us-sanctions 23 July 2020

CAATSA update will address investments in Russian oil export pipelines

The US State Department said it has updated its Countering America’s Adversaries Through Sanctions Act (‘CAATSA’), warning that Washington will not brook certain investments in Russian energy export pipelines, including the Nord Stream 2 pipeline to Germany and the second line of TurkStream, which plans to transport Russian gas to Europe via Turkey.

The State Department said that the update to Section 232 of the Act ‘allows for the imposition of sanctions on persons making certain investments or engaging in certain other activities with respect to Russian energy export pipelines.’

It added that, ’The Department of State intends to clarify that our implementation of Section 232 will now include investments or other activities related to a broader scope of Russian energy export pipelines, including Nord Stream 2 and the second line of TurkStream.’

It warned that ‘persons making such investments or engaging in such activities, including but not limited to financing partners, as well as pipe-laying vessels and related engineering service providers engaging in the deployment of the pipelines, may be subject to sanctions.’

The United States has been vehemently opposed to the Nord Stream 2 project, fearing it will increase Russia’s economic and political influence in Germany and other European countries. Last year, western ships were forced to stop work on the project after a US bill enabled Washington to impose sanctions on any vessel that helps Russia complete the pipeline. Russia has since sent its own vessel to the Baltic Sea to lay the remaining 160 kilometers of pipeline.

On Tuesday, the US House of Representatives passed an amendment that would impose new sanctions on companies helping Russia complete the Nord Stream 2 pipeline, which is more than 90% complete. The Democrat-controlled House passed the amendment to the National Defense Authorization Act (‘NDAA’) earlier this month. It must be approved by the Senate and signed by the president before the new sanctions become law.

Meanwhile, the State Department said it is not imposing any sanctions under CAATSA at this time. ‘However, if we determine that the imposition of sanctions under Section 232 is appropriate under this updated guidance, we will not hesitate to do so,’ it warned.

‘We encourage companies to reassess their participation in Russian energy export pipelines subject to Section 232, and to take appropriate steps to mitigate their exposure to sanctions, pursuant to this updated guidance,’ the State Department said. ‘We will also continue to coordinate with allies and partners in our efforts to implement Section 232 to avoid harming their energy security or endangering public health and safety.’