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August 01, 2017

New Russia Sanctions from Congress

Contents and Significance

By Elizabeth Rosenberg, ​Neil Bhatiya and Edoardo Saravalle

Congress adopted new sanctions in late July to codify and significantly expand U.S. financial restrictions on Russia and tightly constrain the president’s exercise of policy in this domain. The sanctions bill was driven by concerns over Russia’s interference in U.S. elections and destabilizing aggression abroad, as well as a broadly held belief by legislators that the president is mishandling critical national security issues. With these new sanctions authorities, Congress is taking an unprecedented step to assume greater control over a domain of foreign policy.

Close allies in Western Europe have condemned the bill’s interference in continental economic affairs, whereas others in Eastern Europe more vulnerable to Russian coercion have welcomed the tough measures. Unlike the development of transatlantic sanctions on Russia in 2014 in response to its activities in eastern Ukraine and Crimea, this new set of U.S. sanctions features no coordination with, or counterpart in, the European Union. Members of the business community that will be impacted by the bill, particularly in the energy and defense sectors, engaged in a full court press to try and remove themselves from the crosshairs, with some success.

There are three points of significance from the new sanctions:

  • Congress has created broad new sanctions on Russian energy, banking, and financial services; intelligence and defense; and railroad, metals, and mining targets, driven by concerns over the Russian occupation of Crimea, its support for eastern Ukrainian separatists, its destabilizing role in Syria, ongoing cybersecurity breaches, and its interference in Western elections.
  • Though the sanctions are mandatory, the administration retains some discretion in their application, setting the stage for an ongoing fight between the executive and legislative branches over enforcement.
  • Procedural provisions establishing new forms of congressional review will likely serve as a model for future sanctions.

These substantial shifts in U.S. sanctions policy will likely have two serious implications:

  • First, if these provisions are replicated in future bills they will make sanctions, as a foreign policy tool, less flexible and more punitive, as Congress lacks the intelligence resources, bureaucratic capability, and legal flexibility to manage sophisticated sanctions implementation with precision or timeliness.
  • Second, the new review process mandated by the legislation will immediately minimizes the incentive for adversaries to change policy as a negotiating tactic for sanctions removal. Even in the face of their favorable policy change, Congress will struggle to muster the will and coordination necessary to remove sanctions.

What the Bill DoesWhy It’s Significant
Expands sanctions to prohibit U.S. energy companies from partnering with Russian firms in new offshore, deep-water, Arctic, and shale oil projects where a sanctioned entity has at least a 33 percent ownership or control stake








Gives the president discretionary power to sanction Russian energy export pipelines







Restricts dealing in any energy sector debt with a maturity longer than 60 days
Expands the prohibition of such oil projects outside of the Russian Federation or its exclusive economic zone

Represents an industry victory in lobbying to adapt the earlier proposal with no ownership or control threshold



This puts the Nord Stream 2 pipeline in the crosshairs

Provision has attracted significant pushback from Germany, Austria, and the EU



Tightens previous sanctions that mandated a 90-day maturity limit
Restricts transactions in, provision of financing for, and dealings with any debt instruments with maturities longer than 14 days involving the financial sector



Requires the Secretary of the Treasury to submit a report on the effect of expanding sanctions to sovereign debt and derivatives
Tightens previous sanctions that mandated a 30-day limit




This indicates that policymakers may consider future sanctions in this area

Defense & Intelligence Sectors

Mandates sanctioning of any individual involved in a transaction with or operating on behalf of the defense and intelligence sectorsThis may be a challenge to U.S. allies purchasing weapons from the Russian government or government-controlled firms

The government plans to issue further guidance clarifying the scope of the provision

Other Economic Sectors

Expands sectoral sanctions to include the mining, metals, and railways sectorsExpands scope of sectoral sanctions

Represents a retrenchment from original Senate bill that had included the shipping sector

Asset Privatization

Prohibits participation in the privatization of Russian assets if it unjustly benefits Russian officials or close associatesCould be meant as a means of preventing Russian crisis fundraising mechanisms such as the Rosneft stake sale in late 2016

Syria

Mandates sanctions against the sale or transfer of arms to SyriaCreates additional potential avenues for sanctioning individuals or entities

Human Rights

Mandates sanctions against persons responsible for human rights abusesCreates additional potential avenues for sanctioning individuals or entities

Cybersecurity

Mandates sanctions against persons undermining cybersecurity on behalf of the Russia governmentCreates additional potential avenues for sanctioning individuals or entities

Corruption

Mandates sanctions against persons significantly contributing to corruption in the Russian FederationCreates additional potential avenues for sanctioning individuals or entities

Congressional Review & Codification

Requires the president to submit a report to Congress to modify or end sanctions

Institutes congressional hearings to review changes to sanctions

Gives Congress power to pass a Joint Resolution of Disapproval, which, if able override a presidential veto, would prevent the executive branch from lifting sanctions





Codifies Russian sanctions executive orders into law





Changes the sanctions language to make enforcement of many of the sanctions provisions mandatory
Effectively institutes congressional veto over the president’s lifting, or significant modification, of sanctions

Significantly limits presidential power in the foreign policy arena

Creates a new procedural standard that could likely be incorporated in other sanctions legislation



Makes sanctions more permanent by requiring a Congressional approval of any repeal



Limits the discretionary power of the president by requiring him to enforce sanctions

Design: Tristan Campos

  • Elizabeth Rosenberg

    Senior Fellow and Director, Energy, Economics and Security Program

    Elizabeth Rosenberg is a Senior Fellow and Director of the Energy, Economics and Security Program at the Center for a New American Security. In this capacity, she publishes an...

  • ​Neil Bhatiya

    Research Associate, Energy, Economics, and Security Program

    Neil Bhatiya is the Research Associate for the Energy, Economics, and Security Program at the Center for a New American Security. His work focuses on the geopolitics of energy...

  • Edoardo Saravalle

    Researcher, Energy, Economics, & Security Program

    Edoardo Saravalle is a Researcher for the Energy, Economics, and Security Program at the Center for a New American Security (CNAS). At CNAS his work focuses on the national se...

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