On Thursday [February 24], the U.S. Treasury announced a long list of sanctions against Russia, with some taking aim at state-owned diamond miner Alrosa and its CEO, Sergey S. Ivanov.
The new rules do not proscribe U.S. companies from doing business with Alrosa. Instead, President Biden’s executive order forbids them from engaging in transactions with the publicly traded miner involving “new debt of longer than 14 days maturity or new equity.”
While these moves are an attempt to limit Alrosa’s ability to raise U.S. capital, they could affect other transactions, says a member alert from the Jewelers Vigilance Committee (JVC).
The U.S. Treasury defines debt as “bonds, loans, extensions of credit, loan guarantees, letters of credit, drafts, bankers acceptances, discount notes or bills, or commercial paper,” and equity as “stocks, share issuances, depositary receipts, or any other evidence of title or ownership.”
That definition of debt could prohibit certain transactions with Alrosa or its affiliates, including memo agreements, JVC said.
An Alrosa spokesperson tells JCK via email that it doesn’t sell diamonds on memo and intends to conduct business as usual.
“We are carefully studying the new working conditions in connection with the imposed sanction,” said the spokesperson. “We do our best to guarantee the integrity of our operations, trading activities, and interaction with clients, including the work of our U.S. office.”
The JVC alert recommended companies be extra cautious in the current environment.
“Any U.S. business that is currently transacting with Alrosa or Alrosa USA should evaluate the status of any transactions and work to ensure that their transactions do not violate the sanctions,” it said.
It also noted that since a number of Russian banks were sanctioned, “businesses should be careful to check the [sanctioned entities] list before proceeding with any transaction.”
JVC adds that this order does not apply to any goods acquired from Alrosa before Feb. 24, which may be traded as usual. However, it recommends that businesses keep records specifying when Russian-origin goods were acquired.
Along with the new moves against Alrosa, the company’s CEO, Sergey S. Ivanov (also known as Sergey Ivanov Jr.), has been classified as a Specially Designated National (SDN) by the Office of Foreign Assets Control (OFAC). That means he can’t do business in the United States or with any U.S. citizens, and any U.S. assets will be seized.
Alrosa says that the designation will have no effect. “Sergey Ivanov never had assets abroad,” it said.
JVC warns that designation could be a red flag for further action.