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Next round of US sanctions on Russia could target oil flows, bank loans

Washington — A deadline looms next month for a second round of mandatory US sanctions on Russia that could block US imports of Russian oil and ban international bank loans to Moscow.

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In July, the US imported 347,000 b/d of refined products and 107,000 b/d of crude from Russia, according to the latest Energy Information Administration data.

The new sanctions, triggered by a 1991 US law aimed at ending chemical and biological weapons use, will kick in unless the Trump administration certifies to Congress by November 6 that Russia is no longer using chemical or biological weapons, has assured Washington that it will not use the weapons in the future and is willing to allow on-site inspections by UN observers.

Moscow is not expected to make those assurances, leading sanctions watchers to expect the second round of penalties to be imposed.

The US State Department notified Congress in August that it had determined Russia used banned weapons during the March poisoning of a former Russian agent and his daughter in the UK. The determination triggered an initial round of mandatory sanctions terminating arms sales and US exports of national security-sensitive goods and technology to Russia.

For the second round of sanctions, the law requires the president to pick three of the following six penalties to impose:

  • Restricting US imports of Russian goods, "which may include petroleum or any petroleum product"
  • Banning US exports to Russia of all goods and technology, except food and agricultural products
  • Opposing loans or technical assistance to Russia by international financial institutions
  • Prohibiting US banks from making new loans to the Russian government
  • Downgrading diplomatic relations between the US and Russia
  • Restricting air travel in the US by Russia's Aeroflot

A State Department spokeswoman declined to give any details on how that decision would be made. She said the Chemical and Biological Weapons Control and Warfare Elimination Act "mandates that we certify to Congress whether Russia has met the three conditions, three months after the initial determination (August 6). If we cannot make such a certification, we are required to impose a second round of sanctions."

Congress is considering still more sanctions against Russia in response to its activities in Syria and Ukraine and allegations of interference in US elections, but those bills are on hold until lawmakers return from the US midterm elections on November 6. The proposals target the Nord Stream 2 natural gas pipeline, other investments in energy projects with Russian state-owned companies and dollar transactions with several major Russian banks.

-- Meghan Gordon, meghan.gordon@spglobal.com

-- Edited by Derek Sands, newsdesk@spglobal.com