When Sudan was split and Southern Sudan formed, it raised a lot of questions for U.S. entities seeking to engage in business with Sudan. Due to the geographical proximity between the two nations, the former ties, and the fact that Sudan is still subject to country wide U.S. economic sanctions, concerns were high for those with questions about how transactions with Southern Sudan could open one up to liability for violating sanctions administered by the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC). In particular, petroleum exploration and production in Southern Sudan caused numerous concerns. For example, would a U.S. person need an OFAC license to engage in transactions related to petroleum development in Southern Sudan?

The answer is clearly no, and while there is always cause for OFAC compliance concerns when dealing with a country that was formerly part of an embargoed nation, U.S. persons should rest assured that as long as their transactions do not offend the Sudanese Sanctions Regulations, those transaction involving petroleum development in Southern Sudan are authorized. This includes the transshipment of goods, technology, and services to or from the Republic of South Sudan through Sudan; exploration; development; production; field auditing services; oilfield services; activities related to oil and gas pipelines; investment; payment to the Government of Sudan or to entities owned or controlled by the Government of Sudan of pipeline, port, and other fees; and downstream activities such as refining, sale, and transport of petroleum from the Republic of South Sudan. However, keep in mind that the refining in Sudan of petroleum from the Republic of South Sudan remains prohibited due to the sanctions upon Sudan.

The OFAC compliance programs of most major energy companies are fairly sophisticated. However, those U.S. companies providing ancillary goods, services, and technology to foreign entities engaged in the development of petroleum resources, may not have the most sophisticated of compliance programs. The information provided in the paragraph above might be useful for them when considering whether or not to engage in certain transactions, but there really is no replacement for an OFAC compliance program or, at a minimum, policy. Formulation of those types of compliance procedures can save a lot of headaches and money down the line and are a worthwhile investment for anyone engaging in business internationally.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.