Frequently Asked Questions

1055. Do the new investment prohibitions of Executive Order (E.O.) 14066, E.O. 14068, or E.O. 14071 (collectively, “the respective E.O.s”) prohibit U.S. persons from lending funds to, or purchasing a debt or equity interest in, entities located outside of the Russian Federation?    

Answer

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

Date Released
June 6, 2022