the Russians, whose condition exceeds $1 billion On such formal criteria in the list of oligarchs came and the three largest beneficiary of Evraz plc – Roman Abramovich, Alexander Abramov and Alexander Frolov.
The Kremlin report is not a “sanctions list”. The inclusion of natural or legal persons in it should not in any way be interpreted as entailing the imposition of sanctions against these individuals or organizations and is not an official confirmation that any of these persons meets the criteria for the application of the sanctions regime. Moreover, the inclusion of individuals in the report by itself does not create any prohibitions or restrictions on relationship with them for the citizens, residents and companies in the United States or foreign entities.
Thus, it appears that the inclusion of a person in the report has no legal effect. Probably, the main aim of the report was the establishment among the Russian businessmen and politicians fear and tension, due to the fact that at any time in respect of the report of persons can be sanctioned.
Of the 96 billionaires listed in the report, only in relation to the six sanctions were imposed in April 2018 is Vladimir Bogdanov, Oleg Deripaska, Suleiman Kerimov, Kirill Shamalov, Andrey Skoch and Vekselberg. In this connection, the contact in the Kremlin the report and the subsequent imposition of sanctions against several individuals from the report made a number of Russian businessmen to think about preventive measures in order to avoid damage to their business is unpredictable the sanctions policy of the United States.
Despite the fact that at the moment neither Evraz plc, nor its shareholders and beneficiaries are not included in the lists of persons subject to sanctions, it cannot be excluded that in the future the situation may change as the company operates in the steel sector, and its largest beneficiaries appear in the Kremlin report.
The sanctions regime automatically applies to companies more than 50% of the share capital which in the aggregate directly or indirectly by one or more persons included in the sanctions lists. Under indirect possession refers to the ownership of the company one or more persons included in the sanctions lists, through another company or other companies, more than 50% of the share capital of which is collectively owned by such persons.
For example, after the introduction of the April sanctions against Viktor Vekselberg and his company of JSC Renova group Sulzer, a Swiss AGLtd owned by “Renova” of 63.4%, automatically became subject to the sanctions regime. In this regard, Viktor Vekselberg has reduced the share of Renova to 48.8%, sold 14.6% of the shares of Sulzer AGLtd one of the structures of the company (Sulzer Ltd) of the company.
A different regime applies to companies under the control of the persons included in the sanctions lists, but not owned by them, directly or indirectly, 50% or more. The sanctions regime in respect of such companies may only be imposed at the discretion of OFAC, and is not installed automatically.
It happened with Oleg Deripaska and his companies AgroHolding “Kuban” Basic Element Limited, B-Finance Ltd, En+ Group Plc, Group “GAZ”, JSC “EuroSibEnergo”, JSC “Russian machines” and United Company Rusal Plc, who together with him were included in the sanctions list. Currently, Deripaska is trying to achieve exceptions from the sanctions of companies En+ Group plc, UC Rusal plc and GAZ Group through negotiations with OFAC. This was developed a “Plan Barker”, in which Oleg Deripaska has left the Board of Directors of En+ and UC Rusal and should reduce its stake in En+ to below 50%. To fulfill these agreements, OFAC has extended until October 23, 2018 deadline for completion of transactions in shares and debt of these companies, and also ordered American citizens and investors of the company to terminate all contracts and discontinue the interaction with them within the specified period, they should get rid of the stocks and bonds of these companies.
Subject to rule of 50%, in the case of sanctions against both of the main beneficiaries of Evraz plc (Abramovich, Frolov and Abramov), the sanctions regime will be extended to Evraz plc, as together they indirectly own more than 50% of shares of Evraz plc, namely 61,89%. However, if sanctions are to be imposed only in respect of one beneficiary or two of them with a combined hold less than 50%, Evraz plc will not automatically be subject to sanctions. However, the above possibilities to avoid the application of the 50% were not the result of a recent restructuring, as it did not affect the proportion of beneficiaries in Evraz plc.
So now to talk about that recent restructuring in Evraz plc was aimed at preventing the spread of the company under the sanctions, it is impossible. In any case, OFAC and other US authorities have extensive powers to impose sanctions and may set them against any companies affiliated with caught in the sanctions list face, regardless of the 50%.