US sanctions – Nord Stream 2 & TurkStream – CAATSA and PEESA

Summarized update on the United States sanctions on entities involved in the Nord Stream 2 and Turkstream gas Pipelines which are designed to bring natural gas from Russia to Europe.

Countering America’s Adversaries Through Sanctions Act (CAATSA)

On July 15, 2020, the US Department of State updated its guidance regarding the applicability of secondary sanctions under Section 232 of CAATSA to foreign persons who are involved in Nord Stream 2 or TurkStream. This updated guidance means that Section 232 of CAATSA since July potentially include any persons facilitating the construction or deployment of the pipelines, such as pipe-laying vessel operators and related engineering service providers, or those involved in financial aspects of such activities.

Protecting Europe’s Energy Security Act (PEESA) and Protecting Europe’s Energy Security Clarification Act (PEESCA)

PEESA, which came to force on December 20, 2019, enables sanctions on vessels engaged in pipe-laying and those foreign persons who 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 a project related to Nord Stream 2 or Turkstream.

On October 20, 2020, it was issued additional guidance for clarification regarding the phrase knowingly “provided those vessels for the construction of such a project”. Activities that may be subject to sanctions under PEESA or other relevant authorities include, but are not limited to, providing services or facilities for upgrades or installation of equipment for those vessels, or providing funding for such upgrades or installations. The guidance clarifies that sanctions will not apply to persons engaging in activities necessary for or related to the repair or maintenance of Nord Stream 2, TurkStream or any successor project. This includes activities necessary for environmental remediation in respect of the projects.

In late 2020 the PEESCA came into force as an amendment to PEESA with several additional provisions which expand the potential scope of PEESA. Such as sanctions against vessels that engage in “pipe-laying activities” in the construction of Nord Stream 2 and Turkstream. “Pipe-laying activities” has been widened to activities that facilitate pipe-laying, including site preparation, trenching, surveying, placing rocks, backfilling, stringing, bending, welding, coating, and lowering of pipe.

Conclusion

Those operators who may be or are involved in the Nord Stream 2 or TurkStream projects are recommended to review their sanction procedures and internal guidelines in respect of CAATSA and PEESCA regulations in order to ensure that there is no risk of becoming an object of any sanctions.

Alandia will continue to monitor these, and related, sanction regulations closely.
If you have any questions in relation to the above regulations please contact Alandia.