On Tuesday, March 8, 2022, President Biden announced a new ban on the import of Russian oil, liquefied natural gas (LNG), and coal to the United States—the latest retaliatory measure by the U.S. government following the Russian invasion of Ukraine. As summarized in a prior Venable alert, the Department of Commerce and Bureau of Industry and Security (BIS) also took steps to expand export controls on the Russian oil refinery sector. These actions represent an escalation of the U.S. government’s trade restrictions against Russia, which until recently had largely exempted Russian energy transactions.
The most recent developments regarding Russia-Ukraine conflict include:
1. March 8, 2022 Executive Order (EO) Prohibiting Certain Russian Energy Imports and Related Guidance
This Executive Order (March 8th EO), which builds off of EO 14024 (Apr. 15, 2021) and EO 14039 (Aug. 20, 2021), bans the following activities:
- U.S. imports of all Russian-origin crude oil, petroleum, petroleum fuels, oils, and products of their distillation, liquefied natural gas, coal, and coal products.
- New investments in Russian energy sector by a U.S. person, wherever located.
- Any approval, financing, facilitation, or guarantee by a U.S. person, wherever located, of a transaction by a foreign person in the Russian energy sector (i.e., prohibiting U.S. persons from participating in foreign company investments in the Russian energy sector).
- Any other transaction by a U.S. person that evades, or intends to evade, any of the above prohibitions.
In accompaniment, the U.S. Department of Treasury, Office of Foreign Asset Control (OFAC) issued General License No. 16, which authorizes the wind-down of Russian energy transactions entered prior to March 8, 2022, until April 22, 2022.
Additionally, OFAC updated its FAQs to provide clarifying guidance on the scope of the March 8th EO, with additional regulations forthcoming. In particular, we note the following:
- FAQ 1020 – Clarifies that the March 8th EO does not cover dealings in crude oil of the Caspian Pipeline Consortium, nor does the EO cover imports of non-Russian origin crude oil, even if such items “transit through or depart” from Russia.
- FAQ 1019 – Per a forthcoming OFAC regulation, the term “Russian Federation origin” in the March 8th EO means “goods produced, manufactured, extracted, or processed in the Russian Federation, excluding any Russian Federation origin good that has been incorporated or substantially transformed into a foreign-made product” (emphasis added). Further, the phrase “new investment in the energy sector in the Russian Federation” 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 (not including maintenance or repair) located or occurring in the Russian Federation beginning on or after March 8, 2022.”
- FAQs 1017 and 1010 – Clarifies that while General License 8A (Feb. 28, 2022, authorizing certain transactions related to energy with Russian financial institutions) remains in effect until June 24th, any transactions related to the new investment in the energy sector in Russia are not authorized.
- FAQ 1016 – Clarifies that the March 8th EO does not prohibit the import of shipments of listed products that were contracted prior to March 8, 2022 (e.g., shipments of products that were “previously destined” for the U.S.).
Similar action by the United Kingdom targeting the Russian oil sector is anticipated and will be confirmed.
2. BIS Adds 91 Entities with Links to Russia to Entity List
In addition to the new restrictions on the Russian energy sector, on March 4, 2022, BIS added 91 new entities in ten countries (including entities in Russia, Belize, Estonia, Kazakhstan, Latvia, Malta, Singapore, Slovakia, Spain, and the United Kingdom) to its Entity List on the basis of Section 744.11 of the Export Administration Regulations (EAR), which authorizes license requirements for entities acting contrary to the national security or foreign policy interests of the U.S. In this case, BIS targeted these 91 entities for their involvement in or contribution to the Russian military or defense sector. As a result, for each of these 91 entities, BIS now requires a license for all items subject to the EAR.