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Trade Experts Warn New Sanctions On Russia Could Damage US Competitiveness

A new spate of sanctions against Russia recently passed in the Senate could potentially prop up Russian energy companies and harm the U.S. energy industry, according to experts on trade sanctions.

The Russia Sanctions Review Act of 2017 would extend a current ban on companies’ involvement in oil projects located in Russia to similar projects worldwide that involve Russian energy firms. The legislation, which is intended to punish Russia, could effectively sanction U.S. companies.

“Were this legislation to pass with the Directive 4 provision included, it could block U.S. oil and gas firms from participating in some international oil exploration and production projects,” Richard Sawaya, vice president of National Foreign Trade Council, wrote in an editorial earlier this month.

He gave a handful of examples why U.S. companies stand to get the short end of the sanction stick, so to speak. If a sanctioned Russian company is awarded an exploration block on an oil field, then U.S. companies would be denied the means to explore anywhere on the field, according to Sawaya, who also heads USA Engage, an advocacy group for the agricultural industry.

“US firms see an uneven playing field,” Elizabeth Rosenberg, a sanctions expert formerly at the U.S. Treasury, told reporters in June, shortly before Congress voted on the matter. She points to burdensome financial regulations cropping up between the EU and U.S. sanctions.

U.S. companies could be barred from oil projects under the Senate’s version, which was spearheaded by GOP Sen. Lindsey Graham, anywhere in the world that include Russian entities. Companies that play key roles in energy development and production could lose billions of dollars.

Graham, a Republican from South Carolina, has fashioned himself into one of President Donald Trump’s biggest critics. He has joined many of his Democratic colleagues in calls for a special investigator to lead a probe determining if the Trump administration colluded with Russia to meddle in the U.S. presidential election.

China could also gain a foothold, Sawaya added, because the communist country hasn’t sanctioned Russia, allowing it to freely engage in commerce. Even if Putin and Russian oligarchs didn’t crowd out U.S. companies, he writes, other Chinese companies could work to freeze the country out of the oil fields.

The Senate bill permits Congress to prevent President Donald Trump from easing or suspending sanctions on the Kremlin, making it nearly impossible for the president to engage in diplomatic talks with Russia. Senators combined the provision on Russia sanctions with a separate Iran sanctions package, which would make vetoing the bill a much more difficult choice for Trump.

Administration officials believe the Senate’s version must be amended to give Trump more flexibility in his discussions with Russian President Vladimir Putin. The White House is pushing for waivers to be written into the House version of the bill.

“We support the sanctions on Iran and Russia,” White House legislative liaison Marc Short told reporters Sunday. “However, this bill is so poorly written that neither Republican nor Democratic administrations would be comfortable with the current draft because it greatly hampers the executive branch’s diplomatic efforts.”

The new sanctions could also put a crimp in the president’s plan to make it easier for companies to ship natural gas products to Eastern Europe. Trump allegedly intends to break up Russia’s energy monopolization in Europe – the Senate’s pan ironically enough could make it harder for the administration to draw a hardline against Putin.

Trump made public his intent to stymie Russia’s energy monopoly earlier this month at the Three Sees summit, which involved countries surrounding the Adriatic, Baltic and Black Seas, most of whom are completely dependent on Putin for energy.

The Trump administration’s position would reduce the impact of Russia using energy as a weapon against European countries that stray from Putin’s bidding, James Jones, a former NATO Supreme Allied Commander, told reporters.

The White House wants House Republicans to add amendments to the sanction.

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