December 23, 2019

New US Sanctions Target Nord Stream 2 and Turkstream Pipeline Projects

On December 20, 2019, President Trump signed into law the National Defense Authorization Act for Fiscal Year 2020, which, in a title named "Protecting Europe's Energy Security Act of 2019" (PEESA), authorizes imposition of sanctions against persons involved in the Nord Stream 2 and Turkstream pipeline projects.

PEESA requires the Secretary of State, in consultation with the Secretary of Treasury, to issue a report to Congress by February 18, 2020 identifying:

  1. vessels engage in pipe-laying at depths of 100 feet or more below sea level for the construction of the Nord Stream 2 or Turkstream pipeline projects or any successor project thereto (collectively, the Targeted Projects); and
  2. non-US persons that have knowingly sold, leased or provided, or facilitated deceptive or structured transactions to provide, such vessels for construction of the Targeted Projects.

Additional such reports are required for each succeeding 90-day period thereafter.

Non-US persons identified in the reports, and corporate officers and principal shareholders of entities so identified, are – with immediate effect – ineligible to enter the US.  Moreover, the President is required to block and prohibit transactions concerning property and interests in property of persons identified in the reports, which is likely to result in their inclusion on the US list of Specially Designated Nationals.

The sanctions will not be imposed, however, upon persons certified by the President to have, not later than 30 days after enactment of the PEESA  (i.e., by January 19, 2020), engaged in good faith efforts to wind down operations that would otherwise call for imposition of sanctions under the PEESA.  Entities that wish to obtain such certification should thus ensure that their wind-down efforts begin in earnest no later than January 19, 2020.

There are certain exceptions in the PEESA, which apply to:

  • Authorized US intelligence, law enforcement and national security activities;
  • Admission of non-US persons into the US if required under UN-related commitments made by the US;
  • Activities intended for the safety of the crew aboard relevant vessels, protection of human life aboard such vessels, or maintenance of vessels to avoid environmental or other significant damage;
  • Persons engaging in activities necessary for or related to the repair of maintenance of, or environmental remediation with respect to, the Targeted Projects; and
  • Importation of goods into the US.

Finally, the PEESA provides the President with authority to waive application of such sanctions upon determining that doing so is in the national security interests of the US.

Get in touch with your usual Clyde & Co contact if you need specific advice on how this affects you.