How US Congressmen are preparing blow to Russia, bypassing Trump

Author : Georgiy Kuhaleyshvili

Source :

US Congress wants to strike at Russian oil and gas sector by general economic sanctions as a measure of peace enforcement
22:31, 16 January 2017

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Ten US senators, including Republican John McCain and Democrat Ben Cardin, have prepared a draft law "Act of 2017 on combating the hostile behavior of Russia." Senators offer not to be limited by existing anti-Russian sanctions against certain companies and individuals, but move to the general economic sanctions in response to a Russian cyber attacks against the US and aggressive policy against sovereign states.

Copy of sanctions against Iran

According to the Russian economist and analyst Mikhail Krutikhin, "Act of 2017 on combating the hostile behavior of Russia" is similar to the "Act on sanctions against Iran," 1996. In the case of Iran, the sanctions could be applied to the natural and legal persons from third countries who have invested in the development of oil and gas fields of Iran.

By the same principle are created the sanctions against Russia proposed in the new document, the purpose of which is to force the Kremlin to abandon the aggressive policy in Ukraine, Georgia and Syria and stop interfering in the internal affairs of the United States. Within six months after the signing of the act, the United States must find all the Russian organizations which were involved in cyber attacks against the US, arrest their assets in the US territory, impose a ban on their visas and on the conclusion of transactions with US residents. All people involved in cyber attacks will not be able to get loans on amounts over $ 10 million for more than a year, and also to sell their assets to US buyers.

The act prohibits the recognition of Crimea as the Russian territory, Abkhazia and South Ossetia - as independent states. Also it is prohibited for American Airlines to carry out flights in the airspace of Crimea, Abkhazia and South Ossetia. It is forbidden to privatize the property, which is in Russia’s state ownership.

Under the sanctions could fall any company (even the US non-residents), which has invested $ 20 million or more in areas directly or indirectly related to the development of oil and gas fields. Sanctions will be extended to firms that supplied and provided goods for rent, services and technologies worth more than $ 1 million for the development of the oil and gas sector in Russia. Restrictive measures will affect also those investors who have invested more than $ 1 million in the construction or maintenance of Russian oil and gas pipelines.

In contrast to the anti-Russian sanctions which have been in force in 2014 (Barack Obama extended them until March 2018), the proposed package of restrictive measures will remain in force for 10 years.

Iranian scenario for the Russian economy

It is no coincidence that the American senators have developed general economic sanctions against Russia as a copy of sanctions against Iran. Iran, which has a similar raw material economy, received significant damage from the sanctions of the US, the EU and the UN. About $ 100 billion in Iranian assets have been frozen worldwide. Iran's oil exports as well as production of cars fell by 50%. In the second half of the 90s, inflation in Iran has grown from 12.5% to 42.6%. Under the influence of sanctions Azerbaijan refused its assets in the National Iranian Oil Company and participation in the development of oil fields in the Caspian Sea shelf. Japan did not provide Iran with a loan of $ 450 million. Western oil companies have revised the terms of participation in the Iranian projects on development of oil and gas. Under the influence of the sanctions most of the projects were disrupted.

In the case of entry into force, new sanctions would hit the most lucrative oil and gas sector of the Russian economy, on the development of which depends the survival of the Russian Federation. According to the director of the Institute of Energy and Finance, Vladimir Feygin, the contribution of oil and gas to the Russian GDP is 30%, to the budget - 50%. Oil and natural gas account for two thirds of Russian exports. In the first half of 2016, revenues from Russia natural gas exports were $ 14.9 billion, and from the export of oil - $ 39.4 billion.

Related: Ukraine’s lawsuit against Russia submitted in Hague, - Foreign Ministry

General economic sanctions will cut off Russia from access to foreign capital necessary for the development of promising oil and gas fields. Mikhail Krutikhin is convinced that because of the new sanctions it will be impossible to implement Shell's projects in Western Siberia, projects of Total and Exxon Mobil in Sakhalin companies due to the lack of investments for the completion. To understand, one reconnaissance and prospecting well of Exxon Mobil in the Kara Sea has costs the company $ 650 million. Also may become doubtful the realization of projects of the main pipeline "Turkish Stream" (Russia, Turkey and the EU), "Power of Siberia" (Russia-China). New sanctions could entail a reduction in oil and gas production in Russia.

Trump will not help Russia

Views of US President-elect Donald Trump and senators about the anti-Russian sanctions diverge. The new owner of the Oval Office allows the abolition of certain sanctions, including restrictive measures, which were introduced in December last year in connection with the accusations of the Kremlin regarding cyber attacks. Donald Trump is ready to lift the sanctions, if Russia will assist the United States in the fight against terrorism and other purposes.

Apparently, Donald Trump is prepared to bargain with Russian President Vladimir Putin. Maybe Donald Trump is interested to protect the interests of the American company ExxonMobil in the Russian oil and gas sector, which has lost $ 100 billion due to the anti-Russian sanctions. And Donald Trump's favorite for the post of Secretary of State is Rex Tillerson, the former chairman of the oil company board of directors. Improving of US-Russia relations responds the interests of the American oil industry. Donald Trump may cancel the existing anti-Russian sanctions, abolishing decrees of his predecessor, Barack Obama. Current sanctions against Russia are regulated by presidential decrees.

However, the newly elected president can’t influence the position of the Senate (upper house of the US Congress). Donald Trump may criticize the developed by Senators general economic sanctions against Russia and may not sign the "Act of 2017 on combating the hostile behavior of Russia." However, the US political system is based on a system of checks and contradictions. The draft law "Act of 2017 on combating the hostile behavior of Russia" can enter into force and receive federal law status without the approval of the president, if 2/3 of the Senate and the US House of Representatives will vote for it.

EU involvement

US can persuade the EU to accede to the general economic sanctions. European officials have repeatedly stated that the anti-Russian sanctions will continue as long as Russia does not comply with the Minsk agreements. To increase pressure on Russia, Europe can reinforce the US sanctions with reduction of imports of Russian oil and natural gas.

EU consumes most of the export volumes of Russian natural gas. According to the Russian edition, in 2016 Gazprom supplied about 180 billion cubic meters of natural gas to non-CIS countries. A similar situation is observed in oil exports. For comparison, Rosneft has exported to European countries 61.1 million tons of oil, and to the CIS countries - only 7.8 million tons in 2014.

Europe can partially compensate the supply of Russian oil and natural gas by increasing the supply of hydrocarbon resources from Algeria, Qatar and the United States (in 2016 countries began to supply liquefied natural gas to Europe in tankers). Unlike Iran, which has managed to reorient itself in the trade and economic sphere to Asian markets, the Russian economy is still working for the EU market. There is no more profitable industry in Russia at the moment than the oil and gas sector. General economic sanctions as means of coercion to peace may lead to Russia's economic exhaustion.

Related: Poroshenko: Russia has to pay for aggression

Related: Obama comments on anti-Russian sanctions after cyber attacks

Related: Russia faces new U.S. sanctions

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