On March 8, 2022, the White House issued a new Executive Order, “Prohibiting Certain Imports and New Investments with Respect to Continued Russian Federation Efforts to Undermine the Sovereignty and Territorial Integrity of Ukraine” (“Energy-Related EO”), that, among other things, bans the import into the United States of certain Russian-origin energy products and new investments in the Russian energy sector. A new import, export, and investment ban on additional Russian sectors will be addressed via a forthcoming separate blog post.
Concurrently, the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) issued Russia-related General License No. 16 (“GL 16”), published eight new FAQs: 1013, 1014, 1015, 1016, 1017, 1018. 1019, and 1020, and updated existing FAQs: 976 and 1010 to aid in the wind-down of deliveries of existing purchases that have already been contracted for and to help clarify the scope of the Energy-Related EO. See OFAC’s Recent Actions page available here for more information on these developments.
The Energy-Related EO prohibits the following activities:
- the import into the United States of Russian-origin crude oil; petroleum; petroleum fuels, oils, and products of their distillation; liquefied natural gas; coal; and coal products (“Targeted Energy Products”);
- “new investment in the energy sector” in Russia by a US Person; and
- any approval, financing, facilitation, or guarantee by a US Person of a transaction by a foreign person where the transaction by that foreign person would be prohibited the Energy-Related EO, if performed by a US Person or within the United States.
“US Person” means US entities and their non-US branches; US citizens and lawful permanent residents wherever located or employed, and any person physically located in the United States. See also below the description of the OFAC FAQs which clarify certain of the terms used in the Energy-Related EO.
The Energy-Related EO does not prohibit US Persons from (i) transactions such as the unwinding of contracts or other business-related activities in an effort to comply with the import ban or (ii) engaging in transactions to sell or re-direct shipments that were laden on or after March 8, 2022 and previously destined for the United States.
GL 16 authorizes transactions otherwise prohibited by the Energy-Related EO that are ordinarily incident and necessary to the import of Targeted Energy Products that are pursuant to pre-existing written contracts or written agreements entered into prior to March 8, 2022 until 12:01 a.m. eastern, April 22, 2022. To clarify, GL 16 does not authorize entry into new contracts.
New FAQs on the Energy-Related EO and GL 16
OFAC issued FAQs to clarifying the scope of the above, as follows:
- FAQ 1014 clarifies that the Energy-Related EO does not prohibit the importation of other energy products, and does not prohibit imports of non-Russian origin energy products, even if such items transit through or depart from Russia.
- FAQ 1015 clarifies that the Energy-Related EO does not prohibit transactions such as the unwinding of contracts to comply with the import ban, or transactions to sell or re-direct shipments laden on or after March 8, 2022, previously destined for the United States. Likewise, FAQ 1016 clarifies that the Energy-Related EO does not prohibit US Persons from selling or re-directing Targeted Energy Products previously intended for import into the United States.
- FAQ 1017 clarifies that General License 8A, authorizing certain transactions “related to energy,” remains valid but does not authorize transactions prohibited by the Energy-Related EO. Our blog post on General License 8A is available here.
- FAQ 1018 clarifies that non-US parties will not face secondary sanctions risks where importing Targeted Energy Products into non-US jurisdictions, so long as no sanctioned parties are involved.
- FAQ 1019 provides the following definitions related to the Energy-Related EO:
- “Russian Federation origin” means goods produced, manufactured, extracted, or processed in the Russian Federation, excluding any good that has been incorporated or substantially transformed into a foreign-made product.
- “New investment in the energy sector” in Russia means a transaction that constitutes a commitment or contribution of funds or other assets for, or a loan or other extension of credit to, new energy sector activities located or occurring in the Russian Federation beginning on or after March 8, 2022. For purposes of this interpretation, a loan or extension of credit is any transfer or extension of funds or credit on the basis of an obligation to repay, or any assumption or guarantee of the obligation of another to repay an extension of funds or credit.
- “Energy sector” includes the procurement, exploration, extraction, drilling, mining, harvesting, production, refinement, liquefaction, gasification, regasification, conversion, enrichment, fabrication, or transport of petroleum, natural gas, liquified natural gas, natural gas liquids, or petroleum products or other products capable of producing energy, such as coal or wood or agricultural products used to manufacture biofuels, the development, production, generation, transmission or exchange of power, through any means, including nuclear, electrical, thermal, and renewable.
- FAQ 1020 states that the Energy-Related EO does not prohibit dealing in the crude oil of the Caspian Pipeline Consortium.