US Sectoral Sanctions

EU Sectoral Sanctions (cont'd) Loans - for Energy (and Military) Companies and Banks (cont'd) Certain carve-outs provided (per Reg. art. 5.3, amended as of Dec. 2014) Trade finance exemption: for "loans or credit having a specific / documented objective to provide financing for non-prohibited imports or exports of goods and non-financial services between the [EU] and any third State" (intended for use by targeted entity) But not for purpose of funding any such entity (see art. 12) Practical approach to the interplay here: compliant vs. circumvention? (see Reg. art. 12) And see EU Guidance Note FAQ 11: this exception "should be interpreted narrowly" (but also FAQS 11-21 clarifications) And note these further EU Guidance Note FAQ clarifications Post-Sept. 2014 cancellation of a pre-Sept. 2014 loan = prohibited new loan (FAQ 25) A new term deposit at a targeted bank isn't barred (but see FAQ 27 re circumvention) Correspondent banking (or other payment / settlement services) is in itself # making or being part of arrangement to make new loan or credit (FAQ 28, and see FAQs 1 and 2) - contrast this with the US/OFAC position, see slide 20 Payment terms / delayed payment for goods / services # prohibited loan/credit - but warning that may suggest circumvention if (per FAQ 30) "not in line with normal business practice", or "have been substantially extended" since 12 Sept. 2014 Some forms of prepayment finance for Russian oil producers are permissible (and occurring daily) Note the Feb. 2020 UK Office of Financial Sanctions Implementation announcement of penalty against a major UK-based bank for making several loans to then-Sberbank-sub. Denizbank of Turkey in violation of Reg. article 5.3 Morgan Lewis 78

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