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Sens. Cruz, Johnson Put Company Installing Putin’s Pipeline on Formal Legal Notice

“The consequences of your company continuing to do the work?for even a single day after the President signs the sanctions legislation?would expose your company to crushing and potentially fatal legal and economic sanctions”

December 18, 2019

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202-228-7561

WASHINGTON, D.C. - U.S. Sens. Ted Cruz (R-Texas) and Ron Johnson (R-Wis.), members of the Senate Foreign Relations Committee, today sent a letter to the CEO of Allseas Group S.A. (Allseas), the company currently engaged in installing deep-sea pipes for Russia's Nord Stream 2. In the letter, the senators warn Allseas that as soon as President Trump signs the FY20 National Defense Authorization Act (NDAA) - which includes Sec. 7503, Sen. Cruz's bipartisan legislation to stop the Nord Stream 2 - it risks crippling sanctions that could devastate the financial viability of the company.

As the senators wrote:

"This letter is to put you, your employees, your company, and your shareholders on formal legal notice. This legislation was passed specifically to immediately halt your company's work on Nord Stream 2. The only responsible course of action is for Allseas Group S.A. and its employees to stop Nord Stream 2 activities immediately.

"We understand that Russia is paying Allseas a very substantial amount of money to complete the Nord Stream 2 pipeline. However, the consequences of your company continuing to do the work-for even a single day after the President signs the sanctions legislation-would expose your company to crushing and potentially fatal legal and economic sanctions."

They added:

"Section 7503 was the product of almost a year of bipartisan, bicameral, and interbranch efforts aimed at immediately stopping the construction of the Nord Stream 2 pipeline. It requires the President to report on and impose sanctions against individuals and companies that have "sold, leased, or provided" vessels that "engaged in pipe-laying at depths of 100 feet or more below sea level for the construction of the Nord Stream 2 pipeline project." There is no discretion. It also mandates sanctions against foreign persons or companies that seek to circumvent those prohibitions by "facilitat[ing] deceptive or structured transactions to provide those vessels for the construction" of the pipeline.

"The prohibitions are immediate, and the sanctions are mandatory. [...] Although the report is due in 60 days, your legal exposure is immediate from the moment of signing."

As they outline in the letter, these devastating sanctions include:

  • Blocking all assets in U.S. jurisdiction, including their U.S. headquarters in Houston, TX
  • Cutting Allseas off from U.S. markets
  • Blocking transactions with anyone in the U.S. or anyone using the U.S. financial system
  • Denying key leaders in the company visas to enter the U.S.

This morning, Sen. Cruz joined Maria Bartiromo on Fox Business to discuss the impact of these crippling sanctions and stopping Nord Stream 2. There he said:

"We just had a massive bipartisan foreign policy victory, which is in the National Defense Authorization Act-just passed the Senate yesterday. It's on the president's desk for signature right now. And what it does is it's designed to stop the Nord Stream 2 pipeline. That's a pipeline, a natural gas pipeline from Russia to Germany. It's nearly complete. There is right now-there are only five companies on Earth that are capable of building that pipeline. Russia has hired one, a Swiss company named AllSeas. I'm sending today a letter to AllSeas' CEO informing him that under these sanctions, AllSeas has a choice-they either cease construction the day the president signs that bill which is likely to be sometime this week, or they risk crushing sanctions that could put AllSeas out of business forever. The sanctions we're passing - it's my bill, that I got Democrats on board, brought together, the House, the Senate, everyone we passed these sanctions. And what it is designed to do, AllSeas has a ship, the Pioneering Spirit, that's right now laying this pipeline. AllSeas needs to instruct the ship's captain to set sail for other waters, because if they don't, they'll put the company out of business."

He added:

"This pipeline if it's completed, what it would do, it would generate billions of dollars for Putin. And Putin would use that to continue Russia's military aggressiveness. It would make Europe even more dependent on Russian energy, and that makes Europe susceptible to economic blackmail. [...] By stopping this pipeline, by getting the sanction's legislation passed, that will hurt Putin, it will take billions away from him, it will help Europe, it helps Ukraine enormously, and it helps American jobs. [It's] much better for European energy needs to be satisfied by American natural gas, that creates jobs here in America rather than fueling Putin's military aggression."

Read the full letter here and below.

Learn more about Nord Stream 2 here and here.

Watch Sen. Cruz's remarks on the Senate floor on the inclusion of his bipartisan legislation to stop Nord Stream 2 in the NDAA here.

December 18, 2019

Edward Heerema
Chief Executive Officer, Allseas Group
Route de Pra de Plan 18, Case Postale 411
1618 Châtel-Saint-Denis
Switzerland

Dear Mr. Heerema,

This week, President Trump will sign into law the National Defense Authorization Act (NDAA) for Fiscal Year 2020. Section 7503 of that Act mandates that the President impose broad sanctions on foreign persons or companies involved in providing vessels for the installation of deep-sea pipeline for the Nord Stream 2 project. As of his signature, those activities are instantaneously subject to the full force of those sanctions.

