Alerts

US Department of Commerce Announces New Russian Energy Sector Sanctions

08.14.14

Effective Aug. 6, 2014, the U.S. Department of Commerce Bureau of Industry and Security amended the Export Administration Regulations to implement the most recent sanctions reflecting U.S. policy toward Russia as a result of that country’s destabilization activities in Ukraine. The new rule imposes controls on certain items for use in Russia’s energy sector intended for exploration or production from deepwater (more than 500 feet), Arctic offshore or shale projects with the potential to produce oil or gas in Russia. U.S. companies exporting oil and gas equipment should take note that the rule now imposes controls on a wide range of items that were previously exportable to Russia without a license.

The new rule imposes export restrictions on those items listed in the new Russian Industry Sector Sanctions List (Supplement No. 2 to Part 746 of the EAR) and those specified on the Commerce Control List under Export Control Classifications Numbers (ECCNs) 0A998, 1C992, 3A229, 3A231, 3A232, 6A991, 8A992, and 8D999.

Covered items on the Russian Industry Sector Sanctions List include, but are not limited to, drilling rigs, parts for horizontal drilling, drilling and completion equipment, subsea processing equipment, Arctic-capable marine equipment, wireline and down hole motors and equipment, drill pipe and casing, software for hydraulic fracturing, high pressure pumps, seismic acquisition equipment, remotely operated vehicles, compressors, expanders, valves, and risers.

Items covered by the following eight ECCNs below are also subject to the new licensing requirement for Russia:

  • 0A998 Oil and gas exploration equipment, software, and data
  • 1C992 Commercial charges and devices containing energetic materials and nitrogen trifluoride in a gaseous state
  • 3A229 Firing sets and equivalent high-current pulse generators (for detonators controlled by 3A232)
  • 3A231 Neutron generator systems, including tubes
  • 3A232 Detonators and multipoint initiation systems
  • 6A991 Marine or terrestrial acoustic equipment capable of detecting and locating underwater objects or features or positioning surface vessels or underwater vehicles; and specially designed parts and components
  • 8A992 Vessels, marine systems or equipment, and marine boilers
  • 8D999 Software specially designed for the operation of unmanned submersible vehicles in the oil and gas industry

A license is required for the export, reexport, or transfer (in-country) of the above items when the exporter, reexporter, or transferor knows or is informed that the items will be used directly or indirectly in Russia’s energy sector for exploration or production from deepwater (greater than 500 feet), Arctic offshore, or shale projects in Russia that have the potential to produce oil or gas. A license is also required when an exporter is unable to determine whether the items will be used in such projects. Applications for licenses for any item that requires a license to Russia will be reviewed with a presumption of denial.

Exporters should carefully review the full product descriptions in the EAR to confirm whether their products are subject to the new rule. Terms such as “Arctic offshore” and “shale projects” are not defined in the new rule and may lead to confusion. Exporters may be required to seek guidance from BIS regarding the scope of these terms.

The Aug. 6 rule also adds United Shipbuilding Corporation to the Entity List. A BIS license is now required to export, reexport, or transfer any items subject to the EAR to United Shipbuilding Corporation. Such licenses are subject to a policy of denial.

For additional information, contact Gardere’s International Trade Partners Michelle Schulz (mschulz@gardere.com or 214.999.4181) and Elsa Manzanares (emanzanares@gardere.com or 214.999.4172).

The publications contained in this site do not constitute legal advice. Legal advice can only be given with knowledge of the client's specific facts. By putting these publications on our website we do not intend to create a lawyer-client relationship with the user. Materials may not reflect the most current legal developments, verdicts or settlements. This information should in no way be taken as an indication of future results.

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