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US Congress poised to pass new Russia energy sanctions

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Washington — The US House of Representatives is expected Tuesday to overwhelmingly approve a number of new sanctions targeting Russia's oil and natural gas sector, including new limitations on US investments in Arctic, deepwater and shale oil projects that are partially staked by Russian firms.

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"The legislation, if enacted, is a big political win for members of Congress who want to take a strong stance on Russia," Elizabeth Rosenberg, a senior fellow and director of the energy, economics and security program at the Center for a New American Security, said Sunday. "It will rearrange the way the global energy industry does business with Russia and significantly increase the risk around dealings with Russia."

Rosenberg, a former senior adviser at the US Treasury Department, said the legislative package, unveiled by House leaders Saturday morning after weeks of negotiations, pares back some limitations previously expected to impact US energy companies deeply, including adding a higher threshold on Russian ownership that would trigger sanctions.

The US oil and gas industry "scored a huge win" in the new bill, after lobbying Congress to weaken energy investment language in the Russia sanctions bill passed by the Senate by a 98-2 vote on June 15, Rosenberg said.

Still, the bill calls for new limits on investment in Russian pipeline projects, a provision aimed at derailing the Nord Stream 2 project and criticized by European leaders, and narrows time limits for available debt instruments.

"There are still a number of issues which the industry still does not like," Rosenberg said.

The new bill also prevents President Donald Trump from weakening or lifting sanctions against Russia without congressional approval, a policy change the White House had unsuccessfully lobbied to remove from the bill passed by the Senate last month.

"It is unfortunate that the Trump administration has created such uncertainty on Russia policy that Congress feels obliged to control sanctions policy," said David Goldwyn, president of Goldwyn Global Strategies and the State Department's special envoy and coordinator for international energy affairs from 2008 to 2011. "But as that Rubicon will be crossed, this bill is a major step forward from the Senate version, and it now seems certain to pass."

The bill, motivated largely by Russian meddling in the 2016 US presidential election, had been stalled by House leaders for over a month after it was overwhelmingly passed by the Senate in June.

The bill includes new sanctions on Iran in connection with its ballistic missile program and, in a change from the Senate bill, new sanctions on North Korea.

In a statement Saturday, House Majority Leader Kevin McCarthy, Republican-California, and House Foreign Affairs Committee Chairman Ed Royce, Republican-California, said the new bill "addressed original provisions that would have punished American job creators while benefiting a growing Russian energy oligarchy."


The bill, scheduled for a Tuesday House vote, will prohibit US companies from investing in Arctic, deepwater and shale crude oil projects in which Russian firms have a 33% or more ownership or control stake. That new 33% threshold was set after US oil and gas companies said language in the Senate bill could lead to Russian companies buying minimal stakes in certain energy projects and forcing US firms to relinquish their shares.

Joe McMonigle, an oil analyst for Hedgeye and a former US Department of Energy chief of staff under President George W. Bush, said US oil companies will likely find the fix to be "acceptable."

A US oil industry lobbyist told S&P Global Platts Saturday that the new, House bill is "a lot" better for US producers than the earlier Senate version and said only a few projects outside of Russia will likely be impacted.

Still, the lobbyist said, the new 33% threshold could potentially impact future negotiations in projects offshore Brazil, Mexico and Mozambique and could compel Russian companies to increase their share in other projects throughout the globe in order to block US firms' entry.

The bill states that US lawmakers "continue to oppose the Nord Stream 2 pipeline given its detrimental impacts on the European Union's energy security, gas market development in Central and Eastern Europe, and energy reforms in Ukraine."

It adds that the US government should "prioritize the export of United States energy resources in order to create American jobs, help United States allies and partners, and strengthen United States foreign policy."

European leaders, notably Germany's Angela Merkel, have criticized these provisions.


Under the new bill, Trump will not be able to weaken or lift sanctions without congressional approval, a policy shift the White House had been working unsuccessfully to have removed.

In an interview with ABC's "This Week" on Sunday, White House Press Secretary Sarah Huckabee Sanders said Trump was likely to sign the bill into law once passed by the House and Senate.

"The original piece of legislation was poorly written but we were able to work with the House and Senate. And the administration is happy with the ability to do that and make those changes that were necessary," she said. "And we support where the legislation is now, and will continue to work with the House and Senate to put those tough sanctions in place on Russia until the situation in Ukraine is fully resolved. But it certainly isn't right now."

In separate interviews Sunday with CBS' "Face The Nation" and CNN's "State of the Union", however, White House Communications Director Anthony Scaramucci said he did not know if Trump would sign the new sanctions bill.

"My guess is that he's going to make that decision shortly," Scaramucci said on CNN. "But, you know, there [are] a lot of questions out there."

In an interview with "Fox News Sunday," Senator John Thune, Republican -- South Dakota, said he expected the new bill would pass congress with a "veto-proof" majority.

"So the president would -- I think it's in his best interest for a lot of reasons to sign it, and I believe he will," Thune said.

Rosenberg, former Treasury Department adviser, said that the bill would increase the likelihood of this congressional review condition to be added to future sanctions legislation against other countries, "tying the hands" of this and future administrations.

In addition, provisions in the bill could add new hurdles for future changes to any US sanctions, she said.

"Codification isn't even a strong enough word for what this bill does," Rosenberg said. "It will be tremendously difficult for the Congress to adapt them with any nuance, or remove them, even if political circumstances merit."

The new sanctions bill comes as the US Treasury Department Thursday fined ExxonMobil $2 million for violations of Russian sanctions in May 2014, when current US Secretary of State Rex Tillerson was the CEO. In Thursday's announcement, the Treasury said presidents of ExxonMobil's companies violated the sanctions when they signed eight legal documents related to oil and gas projects in Russia with Rosneft President Igor Sechin. The company has denied any wrongdoing and launched a legal challenge in federal court against the Treasury.

--Brian Scheid,
--Edited by E Shailaja Nair,