US Sectoral Sanctions

What's Newest (cont'd) The CAATSA sec. 232 related impactful development: 15 July 2020 State Dep't amendment of Oct. 2017 Guidance removes key grandfathering carve-out for pipeline projects (such as NS2) that were underway upon CAATSA's August 2017 enactment also removes the carve-out for investments and loan agreements made before August 2017 - thus seemingly now exposing the participating European energy companies and other "finance partners" to risk of section 232 sanctions but accompanying new State Dep't FAQs somewhat soften this aggressive new stance - by indicating that such pre-July 2020 participation as such will not be targeted (see FAQs 3-5) the FAQs also stress intended CAATSA 232 application to proposed TurkStream second line (TS2) as well And now State Dep't 20 Oct. guidance on PEESA (thus "jumping the gun" on anticipated PEESCA / NDAA 2021 enactment) clarifying that knowingly providing vessels for construction of such project "may cover foreign firms or persons who provide certain services or goods that are necessary or essential to the provision of operation of a [pipelaying vessel]" including "providing services or facilities for upgrades or installation of equipment for those vessels, or funding for upgrades or installation of equipment for those vessels" Further in this regard Russia's reported intent to complete NS2 (even possibly restarting work this month) ܀ ܀ having readied its own pipe laying vessel ("Akademik Cherskiy") and support vessels, and gotten permission to work in Denmark's sea zone but the tightening US sanctions (by law and executive guidances) continue to scare off non-Russian supporting participation (by insurers and most recently DNV-GL, the leading Norway-based certification agency) - thus causing further delay this on top of direct threat letter of 5 August 2020 from Senator Cruz and two others to executives of the German port that has been serving as staging area for completion of NS2 (which has triggered considerable backlash in Germany) - and other US anti-NS2 diplomatic pressure continues to date possible EU countermeasures under consideration (including conceivable application of blocking statute) various views in German gov't - mostly pro-NS2, but also some fresh opposition sparked by the Navalny poisoning note Germany's reported offer earlier this year to finance receiving terminals for US LNG in exchange for the USG dropping its opposition to sanctions against NS2 but also a most recent reported idea (apparently inspired by the gov't entity exception in PEESCA environmental fund that would funnel help for the project - see slide 7) of a German regional Not clear whether Biden Admin. could reach accommodation with Germany that would allow NS2 to be completed See generally the US Congressional Research Service report of 28 Sept. 2020 on NS2 Morgan Lewis 8

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