You're reading: Many businesses win OK to bypass US sanctions

In the two years since the United States imposed sanctions on Russia, nearly 1,000 separate entities and individuals have requested exemptions.

Of the sanction targeting top Russian officials and their banks, the U.S. Treasury issued a license in roughly 20 percent of cases.

According to U.S. government documents obtained by the Kyiv Post, a significant portion of these requests appear to be from Ukrainian companies and businesspeople attempting to conduct transactions with Russian officials and institutions.

They include: Ukraine International Airlines; Steinman Shippings Ltd., an offshore company linked to arms smuggling between Ukraine and South Sudan; and a network of companies apparently linked to the Turkmen distributor of products made by Ukrainian President Petro Poroshenko’s confectionery company, Roshen.

The U.S. imposed sanctions in response to Russia’s 2014 annexation of Crimea and the Kremlin’s war in the Donbas. Four separate sanction regimes target top Russian officials, banks, and key sectors of the Russian economy.

But the sanctions, administered by the U.S. Treasury’s Office of Foreign Asset Controls, known as OFAC, are not bulletproof: Organizations and individuals can request licenses to gain permission to conduct transactions that would otherwise be prohibited.

A licensed transaction then becomes legal.

The U.S. Treasury relies on America’s centrality to the global financial system, through which it can assert broad jurisdiction to enforce U.S. sanctions on foreign companies, according to Hamilton Loeb, a sanctions attorney at Washington DC law firm Paul Hastings.

“If you’re going to deal with a buddy of (Russian President Vladimir) Putin, even if you were a foreign company… you want to be sure that this is not going to come back and bite you,” Loeb said.

The Kyiv Post obtained a list of companies and individuals that had requested licenses via the U.S. Freedom of Information Act. OFAC declined to comment on the record.

Scandalous companies

The list shows some companies that appear to be connected to questionable business practices that flourished under the regime of ousted President Viktor Yanukovych.

A company called NF Trading AG applied for two licenses to be exempted from the sanction that prohibits dealings with top Russian officials and their banks – Executive Order 13661. That sanction covers individuals such as Deputy Prime Minister Dmitry Rogozin, as well as entities like Kalashnikov, the famous small arms manufacturer.

The Swiss-registered NF Trading is a subsidiary of gas trade intermediary Group DF, owned by Ukrainian oligarch Dmytro Firtash. According to company registry information, however, a man named Dmitry Glebko directs NF Trading. Glebko is known for also having directed RosUkrEnergo, the Firtash-Gazprom joint venture whose business of exporting Russian and other natural gas to Ukraine ended in allegations of price gouging – all denied by Firtash, who has insisted he was an honest broker in the trade. The U.S. is seeking Firtash’s extradition from Austria to stand trial on bribery charges that he also denies.

The Firtash-owned Ostchem company closed NF Trading’s Ukrainian office in September 2015, according to a report from Interfax-Ukraine. But the fact that the company repeatedly applied for licenses reveals that transactions involving the Russian elite continued well beyond Firtash’s March 13, 2014, arrest in Vienna and the supposed start of reform in the Russia-Ukraine gas trade.
OFAC denied one request from Group DF, while the response to a second request was redacted.

A Group DF spokesman did not directly reply to a request for comment, but instead demanded to see the OFAC document that the Kyiv Post received.

Another company on the list, Steinman Shippings Ltd., was linked to a 2011 arms smuggling scandal.

Steinman Shippings, which applied for a sanctions license in 2014, is owned by a company called Cascado AG, according to a 2013 leak of offshore data provided to the International Consortium of Investigative Journalists.

The Panama-registered Cascado has been previously identified as the owner of the MV Faina – the cargo ship that, in 2008, was found after Somali pirates hijacked the vessel to be smuggling tanks from Ukraine to South Sudan.

The scandal surrounding the Faina revealed that Cascado was owned by a Latvian man named Erik Vanagels. Further reports linked the company, and Vanagels, to fraud across Eastern Europe, including a scheme that involved embezzlement during Ukrainian state procurement of pharmaceuticals.

The final beneficial owner of Cascado was never identified. Steinman Shippings received a so-called return-without-action letter for two licensing requests.

Roshen trace

Two other companies that asked for licenses lead back to Cascado AG, and to an apparent cluster of offshore firms linked to Ukrainian businessmen.

