Russian President bans unfriendly countries from transactions involving shares in hydrocarbon projects
The President has signed the Executive Order On the Application of Special Economic Measures in the Financial, and Fuel and Energy Sectors in Connection with the Unfriendly Actions by Some Foreign States and International Organisations, according to the official website of the Kremlin.
The Executive Order was signed in connection with the actions regarded as unfriendly and breaching international law by the United States and the foreign states and international organisations siding with it that are imposing restrictive measures against Russian citizens and Russian legal entities, in order to protect the national interests of the Russian Federation and in accordance with Federal Laws No. 281-FZ “On Special Economic Measures and Coercive Measures” of December 30, 2006, No 390-FZ “On Security” of December 28, 2010, and No. 127-FZ “On Measures to Influence (Oppose) Unfriendly Acts by the United States of America and other foreign States” of June 4, 2018.
Under the Executive Order transactions (operations) resulting directly and (or) indirectly in the establishment, change, termination or encumbrance of rights to own, use and (or) dispose of securities owned by Russian legal entities, shares (contributions) constituting the charter (joint) capital of Russian legal entities, participation interests, rights and obligations belonging to parties to production sharing agreements, joint activity agreements or other agreements under which investment projects are implemented in Russia, are prohibited until December 31, 2022.
In particular, this prohibition shall apply to transactions involving shares, rights and obligations belonging to the parties to the Production Sharing Agreement for the Sakhalin-1 Project (Chayvo, Odoptu, and Arkutun-Dagi oil and gas condensate fields on the Sakhalin Island shelf) and the Agreement on Kharyaga Oil Field Development and Production on a Production Sharing Basis.
The ban appies to shares and interest (contributions) making up the charter capital of such business entities as users of subsurface allotments located in the territory of the Russian Federation and containing deposits of hydrocarbon raw materials (with recoverable reserves of at least 20 million tonnes of oil or at least 20 billion cubic metres of natural gas or at least 35 million tonnes of coal), uranium, high-purity quartz, rare-earth yttrium group metals, nickel, cobalt, tantalum, niobium, beryllium and copper; involving subsurface allotments located on the territory of the Russian Federation that are primary deposits of diamonds, gold, lithium and platinum group metals; involving subsurface allotments of inland sea waters, territorial seas, and the continental shelf of Russia.
The ban applies provided that the securities, shares (contributions), rights and obligations belong to foreign persons associated with the foreign states that commit unfriendly acts in relation to the Russian Federation, Russian legal entities and individuals (including if such foreign persons have citizenship in these states, the place of their registration, the place of their primary business activity or the place of their primary source of profit that is derived from their activity in those states), and persons who are under the control of such foreign persons.
The document lists legal relations which are not covered by the ban established under this Executive Order.
It stipulates, in particular, that transactions (operations) carried out in violation of this Executive Order shall be null and void.
It also stipulates that the transactions (operations) prohibited under this Executive Order may be carried out under special decision of the President of Russia.
The President of Russia may extend the validity of the established restrictions contained in this Executive Order as needed.
The relevant instructions have been given to the Government of the Russian Federation.
