President Biden announced sweeping restrictions on imports and new investments in the Russian energy sector in an Executive Order (E.O.) published March 8, 2022.
Broadly, the E.O. bans the importation of Russian oil, liquefied natural gas (LNG), and coal into the United States. As set forth in the E.O., the importation into the United States of the following products from Russia is now prohibited: crude oil; petroleum; petroleum fuels, oils, and products of their distillation; liquefied natural gas; coal; and coal products. Beyond restrictions on importation, the E.O. also prohibits new investments in the energy sector in the Russian Federation by U.S. persons, wherever located.
Importantly, U.S. persons, wherever located, cannot approve, finance, guarantee, or otherwise facilitate any transaction by a foreign person if the transaction would be prohibited if performed by a U.S. person or within the United States. Additionally, any transaction that evades or avoids the prohibitions of the E.O., or any conspiracy formed to violate any of the prohibitions set forth in the E.O., is also prohibited.
The Office of Foreign Asset Control (OFAC) also issued General License 16, which authorizes transactions that are ordinarily incident and necessary to the importation of these products pursuant to written contracts or written agreements entered prior to March 8, 2022, through 12:01 a.m. EDT, April 22, 2022.
OFAC has also issued a set of Frequently Asked Questions (FAQs) addressing the scope of the E.O. Of particular note are the following:
- There is no blanket prohibition in dealings in crude oil of the Caspian Pipeline Consortium (CPC). Distribution systems such as those within the CPC can segregate various sources of crude oil, meaning that non-Russian origin crude oil can be marketed and loaded separately. The E.O. applies only to the import of certain products of Russian Federation origin to the United States and excludes imports that are not of Russian Federation origin, even if such items transit through or depart from the Russian Federation. Accordingly, the E.O. does not necessarily prohibit dealing in crude oil of the CPC. (FAQ 1,020)
- Not all energy imports from Russia are prohibited. The E.O. prohibitions only apply to the oil, LNG, and coal products specified in the E.O.; they do not apply to imports of other forms of energy of Russian Federation origin, such as uranium for nuclear power plants. In addition, the E.O. does not prohibit importation of non-Russian Federation origin products, even if such items transit through or depart from the Russian Federation. However, targeted prohibitions or restrictions may apply to certain energy-related dealings with specified Russian persons under other sanctions authorities, such as E.O. 13662 or E.O. 14024. (FAQ 1,014)
- The E.O. does not invalidate Russia-related General License 8A, which authorizes transactions “related to energy” involving specified Russian financial institutions. General License 8A remains in effect until 12:01 EDT, June 24, 2022, unless renewed. (FAQ 1,017)
Companies engaged in the importation of Russian oil, gas or coal into the United States should carefully review their activities to ensure that any transactions do not violate the E.O. and/or meet the requirements of General License 16. Additional restrictions relating to the importation of Russian-origin goods are also being contemplated by Congress. U.S. companies should determine the extent of their business dealings with Russia to be aware of any activities that could be captured by future sanctions.
U.S. sanctions with respect to Russia and Ukraine are expected to continue changing in the coming days and weeks. Contact us if you have questions about these developments or their potential impact on your business.