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Enforcement Edge
March 10, 2022

President Biden Issues Executive Order Banning Import of Certain Russian-Origin Energy Products

Enforcement Edge: Shining Light on Government Enforcement

On March 8, 2022, President Biden issued an executive order (EO) broadly prohibiting imports of Russian-origin energy products into the US, including oil, liquefied natural gas (LNG), and coal. This latest measure follows several actions taken over the last several weeks to target Russia’s economy and other critical sectors in response to its continued activities in Ukraine.

Effective immediately, the following Russian products are banned:

  • Crude oil;
  • Petroleum;
  • Petroleum fuels, oils, and products of their distillation;
  • LNG;
  • Coal; and
  • Coal products

The EO also prohibits any new investment in the Russian energy sector by a US person and restricts US persons from approving, financing, facilitating, or guaranteeing a transaction by a foreign person if that transaction would be prohibited under the EO. The EO defines new investment in the Russian energy sector as “a transaction that constitutes a commitment or contribution of funds or other assets for, or a loan or other extension of credit to, new energy sector activities (not including maintenance or repair) located or occurring in the Russian Federation.” The energy sector is defined as “the procurement, exploration, extraction, drilling, mining, harvesting, production, refinement, liquefaction, gasification, regasification, conversion, enrichment, fabrication, or transport of petroleum, natural gas, liquified natural gas, natural gas liquids, or petroleum products or other products capable of producing energy, such as coal or wood or agricultural products used to manufacture biofuels, the development, production, generation, transmission or exchange of power, through any means, including nuclear, electrical, thermal, and renewable.”

The Treasury Department’s Office of Foreign Assets Control (OFAC) issued general license (GL) 16, which permits the import of these products through April 22, 2022, if pursuant to a written contract or agreement made prior to the March 8 EO. GL 16 does not authorize new contracts. Several FAQs were also issued to clarify the scope of the prohibition. The EO only applies to certain Russian-origin products and does not prohibit imports of non-Russian-origin energy products that transit or depart from Russia. Additionally, the EO does not prohibit US persons from engaging in transactions to sell or re-direct shipments destined to the US that were laden on or after March 8.

Other Western allies also announced their intention to enact similar bans. The UK stated it would begin phasing out imports of Russian oil and oil products. Meanwhile, the European Commission published its plans to cut the EU’s dependency on Russian energy by two-thirds by the end of this year.

Sanctions imposed thus far largely have avoided Russia’s energy sector, likely due in part to the country’s status as the second largest exporter of petroleum. Efforts are underway to soften the blow, including coordinating the release of barrels of oil from strategic reserves as well as encouraging an up-tick in production in places like Saudi Arabia, Venezuela, the United States, and others.

Companies actively involved in Russia’s energy sector should be aware of these new restrictions. More broadly, the coordinated effort among allies signals further sanctions and trade restrictions may be imposed if the crisis in Ukraine continues.

© Arnold & Porter Kaye Scholer LLP 2022 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.