Sanctions against Russia and the gas war

Author : Georgiy Kuhaleyshvili

Source : 112 Ukraine

House of Representatives of the US Congress supported a bill on new sanctions against Russia in response to interference in the presidential campaign, aggression in Ukraine and violation of international security standards
21:27, 27 July 2017

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July 25, House of Representatives of the US Congress supported a bill on new sanctions against Russia in response to interference in the presidential campaign, aggression in Ukraine and violation of international security standards. The bill also introduces sanctions against Iran and the DPRK. This document is a revised version of draft law 98-2 on sanctions against Russia and Iran, which was approved by the Senate (upper house of the US Congress) in June and sent to the House of Representatives for consideration. 432 out of 435 congressmen from the Republican and Democratic parties have voted for the bill. The updated draft law on sanctions against Russia, Iran, and North Korea will return to the Senate for final approval. According to US law, the draft law will be able to gain supreme legal force after it is approved by both chambers of Congress and signed by the president.

The bill focuses on anti-Russian sanctions. The proposed restrictive measures prohibit the provision of US banking services, loans in excess of $ 10 million, the implementation of export and import operations against legal entities and individuals that are involved in the implementation of projects of Russian gas pipelines, invest large amounts of money in the economy of the Russian Federation, undermine cybersecurity, violate human rights, and participate in the supply of Russian weapons to Syria. Anti-Russian sanctions, introduced by former President Barack Obama, are imposed at the legislative level.

Related: US sanctions against Russia to cause troubles between US and Europe

American and other companies are prohibited from selling or leasing goods, services, technology for more than $ 1 million - once and for more than $ 5 million - during the year that will be used in the construction of Russian export-oriented gas pipelines. Banks will face restrictive measures, unless they reduce the maximum term of financing to 14 days for sanctioned Russian banks, up to 30 days for Russian oil and gas companies. Sanctions will affect firms that spend more than $ 10 million on privatizing state property of the Russian Federation and even those companies that will help attract such investments.

According to data by Vox, the bill contains some controversial points. It is difficult to determine when specifically American firms will be banned from working with Russian oil and gas companies. Perhaps the congressmen deliberately left a loophole for US oil and gas companies, including ExxonMobil, which do not support the tightening of anti-Russian sanctions. American businessmen are given time to settle their affairs in Russia.

Related: EU Ambassadors agree to expand anti-Russian sanctions over Siemens turbines

According to the bill, the president can refuse from imposed sanctions if this is required by US national security interests. To end the sanctions, the president must notify Congress about this and justify his decision in a special report, which will be considered at the hearings in Congress for at least 30 days. Restrictive measures can be abolished if the object of sanctions has changed his behavior and assured the US President that he would not create a reason for their resumption in the future.

There is no evidence that Donald Trump will support the bill. According to USAToday, Trump disagreed with the restriction of his right to cancel or mitigate the sanctions in the bill. The director of the White House for Legal Affairs, Mark Short, is negative in limiting the president's powers in the bill, considering it an unprecedented delegation of foreign policy to the Congress. Power in the United States is clearly separated, and all the foreign policy issues are in the hands of the executive branch: the president and the State Department. However, the White House spokeswoman Sarah Sanders notes that Trump will support this bill. In her opinion, the original text of the bill was written incorrectly, therefore it had to be improved together with the House of Representatives and the Senate (in order to make the necessary changes). The White House did not disclose when exactly Trump planned to approve the new sanctions. Trump is going to carefully read the bill before signing.

The American president will observe the behavior of Russia in the east of Ukraine after the recent telephone conversations of “Normandy four.” The Kremlin would demonstrate whether the Russian leadership would change its behavior in Donbas and withdraw its troops, or continue its provocations.

Related: US sanctions are steps to annihilate relations normalization, - Russian MFA

The day before the negotiations in the "Normandy format", Ukrainian President Petro Poroshenko stressed that he would demand that Russia respect the ceasefire. Otherwise, Poroshenko will demand stricter anti-Russian sanctions. It is no coincidence that US Special Representative for Ukraine Kurt Volker and US Ambassador to Ukraine Marie Louise Yovanovitch visited the ATO zone on weekends, talked with Ukrainian military and local officials to understand the full picture of the situation in Donbas. During a briefing in Kramatorsk, Kurt Volcker, who supports the idea of giving lethal weapons to Kyiv, stated that the real war is taking place in Donbas and the main task is to restore Ukraine's sovereignty and territorial integrity.

Related: Trump to not lift current anti-Russian sanctions, thinks of new, - White House

The White House gives the Kremlin another signal that Donald Trump might easily toughen anti-Russian sanctions. The bill will have to be approved if Moscow leaveі Washington with no choice. Sanctions are an extreme measure, in case the Russian Federation does not fulfill the security conditions of the Minsk agreements. Only the cessation of hostilities and the withdrawal of Russian troops from the territory of Ukraine can remove the issue of toughening of anti-Russian sanctions.

