On August 2, 2017, President Trump signed the Countering America’s Adversaries Through Sanctions Act (the Act) into law. While the Act introduces several changes to the Russia, Iran, and North Korea sanctions programs, this article will focus on changes related to the Russia sanctions program. As we have previously outlined, Congress sought to strengthen the Russia sanctions by: (i) directly enhancing certain sanctions, (ii) mandating that the President institute new sanctions (depending on specific findings of fact), and (iii) authorizing the President to institute certain additional sanctions. We discuss two important changes.

Russia-Specific Sectoral Sanctions

The Act directs the Secretary of Treasury to tighten the restrictions related to certain debt transactions within 60 days after enactment of the Act, i.e., by October 1, 2017:

• Currently, Directive 1 of the existing sectoral sanctions prohibits all transactions in, provision of financing for, and dealings in new debt of longer than 30 days maturity of persons (including entities) listed by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) as subject to Directive 1, their property, or their interests in property. Under the Act, the maturity date for new debt is changed from 30 to 14 days.
• Currently, Directive 2 of the existing sectoral sanctions prohibits all transactions in, provision of financing for, and other dealings in new debt of longer than 90 days maturity of persons (including entities) listed by OFAC as subject to Directive 2, their property, or their interests in property. Under the Act, the maturity date for new debt is changed from 90 to 60 days.

Directive 4 must be modified by the Secretary of Treasury no later than 90 days after enactment of the Act, i.e., by October 31, 2017.

• Directive 4 will now prohibit the provision, exportation, or reexportation, directly or indirectly, of goods, services (except for financial services), or technology in support of exploration or production for deepwater, Arctic offshore, or shale projects that (i) have the potential to produce oil and (ii) involve any person determined to be subject to the Directive, their property, or their interests in property, who has a controlling interest or substantial non-controlling ownership interest in such a project defined as not less than a 33% interest.
• Two important changes are worth highlighting.

First, the new Directive 4 will prohibit the transactions described above as related to projects having the potential to produce oil anywhere in the world. Previously, Directive 4 only prohibited the transactions described above as related to projects in the Russian Federation, or in maritime area claimed by the Russian Federation and extending from its territory.

Second, in a departure from OFAC practice, the Act imposes sanctions on entities or projects where such entities or projects have sanctioned owners with a “substantial non-controlling” ownership interest. Under this formulation, the ownership interest would be less than a 50% interest and could be as low as a 33% interest.

Russia-Specific Export Pipelines

The Act provides the President with discretion to impose sanctions, after coordination with U.S. allies, on any person who knowingly facilitates the development of energy export pipelines in the Russian Federation. Language specifying that the U.S. shall coordinate with U.S. allies prior to imposing these discretionary sanctions was reportedly included in response to lobbying by European governments and others who vigorously opposed this provision. Although the term “coordination” is not defined, it may indicate congressional intent that discretionary sanctions should not be imposed under this section absent some level of consensus with allies.

As noted, the Act introduces additional changes to the Russia, Iran, and North Korea sanctions program. Thus, any companies engaged in activities related to these jurisdictions should carefully consider what, if any, impact the Act may have on such operations.