[Federal Register Volume 85, Number 142 (Thursday, July 23, 2020)]
[Notices]
[Pages 44561-44563]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-15901]
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DEPARTMENT OF STATE
[Public Notice: 11163]
Notice of Department of State Update to the Public Guidance for
Section 232 of the Countering America's Adversaries Through Sanctions
Act of 2017 (CAATSA)
ACTION: Notice.
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SUMMARY: The Department of State is updating the public guidance for
CAATSA Section 232 on July 15, 2020 to expand the focus of
implementation of Section 232 to address certain growing threats to
U.S. national security and foreign policy related to Russian energy
export pipelines, particularly with respect to Nord Stream 2 and the
second line of TurkStream. The Department of State deleted the portions
of the public guidance in effect prior to July 15, 2020, that limited
the focus of implementation of Section 232 to Russian energy export
pipeline projects for which a contract was signed on or after August 2,
2017. In doing so, the Department of State clarified that the focus of
implementation will include Russian energy export pipelines such as
Nord Stream 2 and the second line of TurkStream.
DATES: The update to the public guidance for Section 232 is effective
on July 15, 2020.
ADDRESSES: The Department of State has published the updated public
guidance for Section 232 on its website. https://www.state.gov/caatsa-crieea-section-232-public-guidance/
FOR FURTHER INFORMATION CONTACT: Stu Hoffman at
[email protected] or (202)-647-7201.
SUPPLEMENTARY INFORMATION:
Background
The Department of State is updating the public guidance for Section
232 on July 15, 2020 to expand the focus of implementation of Section
232 to address certain growing threats to U.S. national security and
foreign policy related to Russian energy export pipelines, particularly
with respect to Nord Stream 2 and the second line of TurkStream. Russia
uses its energy export pipelines to create national and regional
dependencies on Russian energy supplies, leveraging these dependencies
to expand its political, economic, and military influence and
undermining U.S. national security and foreign policy interests. In
this context, Nord Stream 2 and the second line of TurkStream--both of
which are under construction--could undermine Europe's energy security
by maintaining Russia's dominant share in Europe's gas markets for
decades, discouraging investment in critical diversification projects,
and limiting the ability of European countries to gain leverage over
Russia on issues of price, commercial transparency, and the
environment. These projects could severely limit gas transit revenues
through Ukraine, thereby depriving the Ukrainian government of
significant transit revenues and reducing a large deterrent against
further Russian aggression against Ukraine. The development of these
projects also provides Russia with vehicles to further spread its
malign influence in Europe.
The Department of State deleted the portions of the public guidance
in effect prior to July 15, 2020, that limited the focus of
implementation of Section 232 to Russian energy export pipeline
projects for which a contract was signed on or after August 2, 2017. In
doing so, the Department of State clarified that the focus of
implementation will include Russian energy export pipelines such as
Nord Stream 2 and the second line of TurkStream.
In addition, the Department of State deleted the portions of the
public guidance in effect prior to July 15, 2020 that stated that
investments and loan agreements made prior to August 2, 2017 would not
be subject to Section 232. The Department of State has clarified how it
intends to apply Section 232 to such investments and loan agreements in
FAQs #3-5 below.
The updated public guidance continues to make clear that
implementation of Section 232 will not target investments or other
activities related to the standard repair and maintenance of pipelines
in existence on, and capable of transporting commercial quantities of
hydrocarbons, as of August 2, 2017.
Accordingly, the Department of State's public guidance for Section
232 is updated as follows:
CAATSA Section 232 Public Guidance
The Department of State is committed to fully implementing
sanctions authorities in the Countering America's Adversaries Through
Sanctions Act (CAATSA or the Act). We continue to call on Russia to
honor its commitments to the Minsk agreement and to cease its malicious
cyber intrusions.
Section 232 sanctions are discretionary. In accordance with
Sections 212 and 232 of the Act, the Secretary of State, in
consultation with the Secretary of the Treasury, will coordinate with
allies of the United States in imposing these sanctions. The intent of
such sanctions would be to impose costs on Russia for its malign
behavior, such as in response to aggressive actions against the United
States and our allies and partners.
Any implementation of Section 232 sanctions would seek to avoid
harming the energy security of our partners or endangering public
health and safety. Consistent with the Act (Section 257), it remains
the policy of the United States to ``work with European Union Member
States and European institutions to promote energy security through
developing diversified and liberalized energy markets that provide
diversified sources, suppliers, and routes.''
For the purposes of Section 232, the focus of implementation would
be on energy export pipelines that (1) originate in the Russian
Federation, and (2) transport hydrocarbons across an international land
or maritime border for delivery to another country. Pipelines that
originate outside the Russian Federation and transit through the
territory of the Russian Federation would not be the focus of
implementation.
The focus of implementation of Section 232 sanctions would be on
persons who the Secretary of State, in consultation with the Secretary
of the Treasury, determines knowingly, on or after August 2, 2017, (1)
made an investment that meets the fair market value thresholds in
Section 232(a) and directly and significantly enhances the
[[Page 44562]]
ability of the Russian Federation to construct energy export pipelines,
or (2) sells, leases, or provides to the Russian Federation goods or
services that meet the fair market value thresholds in Section 232(a)
and that directly and significantly facilitate the expansion,
construction, or modernization of energy export pipelines by the
Russian Federation.
Implementation of Section 232 sanctions would not target
investments or other activities related to the standard repair and
maintenance of pipelines in existence on, and capable of transporting
commercial quantities of hydrocarbons, as of August 2, 2017.