Related: Ukraine hails new U.S. sanctions against Russia, - Poroshenko

Republican Senator John Tune is convinced that Donald Trump will eventually sign a bill on sanctions, as it meets his interests for "many reasons." A similar position is held by his fellow party member, Senator Marco Rubio. He believes that Donald Trump will not oppose additional anti-Russian sanctions and does not see a problem in them. However, the supporters of tightening anti-Russian sanctions do not have to worry. Even if the president does not sign the bill, according to the American legislation, it can be approved as a federal law by 2/3 votes of the Congress. The majority of senators and Republicans from both parties support the tightening of anti-Russian sanctions. According to CNN, it is not yet known when the Senate can vote for the bill approved in the House of Representatives.

Related: EU could impose return sanctions on U.S., - Juncker

Weakening of Russia's oil and gas industry, which will follow the application of new sanctions, meets the commercial interests of the United States. The goal of the administration of Donald Trump is to increase the volume of production and sales of liquefied natural gas abroad. US president is interested in reducing the US trade deficit ($ 502.3 billion) in the context of his "Make America great again" program. According to the estimates of the American Action Forum, the export of natural gas to 2040 will increase the volume of US trade by 1.6 trillion dollars. The US is just developing its European gas market. In 2016-2017, Americans has supplied natural gas in tankers to Portugal, Spain, Italy, Holland, Poland. The reserves of natural gas in America are 9.86 trillion cubic meters (5th place in the world). During 2018-2020, the US plan to build 4 new terminals. This will allow the US to become the third largest exporter of liquefied natural gas after Australia and Qatar.

Related: Russia’s Federation Council asks Putin to impose sanctions on Poland

Trump's plans are hampered by the dominance of the Russian company Gazprom in the EU gas market. The share of Russian natural gas in EU consumption is 33.5%. In 2016, Russia exported 118 billion cubic meters of gas to the EU (+ 15% to the previous year). About 45% of the "blue fuel" was delivered from Russia to European consumers by the gas transmission system of Ukraine. Now Russia does not spare money for the implementation of the Nord Stream-2 and Turkish Stream gas pipeline projects. The combined capacity of two branches of the Nord Stream gas pipeline (55 billion cubic meters) and four branches of the Turkish Stream gas pipeline (63 billion cubic meters) will annually provide more than 33% of the European Union's natural gas needs bypassing the territory of Ukraine. Russia will be able to control the major share of the European gas market and dictate its conditions to the member states, speculating on their energy dependence. New gas pipelines will become a hindrance to the entry of European natural gas suppliers from other countries, including the United States.

Under current conditions, the US will not compete with Russia in the field of natural gas exports to the EU. The US produces no more than 18.6 billion cubic meters of natural gas per year. According to Forbes, Russia can specifically reduce the price of its natural gas in order to make US gas uncompetitive. With the help of sanctions, the US expects to disrupt the implementation of projects of Russian gas pipelines, cutting them off from foreign sources of financing.

Related: EU can extend sanctions against Russia over Siemens scandal

Half of the costs for the Nord Stream-2 project (9.5 billion euros in total) was taken over by the Anglo-Dutch company Royal Dutch Shell, the French firm Engie, the Austrian company OMV and the German companies Uniper and Wintershall. The Turkish company Botas Petroleum Pipeline Corporation, the Swiss contractor Allseas Group S.A., takes part in the implementation of the Turkish gas pipeline project worth 6 billion euros. All these companies can become objects of US sanctions if they do not stop cooperation with Gazprom. The US wants to expand its niche in the EU gas market by reducing Russia's share.

Related: Kremlin criticizes new sanctions approved by US Congress

New sanctions will reduce the flow of investment in the Russian economy. Donald Trump pursues a policy of protectionism and opposes the outflow of American capital abroad. American president wants to create the new jobs in the US, especially in the oil and gas industry. The new sanctions affect the interests of the US oil and gas company ExxonMobil, which in 2011 agreed with the Russian company Rosneft on the implementation of joint projects on the oil and gas shelf of the Arctic and Black Sea in the amount of $ 3.2 billion.

Related: Germany's Gabriel says gradual lifting of Russian sanctions possible if Minsk holds

It is doubtful that the European Union will join the new US sanctions if necessary. The European Commission did not support the American bill, as it affects the energy interests of the EU and will have unpredictable economic consequences. Previously, participants of the project of the Russian gas pipeline Nord Stream-2 were against tightening of anti-Russian sanctions (German Foreign Minister Zigmar Gabriel, Austrian Chancellor Christian Kern). The European Union defends the interests of its companies, because in the near future the US will not become an alternative to Russia in terms of natural gas supplies. Under favorable circumstances, the US will be able to increase the volume of natural gas exports to only 96 billion cubic meters by 2020.

Related: ExxonMobil challenges US Treasury Department decision on fine for violation of sanctions




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