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31 CFR § 589.205 - Prohibited transactions with respect to oil producing activities in the energy sector of the Russian Federation economy (Directive 4).

Date issued: May. 02 2022

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589.205 Prohibited transactions with respect to oil-producing activities in the energy sector of the Russian Federation economy (Directive 4).

The following activities by a U.S. person or within the United States are prohibited: 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:

(a) That have the potential to produce oil in the Russian Federation, or in maritime area claimed by the Russian Federation and extending from its territory, and that involve any person determined to be subject to this section, their property, or their interests in property; or

(b) That are initiated on or after January 29, 2018, that have the potential to produce oil in any location, and in which any person determined to be subject to this section, their property, or their interests in property has a 33 percent or greater ownership interest, or ownership of a majority of the voting interests.

Note 1 to § 589.205. This section does not apply to projects that have the potential to produce gas only.

Note 2 to § 589.205. The names of persons subject to this section (and earlier versions of Directive 4) are published in the Federal Register and incorporated into OFAC’s Sectoral Sanctions Identifications List (SSI List) with the descriptive text “Executive Order 13662 Directive Determination - Subject to Directive 4.” Certain transactions with persons subject to this section may result in the imposition of secondary sanctions, and therefore such persons’ entries on the SSI List will also include the descriptive prefix text “Secondary sanctions risk:”, followed by information about the applicable secondary sanctions authority. The SSI List is accessible through the Ukraine-/Russia-Related Sanctions page on OFAC’s website: www.treas.gov/ofac. See § 589.411 concerning entities that may not be listed on the SSI List but whose property and interests in property are nevertheless subject to the prohibitions of this section.

Note 3 to § 589.205. See § 589.412 concerning projects in which persons subject to paragraph (b) of this section own a 33 percent or greater ownership interest, or ownership of a majority of the voting interests.

Note 4 to § 589.205. See § 746.5 of the Export Administration Regulations (15 CFR parts 730 through 774) for the Department of Commerce’s related license requirement on exports, reexports, and transfers (in-country) of certain items for use in specified deepwater, Arctic offshore, or shale projects.

Note 5 to § 589.205. Section 216 of CAATSA (22 U.S.C. 9511) requires Congressional review prior to the termination of sanctions imposed pursuant to E.O. 13662. Section 222 of CAATSA (22 U.S.C. 9522) describes the Congressional notification required prior to the termination of sanctions imposed pursuant to E.O. 13662.
External link location:
https://www.ecfr.gov/cgi-bin/text-idx?SID=2d5afa2cb880d557cc00ad2dd3cea64a&mc=true&node=pt31.3.589&rgn=div5#se31.3.589_1205

TURBOFAC Commentary (308 words)

Notes:

1) This provision implements SSI Directive 4. See comments to SSI Directive 4 (web version) for further details. There are no substantive differences between this provision and SSI Directive 4, but the "Notes" are new.

In re: Note 1 to § 589.205 implements FAQ # 414.

In re: Note 2 to § 589.205, see FAQ 545 and 589.413(i), which effectively remove the practical secondary sanctions risk that would otherwise be associated in dealings with SSI list entities that have no U.S. nexus.

In re: Note 5 to § 589.205, see section 222 of Countering America's Adversaries Through Sanctions Act (pdf version).

2) See 589.334 - Shale projects and 589.308 - Deepwater projects. Apart from those two definitional provisions, the 5-2-2022 amendments to the URSR do not meaningfully interpret this Directive in a way that was not otherwise evident from OFAC's previously published FAQs addressing the directive.

Other Directive 4-related regulatory provisions are the following:

31 CFR § 589.301 - Arctic offshore projects.
31 CFR § 589.310 - Effective date.
31 CFR § 589.320 - Initiated.
31 CFR § 589.330 - Production.
31 CFR § 589.411 - Entities owned by one or more persons whose property and interests in property are blocked or who are subject to § 589.202, § 589.203, § 589.204, or § 589.205.
31 CFR § 589.412 - Projects owned, or to which a majority of voting rights are held, by one or more persons subject to § 31 CFR § 589.205.

3) If you are looking for all Research System items dealing with this directive, go to the search interface and type SSI Directive [1, 2 3 or 4] in "Filter Items by Discrete legal Provision of Authority to Which Item Pertains". Using the URSR CFR cite will miss certain documents issued or last amended prior to the implementation of the SSI Directives in the URSR.