On the evening of December 9, 2019, a U.S. congressional conference committee released the compromise version of the National Defense Authorization Act for Fiscal Year 2020 (“NDAA 2020” or “Defense Bill”). NDAA 2020, which will be voted upon without further amendment and is virtually certain to be enacted into law, contains provisions that would authorize new secondary sanctions relating to the Nord Stream 2 and TurkStream projects, Syria, and North Korea.
The Defense Bill provides for the imposition of U.S. blocking sanctions against:
- vessels engaged in pipe-laying at depths of 100 feet or more below sea level for the construction of the Nord Stream 2 and TurkStream pipeline projects and any successor projects; and
- any foreign persons that have knowingly “sold, leased, or provided” such vessels for the pipelines or facilitated deceptive or structured transactions to provide such vessels.
NDAA 2020, Sec. 7503(a)(1). These provisions expire five years after the date of enactment and contain exceptions for the “repair or maintenance” of the pipelines, the safety and care of vessel crew, and vessel maintenance to avoid environmental damage. Id., Sec. 7503(e). Moreover, persons certified by the President to have “engaged in good faith efforts to wind down [sanctionable] operations” within 30 days after enactment are not subject to the blocking sanctions. Id., Sec. 7503(d).
Notably, the sanctions against Russian sovereign debt that were contained in the earlier House bill have been removed from NDAA 2020. The existing, more limited prohibition against U.S. financial institutions participating in primary issuances of non-ruble Russian sovereign debt under the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 remains in place.
NDAA 2020 also includes a number of new sanctions against Syria:
- Secondary Sanctions: Authorizes the imposition of blocking sanctions against foreign persons who engage in significant transactions with the Government of Syria (including any entities it owns or controls) and its senior political figures, persons sanctioned under U.S. sanctions relating to Syria, and persons operating in a military capacity inside Syria for or on behalf of the governments of Syria, Russia, or Iran. See NDAA 2020, Sec. 7412. Blocking sanctions may also be imposed on persons who engage in “significant” activities relating to Syrian domestic petroleum production, construction and engineering, and aircraft or aircraft parts used for certain military purposes in Syria.
- Special Measures: Requires the Secretary of Treasury to determine, no later than 180 days after enactment, whether to impose “special measures” against the Central Bank of Syria as a financial institution of primary money laundering concern. NDAA 2020, Sec. 7411. Such designation may require U.S. financial institutions to comply with information-gathering and record-keeping requirements or to cease opening or maintaining U.S. correspondent or payable-through accounts for the Central Bank of Syria. See id.; 31 U.S.C. § 5318A (USA PATRIOT Act Section 311).
NDAA 2020 further provides for secondary sanctions against foreign financial institutions that knowingly provide “significant financial services” to persons or entities sanctioned under North Korea-related sanctions. See NDAA 2020, Sec. 7121. It also extends U.S. sanctions to subsidiaries owned or controlled by U.S. financial institutions.
In addition, NDAA 2020 creates secondary sanctions authority for the U.S. Administration to impose blocking sanctions on foreign entities engaged in any of the following:
- import and export of significant quantities of coal, textiles, seafood, iron, or iron ore (and services or technology related to such goods); or refined petroleum products or crude oil above United Nations Security Council (“UNSC”) limits;
- significant transfer of funds or property of the Government of North Korea that materially contributes to any violation of an applicable UNSC resolution;
- exportation or employment of North Korean workers that generates significant revenue for the Government of North Korea;
- sales or transfers of a significant number of vessels to North Korea (except as approved by the UNSC);
- significant activity relating to a vessel owned, controlled, commanded, or crewed by a North Korean person; or
- significant acts of bribery, or misappropriation of a significant amount of public funds, for the benefit of a North Korean official, or the use of any such proceeds.
See NDAA 2020, Sec. 7122.
In addition to the above, NDAA 2020 includes the following sanctions provisions:
- Limitation on Removal of Huawei from Entity List: Prohibits the Secretary of Commerce from removing Huawei from the Bureau of Industry and Security “Entity List” until the Secretary makes a number of certifications concerning the resolution of charges under U.S. export controls and sanctions, and the mitigation of threats to U.S. national security and telecommunications systems. See , Sec. 1260I.
- Fentanyl Sanctions Act: Provides secondary sanctions authority to impose five sanctions from a menu of nine against foreign persons or entities identified as a “foreign opioid trafficker” and those that knowingly supply or source precursors for, or act on behalf of, such traffickers. See id., Secs. 7212‑13.