Latest Anti-Russia Sanctions Bill Does Not Target Nord Stream II

765 views |Jul 24, 2018,12:01 pm
Latest Anti-Russia Sanctions Bill Does Not Target Nord Stream II

Kenneth RapozaContributor

House Minority Leader Nancy Pelosi speaks at a press conference at the U.S. Capitol July 23, 2018 in Washington, D.C.. Pelosi, Rep. Adam Schiff (left) (D-CA) and Rep. Eliot Engel (right) (D-CA) have introduced a resolution condemning U.S. President Donald Trump’s statements during the recent summit with Russian President Vladimir Putin in Helsinki. (Photo by Win McNamee/Getty Images)
More Russian sanctions are coming. Can you believe it?

The resuscitation of twin bills in the House and Senate, first introduced in January, follows President Trump’s highly polarizing encounter with Vladimir Putin in Helsinki. When Trump did not immediately side with intel stating the Russians hacked emails belonging to the Democratic Party, both sides of the aisle rushed to chastise the president and re-punish Putin with sanctions.

These bills are more overkill than not. Neither is much different from the sanctions law signed by Trump in his first year of office. They still give the final power to impose fines on the Treasury Department, run by the Executive (meaning Trump).

However, the sanctions bill in the Senate, authored by Democrat Chris Van Hollen, and the one in the House by Republican Ileana Ros-Lehtinen, make some new threats. For instance, the new bills ban Americans from owning Russian bonds, further targets Russian energy company assets in the U.S. and makes the U.S. spy agencies the final judge and jury on Russian meddling in elections. If the Director of National Intelligence deems Russia interfered in a U.S. election, the sanctions law would kick in.

Senator Chris Van Hollen. His January Russian sanctions bill has come back to life. (Photo By Tom Williams/CQ Roll Call)??
The bill in both houses is called the Defending Elections from Threats by Establishing Redlines Act of 2018. Both bills have seen no action since January, but Trump’s meeting with Putin gave them life. If Trump is serious about bringing Putin to Washington this fall, expect those two bills to be placed on the President’s desk for an autograph within days of the meeting. Like August 2017, Trump would be forced to sign the bills or risk being made to look like Putin’s puppet, something nearly every Democratic voter already believes to be true.

Gazprom has no assets of any value in the United States. They are already sanctioned. Their CEO Alexei Miller is also sanctioned.

In April, he sounded pleased by his inclusion on Washington’s hit list.

“Not being included in the first list I even had some doubts … maybe there is something wrong with me? But I am finally included. This means that we are doing everything right,” Alexie Miller said through his spokesman.

Russia’s sanctioned oil firm Rosneft does have controlling stakes in assets located in the United States. They are partial owners of Citgo with the Venezuelan government. Under this bill, Russia’s stakes in Citgo risk seizure.

Gazprom CEO Alexei Miller: happy to be sanctioned. (Photo by Danila ShostakTASS via Getty Images)
Perhaps the hardest hit of the Russian energy companies on the list would be Lukoil, which is ironically not state controlled. Lukoil has been in the U.S. for 18 years and has gasoline stations in 11 states. In addition, Lukoil has a branch in Houston that coordinates its international offshore oil exploration and production projects.

From the Senate bill*:

The Secretary of the Treasury shall, pursuant to the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.), block and prohibit all transactions in all property and interests in property of two or more of the entities specified in subparagraph (B) if such property and interests in property are in the United States, come within the United States, or are or come within the possession or control of a United States person.

(B) ENTITIES SPECIFIED.—The entities specified in this subparagraph are the following:

(i) Gazprom.

(ii) Rosneft.

(iii) Lukoil.

*House bill language is identical.

A gasoline station in Princeton, New Jersey, owned by Lukoil, a publicly traded Russian company sanctioned by Washington. (AP Photo/Mel Evans)
Also absent from both bills is the specific targeting of Gazprom’s Nord Stream II. Trump made reference to the controversial pipeline during the NATO meeting and again in Helsinki. He called Russia a strong competitor in global energy markets. And said that Europe was a market the U.S. wanted to get its LNG into, competing with cheaper Russian gas. Trump said Nord Stream I and II gave Russia the upper hand in Europe. But Nord Stream II is not in the language of the bill.

Nord Stream II is already in the previous sanctions law signed by the president. It gives Trump’s Treasury the power to sanction European companies like Shell Oil and Wintershall from doing business with Gazprom’s new gas line. Both are partners in Nord Stream II and have sunk billions into the ongoing project connecting Russia to Germany via the Baltic Sea.

Fining Nord Stream II would punish European allies, who would see it as a political move to push higher cost American LNG into Europe.

The Citgo sign outside of Fenway Park in Boston. It is partially owned by the Russian oil giant Rosneft. A new sanctions bill could upend that if Russia is found meddling in U.S. elections again. (AP Photo/Charles Krupa)
Look for this bill to be placed on the president’s table if Putin ever comes to town ahead of the midterms in November. Trump will be forced to sign it. Any whispers of Russian meddling in November, something many Democrats are already warning about, would tip the scales in favor of sanctions. While Russian securities in the popular Market Vectors Russia (RSX) fund are not sanctioned, their biggest holdings are.

Meanwhile, Russia is raising taxes next year, and interest rates are also expected to rise. Emerging market investors may want to look elsewhere. Russian stocks have outperformed emerging markets all year thanks to higher oil prices. A new sanctions bill signed by Trump would erase that in a hurry.

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