Sanctions are a tool that is used by the initiator of restrictive measures to put pressure on geopolitical rivals, individual states or certain territories. States and organizations impose sanctions and create liabilities for their violation at the legislative level.

However, direct sanctions do not always lead to the desired political result for their initiator. Countries under sanctions look for and successfully find new ways of development, new business partners, open up new markets and often even take advantage of the current situation.

The beneficiaries of the expansion of the scope of sanctions measures are the United States. A division of the United States Department of the Treasury, the Office of Foreign Assets Control, commonly known as OFAC, is the originator of the 50% Rule.

For the first time OFAC applied the 50% Rule in 2008 as part of its Iran containment program. Subsequently, the Rule was extended to other sanctions programs.

According to the 50% Rule, any entity that is 50% or more owned, directly or indirectly, by one or more sanctioned entities is also treated as a sanctioned entity, even if it is not on the list.

The purpose of the Rule was to extend sanctions to all entities that may be directly or indirectly associated with individuals and companies under sanctions.

Let's take a look at the application of the 50% Rule with a few examples.

Person X is sanctioned and owns 60% of Company A. Company A owns 50% of Company B. At the same time companies A and B are not on the sanctions list.

According to the 50% Rule both companies A and B are subject to sanctions restrictions.

Person X is sanctioned and owns 40% of Company A. Company A owns 80% of Company B. At the same time companies A and B are not on the sanctions list.

According to the 50% Rule companies A and B will not be subject to sanctions restrictions.

Person X and Company are under sanctions. Person X owns 4% and Company owns 47% of Company A. At the same time company A is not on the sanctions list.