On August 2, 2017, President Donald Trump signed into law the Countering America’s Adversaries Through Sanctions Act (the “CAATSA” or “Act”), which imposes additional sanctions on Russia, Iran, and North Korea.
Russia
In drafting the CAATSA, Congress intended to restrict the Executive Branch’s ability to lift sanctions against Russia. To that end, the Act codifies previous executive orders sanctioning Russia and provides Congress the ability to restrict the President from implementing certain measures that would significantly alter current sanctions against Russia.
The Act imposes new sanctions against Russia in response to Russian cyber-attacks intended to disrupt the 2016 U.S. presidential election. Namely, the CAATSA blocks and prohibits transactions in all property and interests in property of persons identified by the President as undermining U.S. cybersecurity and persons identified as human rights violators. Previous legislation has been modified to limit certain projects related to crude oil extraction and to block the property and interests in property of corrupt Russian officials and their associates.
The Act also modifies the preexisting Sectoral Sanctions, discussed in our July 2014 memorandum and in our September 2014 memorandum, by shortening the maturity terms for dealings in new debt. The Act modifies Directive 1 such that U.S. persons are now prohibited from transacting in, providing financing for, or otherwise dealing in new debt with a maturity of longer than 14 days for persons identified on OFAC’s Sectoral Sanctions Identifications (SSI) List (reduced from 30 days). Directive 2, which targets Russia’s energy sector, has been modified such that U.S. persons cannot deal in debt longer than 60 days (reduced from 90 days).
Additionally, the Act amends Directive 4 to prohibit the provision, exportation, or reexportation by U.S. persons or persons within the U.S. of goods, services (except for financial services), or technology in support of exploration or production for new deepwater, Arctic offshore, or shale projects that have the potential to produce oil and that involve any person designated under Directive 4 or where the designated entity has a controlling interest or a substantial non-controlling ownership interest in such a project (defined as not less than a 33 percent interest). Directive 4 has thus been broadened insofar as it previously applied to projects involving entities owned 50 percent or more by a Directive 4 entity and was previously limited in geographic scope to projects in Russia.
As always, proceed with care when considering business dealings with entities in the financial services, energy, defense and related materiel sectors, and conduct thorough due diligence. Transactions and investments should be carefully evaluated to ensure compliance with U.S. law.
Iran
The CAATSA does little to change the current U.S. sanctions regime against Iran. Significantly, it does not alter the Joint Comprehensive Plan of Action (“JCPOA”), which, as discussed in our January 2016 memorandum, suspended a number of nuclear-related sanctions on Iran, including so-called “secondary sanctions,” and those restricting foreign subsidiaries of U.S. persons from conducting business with Iranian persons or entities.
Instead, the Act largely provides the President with additional authority to block the property and interests in property of certain persons and entities he designates, including persons involved in Iran’s ballistic missile program or other weapons of mass destruction programs, as well as those knowingly providing support for such a person. The President may also block the property and interests in property of human rights violators and those engaging in activities involving the supply or transfer to or from Iran of certain combat vehicles, artillery, arms, and related materiel. U.S. persons will be prohibited from engaging in transactions with any designated person.
North Korea
The Act amends prior legislation targeting North Korea by requiring that the President block the property and interests in property of persons that: (1) acquire certain earth minerals and metals from North Korea; (2) provide North Korea rocket, aviation, or jet fuel; (3) provide fuel, supplies, or services to previously sanctioned North Korean vessels; (4) insure or register a vessel owned or controlled by the North Korean government; or (5) maintain a correspondent account with any North Korean financial institution. Again, U.S. persons will be prohibited from engaging in transactions with any designated person or entity.
The Act also contains “discretionary designations,” which provides the President the ability to designate persons that, among other things, acquire certain earth minerals, textiles, and agricultural products from the North Korean government or that conduct certain transactions including in North Korea’s mining industries.
In addition, the Act prohibits “indirect correspondent accounts” by requiring that a U.S. financial institution cease providing services upon learning that it holds a correspondent account for a foreign bank used to provide financial services to a sanctioned person or entity.
Finally, the CAATSA restricts certain vessels owned by North Korea, North Korean persons, and other countries identified by the President as failing to comply with United Nations resolutions from entering into U.S. waters or transferring cargo in any U.S. port.
If you have any questions or concerns about U.S. sanctions against Iran, North Korea, or Russia, please contact one of the attorneys listed below.
