Shearman & Sterling LLP
Issue link: https://digital.shearman.com/i/1422677
3 RUSSIA Just months after effectively greenlighting the completion of the Nordstream 2/Turkstream gas pipelines, the U.S. State Department this quarter announced new sanctions against two entities and one vessel for involvement in the project. Russia's attack on opposition leader Alexei Navalny prompted new sanctions pursuant to the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991, including new restrictions on the export of weapons material from the U.S. to Russia. Finally, the leaders of Turkey and Russia met in September to discuss a second purchase by Turkey of Russia's S-400 missile defense equipment, prompting a flurry of new sanctions threats from U.S. lawmakers. Biden Streamlines Russian Pipeline Authorities While State Department Identifies New Sanctions Targets As reported last quarter, the State Department in May made the controversial decision to waive enforcement of sanctions against key figures in the development and completion of the Nordstream 2 pipeline. The decision not to sanction Nordstream 2 AG (the company overseeing the Nordstream 2 project), and the company's CEO, Matthias Warnig, prompted threats from members of Congress to pass legislation to reverse the waiver. Those threats subsided this quarter and the waivers remain in place. While the waiver effectively greenlighted the pipeline's completion, the Biden Administration nonetheless revised the sanctions regime to fill a gap. On August 20, President Biden signed Executive Order 10439, titled "Blocking Property with Respect to Certain Russian Energy Export Pipelines." The order is designed to further implement sanctions provided for under The Protecting Europe's Energy Security Act of 2019 (PEESA), the 2019 statute that calls for mandatory sanctions on non-U.S. persons determined to have sold, leased, or provided subsea pipe-laying vessels for the construction of the Nord Stream 2 or Turkstream pipelines, unless specifically waived by the State Department. E.O. 10439 expands the authority delegated to OFAC so that it may now impose full-scale blocking sanctions on any person named in the State Department's periodic reports to Congress. Notably, E.O. 10439 does not expand the scope of sanctionable activity. As required under PEESA, the State Department submitted to Congress in August an updated report which identified new sanctions targets in connection with the construction of the Nord Stream 2 pipeline. Specifically, the State Department identified two Russian entities and one vessel for their involvement in the project: