US Sanctions Targeting Nordstream 2 and Turkstream Pipelines

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The National Defense Authorisation Act for Fiscal Year 2020 (“NDAA 2020”) was signed into force by President Trump on Friday 20 December 2019.

NDAA 2020 contains a number of sanctions related measures, one of which specifically targets certain European energy programmes in which Russia plays a significant role. Title LXXV of the Act is called the ‘Protecting Europe’s Energy Security Act of 2019 (“the Act”), and is designed to limit Russia’s influence over Europe’s energy demands. The restrictions imposed by the Act have specific application to certain shipping-related activities.

Within 60 days of its enactment (i.e. 18 February 2020) the State Department is required to produce a report (as well as every 90 days thereafter), identifying:

(1) any vessels that have engaged in pipe-laying at depths of 100 feet or more below sea level for the construction of Nord Stream 2 or TurkStream pipelines (or any project that is a successor to either such project);

(2) any foreign (i.e. non-US) persons that have:
• knowingly sold, leased, or provided those vessels for the construction of such a project; or
• facilitated deceptive or structured transactions to provide those vessels for the construction of such a project.

In the event of a breach being reported by the State Department the US may:
(a) freeze the property of all persons identified in the report to the extent that such property is or comes within the US; and
(b) prohibit the entry into the US of “corporate officers” or “controlling shareholders” of persons so designated.

The Act provides for a wind-down period of 30 days. A related OFAC FAQ clarifies that in the context of winding down activities permitted by the Act “…involved parties that have knowingly sold, leased, or provided vessels that are engaged in pipe laying at depths of 100 feet or more below sea level for the construction of Nord Stream 2 or Turkstream must ensure that such vessels immediately cease construction-related activity.”

The Act provides for limited exceptions, including activities that are:

• “…intended for the safety and care of the crew aboard the vessel, the protection of human life aboard the vessel, or the maintenance of the vessel to avoid any environmental or other significant damage”;
• “necessary for or related to the repair or maintenance of, or environmental remediation with respect to, a pipeline project”

Members engaging in activities which might be caught by the restrictions or which might otherwise fall within the limited exceptions provided for under the Act should consult with the Club.