Russian Energy Industry Sanctions

Russian Energy Industry Sanctions

Russian Energy Industry Sanctions
Arctic Drilling by Russia

EAR section 746.5, titled “Russian Energy Industry Sanctions”

Effective August 6th, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) imposed a variety of Russian energy industry sanctions.

These new sanctions of the Export Administration Regulations (EAR) impose the following restrictions:

No item classified under ECCNs 0A998, 1C992, 3A229, 3A231, 3A232, 6A991, 8A992 or 8D999 may be exported to Russia without a license if it will be used for energy exploration or productions in deepwater (greater than 500 feet), Arctic offshore, or in shale projects.  Also, items identified by Schedule B number in Supplement No. 2 to Part 746 of the EAR are subject to the same export / re-export restrictions and license requirements as the ECCNs identified in paragraph 1 if again they are to be used for energy exploration or productions in deepwater (greater than 500 feet), Arctic offshore, or in shale projects.

Essentially, items that are now licensable for shipment to Russia include, but are not limited to, drilling rigs, parts for horizontal drilling, drilling and completion equipment, subsea processing equipment, Arctic-capable marine equipment, wireline and down hole motors and equipment, drill pipe and casing, software for hydraulic fracturing, high-pressure pumps, seismic acquisition equipment, remotely operated vehicles, compressors, expanders, valves, and risers. (The items currently controlled under ECCN 0A998 are oil and gas exploration data (such as seismic analysis data), design and analysis data/software for hydraulic fracturing; hydraulic fracking proppant, fracking fluid, and chemical additives thereof; and high pressure pumps for hydraulic fracturing). Additionally, a new ECCN 8D999 was added to the Commerce Control List to control the export / re-export to Russia of software specially designed for the operation of unmanned submersible vehicles in the oil and gas industry.

These Sanctions are No Joke

The export or re-export of such items requires a license if the exporter or re-exporter cannot determine whether the item will be used in such projects. And the licensing policy for the items subject to these new license requirements is a “presumption of denial.” No licenses will be issued unless there is an overriding US foreign policy interest in granting a license.

These new EAR provisions are in addition to those actions already taken by OFAC. This is important because OFAC sanctions against Ukraine and Russia control the activities of “U.S. Persons” as defined by OFAC to be any of the following:

  • U.S. citizen,
  • Permanent resident alien,
  • Entity organized under the laws of the United States, or
  • Any jurisdiction within the United States (including foreign branches), or
  • Any person in the United States.

In general, the following items and entities are subject to the EAR for purposes of the new Russian license requirements:

  • All items in the United States, including in a U.S. Foreign Trade Zone or moving in transit through the United States from one foreign country to another
  • All U.S. origin items, wherever located in the world, whether in the possession of a U.S. Person or in the possession of a non-U.S. Person
  • Foreign-made commodities that incorporate controlled U.S.-origin commodities of 25% or more by value, wherever located in the world, whether in the possession of a U.S. Person or in the possession of a non-U.S. Person

No less noteworthy is that these new export restrictions were effective immediately and shipments that were already en route to Russia at the time of publication should be not delivered and should be brought back to the United States or re-routed to consignees in other countries who will not forward the goods on to Russia.

Russian Energy Industry Sanctions
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