On 7 August 2015, the U.S. Commerce Department’s Bureau of Industry and Security (“BIS”) published a final rule adding a Russian oil and gas field, the Yuzhno-Kirinskoye Field located in the Sea of Okhotsk, to the Entity List maintained in the Export Administration Regulations, 15 C.F.R. Parts 730-774 (“EAR”). As a result of this designation, the exportation, reexportation, or in-country transfer to this field of any item subject to the EAR requires a BIS license. Requests for such licenses will be subject to a presumption of denial.
BIS explained that this designation reflects the fact that the Yuzhno-Kirinskoye Field contains substantial reserves of oil. Because of these reserves, BIS found that exports, reexports, or in-country transfers of items subject to the EAR to this field present “an unacceptable risk” of being used in or diverted to the exploration for or production of oil or gas in Russian deepwater (greater than 500 feet) projects. This is the first instance of BIS relying on diversion as a basis for designating a Russian energy company on the Entity List.
The restrictions on the Yuzhno-Kirinskoye Field are broader than those placed on certain other Entity List designations targeting the Russian energy sector. Exports, reexports, or in-country transfers to some Russian energy companies designated on the Entity List (i.e., Gazprom, Gazprom Neft, Lukoil, Rosneft, Surgutneftegas) are subject to licensing requirements only where the exporter (i) knows that the items will be used for targeted end-uses (i.e., deepwater, Arctic offshore, or shale projects) or (ii) is unable to determine whether the items will be used for such end-uses. Under the restrictions that apply to the Yuzhno-Kirinskoye Field, however, all items subject to the EAR require a BIS license—regardless of what the exporter understands to be the intended end-use.