Frequently Asked Questions
1. Why is the Department of State issuing updated public guidance for
Section 232 on July 15, 2020?
The Department of State is updating the public guidance for Section
232 on July 15, 2020, to expand the focus of implementation of Section
232 to address certain growing threats to U.S. national security and
foreign policy interests related to Russian energy export pipelines,
particularly with respect to Nord Stream 2 and the second line of
TurkStream. Russia uses its energy export pipelines to create national
and regional dependencies on Russian energy supplies and leverages
these dependencies to expand its political, economic, and military
influence and undermine U.S. national security and foreign policy
interests.
In this context, Nord Stream 2 and the second line of TurkStream--
both of which are under construction--could undermine Europe's energy
security by maintaining Russia's dominant share in Europe's gas markets
for decades, discouraging investment in critical diversification
projects, and limiting the ability of European countries to gain
leverage over Russia on issues of price, commercial transparency, and
the environment. These projects could destabilize the Ukrainian economy
and government severely limiting gas transit through Ukraine, thereby
depriving the Ukrainian government of significant transit revenues and
reducing a large deterrent against further Russian aggression against
Ukraine. The development of these projects also provides Russia with
vehicles to further spread its malign influence in Europe.
2. What specific changes to the public guidance for Section 232 did the
Department of State make on July 15, 2020?
The Department of State deleted the portions of the public guidance
in effect prior to July 15, 2020, that limited the focus of
implementation of Section 232 to Russian energy export pipeline
projects for which a contract was signed on or after August 2, 2017. In
doing so, the Department of State clarified that the focus of
implementation will include Russian energy export pipelines such as
Nord Stream 2 and the second line of TurkStream.
In addition, the Department of State deleted the portions of the
public guidance in effect prior to July 15, 2020, that stated that
investments and loan agreements made prior to August 2, 2017, would not
be subject to Section 232. The Department of State has clarified how it
intends to apply Section 232 to such investments and loan agreements in
FAQs #3-5 below.
The updated public guidance continues to make clear that
implementation of Section 232 will not target investments or other
activities related to the standard repair and maintenance of pipelines
in existence on, and capable of transporting commercial quantities of
hydrocarbons, as of August 2, 2017.
3. Will the Department of State impose sanctions under Section 232 on a
person who made investments or engaged in other activities prior to
July 15, 2020, that were not the focus of implementation of Section 232
sanctions pursuant to the public guidance in effect prior to July 15,
2020, but are now the focus of implementation of Section 232 sanctions
pursuant to the public guidance in effect on July 15, 2020?
No. The Department of State will not impose Section 232 sanctions
for activity undertaken prior to July 15, 2020, that was consistent
with the public guidance in effect prior to July 15, 2020; see also
FAQs 4 and 5.
4. Will the Department of State impose sanctions under Section 232 on a
person who made investments or engaged in other activities on or after
July 15, 2020, that are ordinarily incident and necessary to the wind
down of operations, contracts, or other agreements in effect prior to
July 15, 2020?
No, provided that: (1) Such investments or other activities are
consistent with the guidance in effect prior to July 15, 2020; (2) such
investments or other activities are undertaken pursuant to a written
contract or written agreement entered into prior to July 15, 2020; and
(3) the person making such investments or engaging in such activities
is taking reasonable steps to wind down the operations, contracts, or
other agreements as soon as possible after July 15, 2020.
5. Will the Department of State impose sanctions under Section 232 on a
person who made investments or engaged in other activities on or after
July 15, 2020, that are ordinarily incident and necessary to the
maintenance of operations, contracts, or other agreements in effect
prior to July 15, 2020?
The Department of State may impose sanctions under Section 232 on a
person who made such investments or engaged in such activities on or
after July 15, 2020. This applies, but is not limited, to persons
facilitating the construction or deployment of the pipelines such as
financing partners, pipe-laying vessel operators, and related
engineering service providers. Except as provided in FAQ #4 above, the
updated guidance does not grandfather contracts or other agreements
signed prior to July 15, 2020.
6. Does the Department of State consider either the Nord Stream 2
pipeline or the second line of TurkStream to be a pipeline in existence
on, and capable of transporting commercial quantities of hydrocarbons,
as of August 2, 2017, for purposes of Section 232?
No. As a result, investments or other activities related to the
standard repair and maintenance of these pipelines could be the target
of sanctions.
7. How will the Department of State interpret the term ``investment''
as used in Section 232 of CAATSA?
For purposes of implementing Section 232 of CAATSA, the Department
of State will interpret the term ``investment'' broadly as a
transaction that constitutes a commitment or contribution of funds or
other assets or a loan or other extension of credit to an enterprise.
For purposes of this interpretation, a loan or extension of credit is
any transfer or extension of funds or credit on the basis of an
obligation to repay, or any assumption or guarantee of the obligation
of another to repay an extension of funds or credit, including:
Overdrafts, currency swaps, purchases of debt securities issued by the
Government of Russia, purchases of a loan made by another person, sales
of financial assets subject to an agreement to repurchase, renewals or
refinancing whereby funds or credits are transferred or extended to a
borrower or recipient described in the provision, the issuance of
standby letters of credit, and drawdowns on existing lines of credit.
[[Page 44563]]
8. Does the updated public guidance apply to the first line of
TurkStream?
The first line of TurkStream, which is designed exclusively to
supply Turkey's domestic natural gas market, is not the focus of our
Section 232 implementation efforts.
Melissa Simpson,
Deputy Assistant Secretary, Bureau of Energy Resources, Department of
State.
[FR Doc. 2020-15901 Filed 7-22-20; 8:45 am]
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