On April 15, 2021, President Joe Biden issued an Executive Order declaring a new national emergency with respect to the actions of the Russian government and authorized the Secretary of the Treasury, Secretary of State, and Attorney General to implement a sweeping series of sanctions. The newly imposed sanctions represent a significant escalation and addition to the sanctions architecture put in place by the Obama and Trump Administration. Critically for entities in the commodities sector, this Executive Order authorizes sanctions against any Russian citizens, nationals, or entities determined by the Secretary of State to be directly or indirectly engaged in, or attempting to have engaged in, cutting or otherwise disrupting gas or energy supplies to Europe, the Caucasus, or Asia.
While to date, no entity has been sanctioned pursuant to this authorization the Executive Order is clearly meant to be a shot across Russia’s bow – warning Russia not to engage in past actions like the 2008-2009 shutoff of gas flows to the Ukraine, which impacted much of Southeastern Europe.
Moreover, provisions in the EO could be used by the US government to escalate sanctions on Nord Stream 2 and Turkstream, two pipelines that, when completed, would supply natural gas to Europe. (Turkstream is already supplying natural gas to Bulgaria and Serbia.) Both these pipelines have already been the targets of US sanctions over the last several years. Bipartisan Congressional opposition currently exists to Nord Stream 2, and both the Administration and members of Congress from both sides of the aisle have expressed concerns that it will harm Europe’s energy independence. In March, Secretary of State Anthony J. Blinken described that pipeline as “a bad deal…. a Russian geopolitical project intended to divide Europe and weaken European energy security.”
If your company engages in transactions with gas or energy companies in Russia, it is important that you take note of these rapidly moving developments. Action steps to consider:
- conduct due diligence on these companies
- ensure that you closely monitor upcoming sanctions
- ensure that your contract include protections for you and your projects should US sanctions be imposed on your counterparties.
For more detailed information on all aspects of this Executive Order, please see a related alert here. Learn more about the impact of the EO on your business by contacting any of the authors.