Companies Restructure to Escape the Brunt of U.S. Sanctions
January 24 2020 - 6:15PM
Dow Jones News
By Kristin Broughton
The planned restructuring of Swedish oil refiner Nynas AB shows
how some companies are trying to disentangle ownership to free
themselves from U.S. sanctions.
Stockholm-based Nynas this week said it would reorganize with
the goal of getting out from under U.S. sanctions. The company is
co-owned by Petróleos de Venezuela SA, which holds a slight
majority of shares, and the Finnish company Neste Oyj.
Petróleos de Venezuela, or PdVSA, is Venezuela's state-owned oil
company. It is on a U.S. blacklist and at the center of a U.S.
campaign to pressure Venezuelan President Nicolás Maduro, whose
government the U.S. considers corrupt and illegitimate.
Nynas has blamed its financial woes on sanctions against PdVSA.
In a plan published Tuesday, Nynas said it has been unable to
access basic banking services in recent months despite receiving a
key exemption from the U.S. Treasury Department.
The company's restructuring plan is the latest attempt to
reorganize as a result of U.S. sanctions.
Two years ago, Swiss manufacturer Sulzer AG changed its
ownership structure to escape sanctions against its former majority
owner, the Renova Group, a conglomerate with ties to blacklisted
Russian oligarch Viktor Vekselberg. Last year, the Treasury
Department removed Russian aluminum company Rusal from its
sanctions list after a blacklisted billionaire and close ally of
President Vladimir Putin, Oleg Deripaska, agreed to divest a
majority stake.
The Nynas plan underscores the limitations of general licenses,
a tool used by the Treasury Department's Office of Foreign Assets
Control to encourage banks to provide services to companies and
sectors that OFAC wants to protect, sanctions lawyers said. OFAC
administers and enforces U.S. economic sanctions.
"Sanctions aren't always as precise as they need to be," said
Michael Gershberg, a partner at the law firm Fried, Frank, Harris,
Shriver & Jacobson LLP who focuses on sanctions and
international trade.
Although general licenses are intended to send a message to the
financial sector that it is permissible to do business with a
particular company or sector, some banks simply avoid them for fear
of running afoul of sanctions, lawyers said.
Nynas, which refines oil used for paving and other industrial
products, said in its restructuring plan that its shareholders
agreed to a new ownership structure. The company didn't provide
details on how it will restructure, but said it would work with
Carnegie Investment Bank AB to negotiate with investors regarding
short-term bridge financing and long-term equity investments.
Nynas declined to comment on its reorganization plan, which the
company posted on its website.
Nynas in its plan said it would only move forward with the
reorganization if it receives written confirmation from OFAC that
it would no longer be subject to U.S. sanctions.
A spokeswoman for OFAC declined to comment.
Nynas said in its restructuring plan that its financial troubles
began in August 2017 when the U.S. imposed sanctions on PdVSA, a
move designed to curb the Venezuelan oil company's access to
funding. The sanctions initially resulted in higher purchasing
costs and restrictions on accessing credit through U.S. banks,
according to the reorganization plan.
OFAC escalated its campaign to pressure PdVSA in January 2019,
adding the company to its blacklist, but created an exemption for
Nynas by issuing the Swedish company a general license permitting
transactions that don't also involve PdVSA.
Banks, however, have been unwilling to do business with Nynas,
the company said in its plan, citing potential risks and compliance
burdens of working with an entity with ties to sanctioned
entities.
"Nynas can thus, from time to time, neither make nor receive
payments," the company said in its plan. "Even more serious is the
fact that Nynas hasn't been able to borrow new funds."
Write to Kristin Broughton at Kristin.Broughton@wsj.com
(END) Dow Jones Newswires
January 24, 2020 18:00 ET (23:00 GMT)
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