Two UK-registered firms – Peleston LLP and Stock Plaza LLP – applied to the OFAC for licenses. Both companies are currently controlled by the same two director firms: the Belize-based Viala Trade Ltd. and the Panama-based Gateno Ventures Ltd.

According to publicly available records, both Gateno Ventures and Cascado were set up by the same person: Ricardo Cambra la Duke, a Panamanian lawyer.

La Duke and his companies appear to be the connecting point for dozens of Ukrainian businesses.
Gateno and Viala control dozens of companies registered at the United Kingdom address of 43 Bedford St., London. Peleston, for example, is registered at 43 Bedford St.

Another Gateno-owned company is also registered at 43 Bedford St.: Foreway Sales LLP, a company to which Roshen purportedly sent nearly $1 million in candy exports. 2015 records for Roshen’s candy exports to Turkmenistan list the “country of trade” as the United Kingdom, even though the exports were listed as being sent to a Turkmen company.

Another company, not owned by Gateno, is also listed at 43 Bedford St.: Roshen UK Limited.
Vyacheslav Moskalevsky, managing director of Roshen, told the Kyiv Post in a telephone interview that Foreway Sales was set up by Roshen’s Turkmen distributor. A Roshen spokeswoman said in a later phone call that Roshen had no record of any payments to Foreway Sales.

“It’s normal in the confectionary business to use these sorts of intermediary companies,” Moskalevsky said, adding that Roshen UK Limited is unconnected to Roshen-Ukraine.
Roshen is owned by Ukrainian President Poroshenko, who says he has transferred the company to a blind trust, but has yet to publicly provide documentary evidence of the details of the transfer.

The sheer number of Ukraine-connected shell companies at 43 Bedford St. has already attracted media attention – the Ukrainian investigative journalist team Nashi Groshi published an article in 2014 on the address, calling it “London’s dormitory for Roshen and Yanukovych.”

La Duke told the Kyiv Post that his law firm “rarely deal[s] with individual clients.”

“We are not willing and have not knowingly engaged clients that have allegedly acquired assets in a fraudulent matter,” La Duke said in a statement.

Air travel

Ukraine International Airlines, among others, applied for a license twice, and received one once.
According to UIA spokeswoman Yevgeniya Satska, the company applied for a license because the Russian civil aviation authority’s bank account was located in a sanctioned bank. In order to pay the authority fees for using Russian airspace services, Satska said, it was therefore necessary to sidestep a sanction.

Satska declined to provide the name of the bank, though Bank Rossiya remains the first bank to be hit with sanctions by the U.S. government. This would also account for the presence of numerous international airlines, like Emirates and KLM, on the list of companies that received licenses.

A number of other Ukrainian airlines also applied for licenses. Motor Sich, the Zaporizhiya-based carrier, applied for two licenses and received one. UTAir-Ukraine Airlines, the defunct carrier formerly owned by a Russian carrier, applied for two licenses as well; one was denied, while the other was approved.

Two of Ukraine’s richest and most powerful oligarchs are Dmytro Firtash (L) and Igor Kolomoisky. (Ukrafoto, courtesy)Two of Ukraine’s richest and most powerful oligarchs are Dmytro Firtash (L) and Igor Kolomoisky. (Ukrafoto, courtesy)

Two of Ukraine’s richest and most powerful oligarchs are Dmytro Firtash (L) and Igor Kolomoisky. (Ukrafoto, courtesy)

Ukrainian banks

Three Ukrainian banks also made requests for licenses.

One bank, called Bank National Investments, made 13 separate requests.
The requests continued through 2015, until the National Bank of Ukraine began to liquidate the bank due to insolvency and the NBU’s purported inability to determine who most of National Investments’ investors were.

Prominvestbank, 99 percent owned by Russia’s Vnesheconombank, requested a license for an unspecified transaction under the sectoral sanctions, which prohibit financing the debt of Gazprom and companies in Russia’s arms industry for a period longer than 90 days.

Ihor Kolomoisky’s PrivatBank applied for a license three times – one request was denied, while the OFAC informed the bank two other times that it did not need a license because it was located outside U.S. jurisdiction.

In a statement to the Kyiv Post, a PrivatBank spokesman denied that the financial institution was attempting to bypass U.S. sanctions.