A Storm Is Brewing Over New US Sanctions On Russia, These Are Biggest Immediate Threats

Draft legislation toughening measures against Russia is proving divisive both at home and abroad.

A Congressional bill imposing major new sanctions on key sectors of the Russian economy is putting further strain on America’s relations with European partners and may meet resistance from the Trump administration.

Germany and Austria are concerned they were not consulted about the measures which they fear may jeopardise the involvement of European companies in Russian energy pipeline projects. The White House is opposed to provisions that would limit presidential powers to influence sanctions policy.

The proposed new restrictions reflect Congressional concerns over President Donald Trump’s campaign pledges to seek a rapprochement with Moscow and his reluctance to acknowledge alleged Russian election meddling.

The sanctions will affect Russia’s mining, metals, railway, shipping, defence and intelligence sectors, as well as Russians implicated in cyber-attacks, human rights abuses and the supply of arms to the Assad regime. They additionally target privatisations of state-owned assets, and strengthen existing measures against the energy and finance sectors and deep water, arctic and shale oil prospecting.

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The measures also put into law sanctions against Moscow issued by former President Barack Obama as executive orders and require Trump to seek Congressional approval before lifting or relaxing measures.

The sanctions, passed overwhelmingly by the Senate in mid-June in a surprising display of bipartisanship, punish Russia for its alleged interference in the US elections and interventions in Syria and Ukraine. They form an amendment to a bill imposing further sanctions on Iran over its ballistic missile tests, support for terrorism and human rights abuses. Some commentators suggest the Democrats were not ready to back the Iran sanctions unless the Russian restrictions were added. The vote was taken amid increasing scrutiny of Russia’s alleged role in last year’s presidential ballot.

White House officials have been reportedly lobbying to change the bill, in particular its limiting of the US President’s ability to effect sanctions policy. Prior to the vote Secretary of State Rex Tillerson urged lawmakers “to ensure any legislation allows the President to have the flexibility to adjust sanctions to meet the needs of what is always an evolving diplomatic situation”.  The Senate was seemingly unmoved by his call, the draft law passing to the Republican-dominated House of Representatives for consideration.

However, delays over a constitutional hitch – which some Democrats suspected was a bid to stall the bill at the administration’s behest – have meant that the House will not be able to start debating the bill until after this week’s G20 summit in Germany.  Senate leaders had hoped it would be passed by then, sending a strong signal to President Vladimir Putin who is expected to hold talks with Trump at the meeting.  If the draft law is eventually approved by the lower chamber and then encounters a White House veto, there may be sufficient support within Congress to override the latter. Moreover, attaching Russian sanctions to the Iranian measures, which the White House supports, makes a block harder to justify.

In what has been described by some observers as an attempt by the administration to demonstrate a tougher line on Russia in the face of Congressional scepticism, the Treasury imposed new sanctions against Russia following the Senate vote. The measures target 38 Russian individuals and entities linked to the Ukraine conflict, including shell companies, banks and, intriguingly, a businessman known as Putin’s chef.

When it weighs up the Senate bill, the House will be mindful not only of the possibility of a damaging fall-out with Trump but also the possible negative impact on relations with Europe, already unsettled by the US President’s confrontational rhetoric. The draft law has angered Germany and Austria because it could lead to European companies being fined for supporting Russian energy pipelines, potentially undermining the planned Nord Stream 2 project. This major gas pipeline will allow Moscow to double its gas supplies to Europe. In a joint statement, Germany’s Foreign Minister, Sigmar Gabriel, and Austria’s Chancellor, Christian Kern, said the threat of penalties brings a “completely new, very negative dimension into European-American relations”.

Berlin also believes the proposed sanctions depart from the US and Europe’s joint, carefully calibrated, approach to sanctioning Russia over its intervention in the Ukraine. It is concerned that widening the justification for restrictions may make it harder to use them as a lever to persuade Putin to work towards a resolution of the conflict. The European Union continues to renew its measures against Russia but there is little desire to make them tougher. In their joint statement, Gabriel and Kern warned that if America and Europe stop taking joint action on Ukraine, the “effectiveness of our stance on the conflict” would diminish.

A coordinated sanctions policy over the Ukraine conflict is clearly important, particularly since Putin is showing little willingness to ease his grip on the Donbass or Crimea. While many Congressmen argue that the proposed new restrictions are justified and timely given Moscow’s alleged interference in the US elections, their bill could put relations with an important ally under further strain and lead to disjointed sanctions policies towards Russia.

White House officials, meanwhile, told the New York Times that they do not want to weaken Russian sanctions, but are concerned the draft law might undermine the administration’s ability to signal its willingness to relax them in exchange for Putin’s cooperation.

For his part, Russia’s leader has said the proposed restrictions would harm relations with Washington. One area that will particularly worry him is their impact on foreign investors, who have been showing renewed interest in the recovering Russian economy. Last year, Moscow was optimistic that Trump’s election would lead to a rapprochement with the US and an easing of sanctions, but given the mood on Capitol Hill more doors to investment may close.

Yigal Chazan is an Associate at Alaco, a London-based business intelligence consultancy.


This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.
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