State Department CAATSA Section 225 Guidance

The Department of State is committed to fully implementing sanctions authorities in the Countering America’s Adversaries Through Sanctions Act (CAATSA). We continue to call on Russia to honor its commitments that were made under the Minsk agreements and to cease its malicious cyber intrusions.

Sanctions under Section 4(b) of the Ukraine Freedom Support Act (PL 113-272) (UFSA), as amended by CAATSA, shall be imposed absent a determination that the sanctions are not in the national interest of the United States.

Sanctions under this provision will apply if the Secretary of State, in consultation with the Secretary of Treasury, determines that a foreign person knowingly makes a significant investment in a special Russian crude oil project on or after September 1, 2017.

The UFSA provides the definition for a “special Russian crude oil project.” Under that Act, a “special Russian crude oil project” is a project intended to extract crude oil from:

A. The exclusive economic zone of the Russian Federation in waters more than 500 feet deep;
B. Russian Artic offshore locations; or
C. Shale formations located in the Russian Federation.

“Knowingly” is defined in the UFSA. For these purposes, the term “knowingly,” with respect to conduct, a circumstance, or a result, means that a person has actual knowledge, or should have known, of the conduct, the circumstance, or the result.

The term “foreign person” includes any individual or entity that is not a United States citizen, a permanent resident alien, or an entity organized under the laws of the United States or any jurisdiction within the United States.

In determining whether an investment is “significant” for the purposes of the UFSA, the Department of State will consider the totality of the facts and circumstances surrounding the investment and weigh various factors on a case-by-case basis. The factors considered in the determination may include, but are not limited to, the significance of the transactions to U.S. national security and foreign policy interests, in particular where the transaction has a significant adverse impact on such interest; the nature and magnitude of the investment, including the size of the investment relative to the project’s overall capitalization; and the relation and significance of the investment to the Russian energy sector.

For the purposes of Section 225, an investment is not significant if U.S. persons would not require specific licenses from the U.S. Treasury Department’s Office of Foreign Assets Control to make or participate in it.

Frequently Asked Question

If goods or services are provided in exchange for equity in an enterprise or rights to profits or revenue thereof, then could that be considered an “investment”?

Yes. “Investment” could include arrangements where goods or services are provided in exchange for equity in an enterprise or rights to a share of the revenue or profits of an enterprise.

Link:

CAATSA Section 225 Guidance

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