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August 01, 2017
New Russia Sanctions from Congress
Contents and Significance
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 Does | Why It’s Significant | |
|---|---|---|
Energy Sector | 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 |
Banking & Financial Services Sector | 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 sectors | This 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 sectors | Expands 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 associates | Could 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 Syria | Creates additional potential avenues for sanctioning individuals or entities |
Human Rights | Mandates sanctions against persons responsible for human rights abuses | Creates additional potential avenues for sanctioning individuals or entities |
Cybersecurity | Mandates sanctions against persons undermining cybersecurity on behalf of the Russia government | Creates additional potential avenues for sanctioning individuals or entities |
Corruption | Mandates sanctions against persons significantly contributing to corruption in the Russian Federation | Creates 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 |
Authors
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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 a...
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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...
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Edoardo Saravalle
Former Researcher, Energy, Economics, & Security Program
Edoardo Saravalle is a former Researcher for the Energy, Economics, and Security Program at the Center for a New American Security (CNAS). At CNAS his work focused on the nati...
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