Two days after the House passed bipartisan legislation in a 419-3 vote codifying and imposing further sanctions against Russia, Iran and North Korea and preventing the president from acting unilaterally to remove certain sanctions on Russia, moments ago the Senate also overwhelmingly approved the measure in a 98-2 vote. Only Senators Rand Paul and Bernie Sanders voting no. The bill will now head to the White House where it will be either signed into law by the president or vetoed, setting up a potential showdown with the White House over Russia. The move marks congressional Republicans' first rebuke of Trump's foreign policy, where the administration's warmer stance toward Russia has drawn heavy skepticism from both parties. The three countries named in the bill are accused of violating “the international order” by Senator Bob Menendez, the former chairman of the foreign relations committee. Under the bill, existing sanctions on Russia for its aggression in Ukraine and interference in the 2016 election would be codified into law. New sanctions would go into effect against Iran for its ballistic missile development, while North Korea’s shipping industry and people who use slave labor would be targeted amid the isolated nation’s efforts to launch an intercontinental ballistic missile (ICBM).
While a full breakdown of the key details in the legislation is provided at the bottom of this post, in a nutshell the sanctions target Russian gas and pipeline developments by codifying six of Barack Obama’s executive orders implementing sanctions on Russia for its alleged interference in the US elections.
John McCain lauded the bipartisan process that supported the bill: “We will not tolerate attacks on our democracy!” the Senator, who chairs the armed services committee, said from the Senate floor. “That's what this bill is all about.”
The Senate passage now sends the sanctions bill to Trump's desk, although lawmakers expressed mixed expectations on whether the president would sign it into law. In recent days, White House press secretary Sarah Huckabee Sanders offered mixed messages in recent days. On Sunday, Sanders told ABC’s “This Week” that the administration supports the bill. But on Monday, she told reporters on Air Force One that Trump is “going to study that legislation” before making a final decision.
# Should Trump sign the bill into law, a prompt Russian response is imminent. On Thursday, Russia's Kommersant newspaper reported that Russia is planning “symmetrical" response to earlier U.S. actions, including expelling diplomats and seizing U.S. Embassy properties, if and when Trump signs the new sanctions legislation.
It noted that Russia may take the Serebryany Bor vacation complex, and send home 35 diplomats, the same number as the Russian diplomats who were expelled by Barack Obama late in December. Komersant added that Russia may also limit maximum number of U.S. diplomatic personnel, which currently exceeds Russian staff in U.S.
Also on Thursday, Vladimir Putin said that Russia would be forced to retaliate if Washington pressed ahead with what he called illegal new sanctions against Moscow, describing U.S. conduct towards his country as boorish and unreasonable.
"As you know, we are exercising restraint and patience, but at some moment we'll have to retaliate. It's impossible to endlessly tolerate this boorishness towards our country," Putin told a joint news conference during a press conference in Findland.
"When will our response follow? What will it be? That will depend on the final version of the draft law which is now being debated in the U.S. Senate." Putin also spoke about an ongoing diplomatic row between Moscow and Washington which erupted last December when then U.S. President Barack Obama ordered the seizure of Russian diplomatic property in the United States and the expulsion of 35 Russian diplomats.
"This goes beyond all reasonable bounds," said Putin. "And now these sanctions - they are also absolutely unlawful from the point of view of international law." Calling the proposed sanctions "extremely cynical," Putin said the demarche looked like an attempt by Washington to use its "geopolitical advantages to safeguard its economic interests at the expense of its allies".
# But while Russia's adverse reaction is to be expected, it is the EU's response that will be closely watched.
According to an internal memo leaked to the FT earlier in the week, Brussles said it should act "within days" if new sanctions the US plans to impose on Russia prove to be damaging to Europe’s trade ties with Moscow. Retaliatory measures may include limiting US jurisdiction over EU companies. The memo, reported by the Financial Times and Politico, has emerged amid mounting European opposition to a US bill seeking to hit Russia with a new round of sanctions.
The document said European Commission chief Jean-Claude Juncker was particularly concerned the sanctions would neglect the interests of European companies. Juncker said Brussels “should stand ready to act within days” if sanctions on Russia are “adopted without EU concerns being taken into account,” according to the Financial Times.
The EU memo also warns that “the measures could impact a potentially large number of European companies doing legitimate business under EU measures with Russian entities in the railways, financial, shipping or mining sectors, among others.”
The freshly leaked memo suggests that the EU is seeking “a public declaration” from the Trump administration that it will not apply the new sanctions in a way that targets European interests. Other options on the table include triggering the ‘Blocking Statute,’ an EU regulation that limits the enforcement of extraterritorial US laws in Europe.
A number of “WTO-compliant retaliatory measures” are also being considered, according to the memo.
Over the weekend, we reported that Brussles expressed its concerns over the sanctions bill, when the European Commission said in a statement that “the Russia/Iran sanctions bill is driven primarily by domestic considerations,” adding that it “could have unintended consequences, not only when it comes to Transatlantic/G7 unity, but also on EU economic and energy security interests.”
And so, trapped between looking like a Russian crony on one hand if he refuses to sign the bill, and inflaming relations with not only Moscow but also Europe if he does sign, it will be up to Trump to determine if the feud with Russia escalates even more and involves European nations who are far closer to Russia in socio-economic terms than they would like to admit.
*) Finally, courtesy of Goldman, here are the main details of the draft legislation:
- Codifies existing US sanctions on Russia and requires Congressional review before they are lifted.
- Reduces from 30 days to 14 days the maximum allowed maturity for new debt and new extensions of credit to the state controlled financial institutions targeted under the sectoral sanctions.
- Reduces from 90 days to 60 days the maximum allowed maturity for new debt and new extensions of credit to sectoral sanctions targets in the energy sector, although this largely only brings US sanctions in line with existing EU sanctions, which already impose a 30-day maximum for most energy companies.
- Expands the existing Executive Order authorising sectoral sanctions to include additional sectors of the Russian economy: railways and metals and mining.
- Requires sanctions on any person found to have invested $10 million or more, or facilitated such an investment, in the privatisation of Russian state-owned assets if they have “actual knowledge” that the privatisation “unjustly benefits” Russian government officials or their close associates or family members.
- Authorises (but does not require) sanctions “in coordination with allies” on any person found to have knowingly made an investment of $1 million or more (or $5 million or more in any 12-month period), or knowingly provided goods or services of the same value, for construction, modernisation, or repair of Russia’s energy export pipelines.
- Orders the treasury, in consultation with the Director of National Intelligence and the Secretary of State, to prepare detailed reports within the next 180 days:
* on Russia’s oligarchs and parastatal companies including individual oligarchs' closeness to the Russian state, their involvement in corrupt activities and the potential impact of expanding sanctions with respect to Russian oligarchs, Russian state-owned enterprises, and Russian parastatal entities, including impacts on the entities themselves and on the economy of the Russian Federation, as well as the exposure of key US economic sectors to these entities.
* on the impact of debt- and equity-related sanctions being extended to include sovereign debt and the full range of derivative products....