Russia Sanctions Energy Rewrite Stokes Cross-Capitol Clash

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By Brian Dabbs and Dean Scott

Plans to scale back energy restrictions in a House version of a new Russia sanctions bill are already facing pushback across the Capitol.

Rep. Pete Sessions (R-Texas), the House Rules Committee chairman, told reporters July 20 that a new bill may get a vote next week before that chamber departs for its August recess, arguing there is “widespread agreement” over the need to ease the restrictions.

The Senate bill would restrict U.S. investment in energy projects that share Russian investment, and the House is aiming to relax those restrictions. Critics say the measures would hamper U.S. industry and stifle energy shipments to European countries.

But some senators on the Foreign Relations Committee, the panel that crafted the bill (S. 722), decried the House plans. Potential changes could put the bill in jeopardy and spoil Senate efforts to send a strong signal to Russia.

“It sounds like the oil companies and the energy companies got in there, and they’re pushing for a different policy. It’s unfortunate,” Sen. Marco Rubio (R-Fla.) told Bloomberg BNA. “I’m troubled they’re seeking to water it down, and I hope we can reverse that.”

Bipartisan Resistance?

The bill, which aims to confront cyber-hacking and Russian aggression in Ukraine through sanctions, sailed through the Senate in June, 98-2.

“I have problems with,” the House plan, Sen. Bob Menendez (D-N.J.), the former chairman of the Foreign Relations Committee, told Bloomberg BNA. “I haven’t seen the exact language and the scope of what they’re talking about, but the reality is you either decide that you’re going to allow a regime to continue to make money and violate the international order or you’re going to find ways to constrain it.”

State-owned Russian energy companies, such as Gazprom PJSC, develop energy resources globally.

Senate Foreign Relations Committee leaders are signaling they want to work with House counterparts. “We’re looking at their requests. I think some of their suggestions have been helpful. Others we have said that we think [are] not appropriate,” Sen. Ben Cardin (D-Md.), the ranking member of the Foreign Relations committee, told Bloomberg BNA. “They asked us for input and we’re trying to give them input.”

House leadership and the House Foreign Affairs committee didn’t respond to Bloomberg BNA requests for comment.

Late July 19, Sen. Bob Corker (R-Tenn.), chairman of the Senate Foreign Relations Committee, told Bloomberg BNA a compromise “is almost there, if not [already] there now.”

Restriction on U.S.-Russia Energy Projects

House members are homing in on a provision in the Senate bill that would prohibit U.S. private sector involvement in energy projects, including oil, deepwater, Arctic offshore, or shale projects, that have Russian investors.

The Senate language revises current sanctions—imposed in 2014—that prohibit U.S. private sector involvement strictly in the Russian Federation or its territorial waters.

The new language would mean Russian companies could push American investors out of projects that are operating outside of Russia simply by investing, energy analysts and former diplomats said at an Atlantic Council event July 19.

That language would amend a Treasury Department policy, which gives exemptions as “provided by law or unless licensed or otherwise authorized.”

Russian ‘Poison Pills’

“I would make some technical fixes so it didn’t inadvertently give the Russians the ability to inject poison pills into otherwise perfectly legitimate worldwide energy exploration projects,” Daniel Fried, a former ambassador to Poland, said. Fried and other regional experts said Caspian Sea energy projects located off Azerbaijan could be subject to sanctions with the new policy. Chevron Corp., Exxon Mobil, and Lukoil PJSC, a Russia company, are part of a larger ownership consortium that produces oil at the Azeri-Chirag-Deepwater Gunashli field.

Sessions, the House Rules Committee chairman, said the Senate bill language could also sanction U.S. involvement in regional pipelines, which transfer natural gas to Europe. Russia maintains a near stranglehold on European gas supply.

‘Against the Best Interest of Eastern Europe’

“It would arbitrarily put Russia in a position against the best interest of Eastern Europe and against the United States,” Sessions told reporters.

One possible fix could scrap the blanket Russian investment language and replace it with a prohibition on U.S. involvement in energy projects that are 50 percent or more owned by Russian companies, David Mortlock, a former National Security Council official under the Obama administration, said at the Atlantic Council event.

The House is also likely to tack North Korea sanctions on the bill, which already includes Iran sanctions.

Regardless of the cross-Capitol dispute, the Senate will face pressure to pass a bill before its August break.

“The House will have adjourned and therefore there will be no time to send a further revised bill back to the House until September, and remember it is the Senate that is driving this debate,” Jeffrey L. Turner, a partner at Squire Patton Boggs LLP in Washington, said at the event. “And I think the Senate would like to get some legislation accomplished before they leave.”

But the Republican-controlled House and Senate will need to move quickly when they resume floor action the week of July 24, Cardin said.

“I’d imagine we have until early part of next week to get this resolved,” he said, while noting Senate Republicans have vowed to work into August if needed to wrap up agenda items including their health care bill and confirming Trump administration nominees.

To contact the reporter on this story: Brian Dabbs in Washington at bdabbs@bna.com and Dean Scott in Washington at dscott@bna.com

To contact the editor responsible for this story: Rachael Daigle at rdaigle@bna.com

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