This letter is to put you, your employees, your company, and your shareholders on formal legal notice. This legislation was passed specifically to immediately halt your company's work on Nord Stream 2. The only responsible course of action is for Allseas Group S.A. and its employees to stop Nord Stream 2 activities immediately.

We understand that Russia is paying Allseas a very substantial amount of money to complete the Nord Stream 2 pipeline. However, the consequences of your company continuing to do the work-for even a single day after the President signs the sanctions legislation-would expose your company to crushing and potentially fatal legal and economic sanctions.

Your contract surely contains an avenue to withdraw in the event regulations or sanctions prevent completion of the pipeline; with the passage of the NDAA, you have no reasonable choice but to exercise that avenue and immediately halt installing deep-sea pipeline for the Nord Stream 2 project.

Section 7503 was the product of almost a year of bipartisan, bicameral, and interbranch efforts aimed at immediately stopping the construction of the Nord Stream 2 pipeline. It requires the President to report on and impose sanctions against individuals and companies that have "sold, leased, or provided" vessels that "engaged in pipe-laying at depths of 100 feet or more below sea level for the construction of the Nord Stream 2 pipeline project." There is no discretion. It also mandates sanctions against foreign persons or companies that seek to circumvent those prohibitions by "facilitat[ing] deceptive or structured transactions to provide those vessels for the construction" of the pipeline.

The prohibitions are immediate, and the sanctions are mandatory. Prohibited activities became sanctionable "beginning on the date of the enactment of this Act," i.e. when the President signs the NDAA, and the "the President shall" designate violators.

Under the sanctions in Sec. 7503, violators will be fully cut off from the United States and have any and all assets within the U.S. blocked for 5 years. Any individual designated will be denied the issuance of a visa required for admission to the U.S. and will have any current visa or entry documentation revoked. Moreover, for both individuals and companies, the President is required to exercise all powers granted to him by the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) "to block and prohibit all transactions in all property and interests in property" to the extent they "are in the United States, come within the United States, or come within the possession or control of a United States person."

Allseas has several vessels that, according to materials published by the Nord Stream 2 project, are engaged in the project: the construction vessel Pioneering Spirit (IMO: 9593505, MMSI: 249110000, Call Sign: 9HA4112), the pipelay vessel Solitaire (IMO: 7129049, MMSI: 249118000, Call Sign: 9HA4114), and the pipelay vessel Audacia (IMO: 9305130, MMSI: 249117000, Call Sign: 9HA4111). The Pioneering Spirit and Solitaire are currently in the Baltic Sea, and at least the Pioneering Spirit is engaged in deep-sea pipe-laying activities that are now sanctionable.

If you violate the sanctions legislation, and your vessels enter U.S. jurisdiction, those vessels will become frozen assets.

Allseas and its key personnel who knowingly sell, lease, or provide those vessels for the Nord Stream 2 project will be sanctioned if those activities do not cease immediately. For the next half decade your company and those personnel will be entirely barred from the U.S. In the meantime, any transactions they attempt to conduct with anyone who is in the U.S. or using the U.S. financial system will be blocked. Moreover, all property you have within our jurisdiction will be frozen, including assets related to Allseas USA headquartered in Houston, TX, any financial assets in U.S. banks, and any physical vessels or materials owned by Allseas that come into the U.S.

It is important to reemphasize the immediacy required by Sec. 7503, because this aspect of the legislation has been broadly misunderstood and misreported. In two months, the President will report to Congress if Allseas ceased engaging in sanctionable activities and, if you did not, you will be sanctioned. Although the report is due in 60 days, your legal exposure is immediate from the moment of signing.

To be sure, there is a 30-day "wind-down" period for which the President has the option of not imposing sanctions, but to exercise that option the President must certify to Congress that Allseas "engaged in good faith efforts to wind down operations." Rushing to finish the Nord Stream 2 project over that time would foreclose the possibility of that certification.

If you were to attempt to finish the pipeline in the next 30 days, you would devastate your shareholders' value and destroy the future financial viability of your company. And, you would surely face billions of dollars in shareholder derivative suits for your breach of fiduciary duty.

You face a binary choice: stop NOW, and leave the pipeline unfinished (the express intention of the sanctions legislation, which we authored), or make a foolish attempt to rush to complete the pipeline and risk putting your company out of business forever.

The U.S. government knows that the Nord Stream 2 pipeline is near completion and considers it a grave threat to European energy security and American national security. Top officials from the State and Treasury Departments have repeatedly emphasized the gravity of those threats and sought to forestall them. Sec. 7503 represents a whole-of-government approach to ensuring that the pipeline remains uncompleted and those threats are never realized.

It's time for the Pioneering Spirit and Solitaire to find other waters in which to sail.

Sincerely,

/s/

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