The US Department of Treasury updated Directive No. 4, originally introduced in 2014, as part of the sanctions against Russia due to the conflict in Ukraine. Restrictions against Russian oil companies have been extended to future projects on developing recoverable oil outside Russia.
The new sanctions law (CAATSA -Countering America’s Adversaries Through Sanctions Act), signed by US President Donald Trump on August 2nd, required the amendment of this directive. The amendments had to be made by October 31st, and unlike delayed restrictions against the defense and intelligence sectors, the US Department of Treasury fulfilled its task on time.
The directive, in its original form, prohibited US businesses from providing, exporting, or re-exporting goods, technologies, and non-financial services in support of projects in Russia that have the potential to produce oil on the Arctic shelf, in the deep sea, or in shale, and includes any project that involves a company listed in the sectoral list (at the moment these companies are Rosneft, LUKOIL, Gazprom, Gazprom Neft and Surgutneftegaz, and their subsidiaries).
These restrictions have not changed, but new restrictions have been added: American businesses are forbidden to cooperate with arctic, deep-water, or shale projects that meet the three criterion. These include projects that begin after January 29, 2018, and are located anywhere (not only in Russia) and involve the specified Russian companies Rosneft, LUKOIL, Gazprom, Gazprom Neft, Surgutneftegaz, or any other company that will fall under the directive in the future) including if the company owns a share of 33% or more in the project, or controls the majority of voting rights.
Experts have previously assessed that under the new restrictions on the participation of American businesses are prohibited in participating in other projects, for example, Rosneft projects in Brazil and Venezuela, and LUKOIL projects in Ghana and Romania. However, the US Department of Treasury specified in the Frequently Asked Questions section that the projects that were started before January 29, 2018, are not subject to the ban. The issuance of formal rights for exploration, production, or development of oil by the authorities of a relevant country will be considered as the beginning of the project.
Moreover, it will be sufficient for the license to have been provided to any party prior to January 29th, for the project to be free from any restrictions, the US Department of Treasury clarified. For example, if a foreign government has already granted rights to develop a deep-water oil field to its state-owned company, and then it attracted a Russian company into the project, which is under sanctions, American businesses will be able to assist with such a project.