According to the White House, Obama will sign the bill imposing new sanctions on Russia.
Reportedly, he is not especially eager to sign it, but is being forced to do so under pressure from Congress. It is easy to see why: some of the measures look particularly harsh and will clearly create additional tension between the State Department and the Kremlin.
Since, as usual, hardly anyone has really understood anything yet or read the text carefully, Nikita from the ACF (Anti-Corruption Foundation) investigations department has sorted it out and offers another crash course on the new sanctions. Read on:
The stated purpose of the bill. To help Ukraine restore its territorial integrity and statehood, and to deter the Russian government from further destabilization and invasion of Ukraine, as well as other independent countries in Eastern Europe and Central Asia.
● Any three of the sanctions measures listed below will be imposed on ROSOBORONEXPORT. (This is the Senate’s proposal; Obama may choose which specific measures to impose.)
● Any three of the measures listed below will be imposed on Russian arms manufacturers, sellers, or transporters that supply weapons to Syria, Ukraine, Georgia, Moldova, or other countries without the consent of those countries’ recognized governments.
● The sanctions will also be extended to any individuals or legal entities that assist, including financially, the persons or organizations mentioned in the previous two points.
● Any three of the measures listed below will also be imposed on any companies investing in the development of Russian offshore oil fields, Arctic oil fields, or deepwater oil production. (That means that if a Chinese oil company wants to help Rosneft pump oil from offshore fields, that Chinese company would come under sanctions.)
● The sanctions measures themselves, which may be applied at the discretion of the President of the United States:
a. The U.S. Export-Import Bank will not support the relevant transactions. (This government bank provides support and insurance for foreign trade operations.)
b. U.S. government procurement of goods and services from the sanctioned person or entity will be prohibited.
c. Any supply of military or dual-use goods or services to the sanctioned person or entity will be prohibited.
d. Any transactions involving real estate (including its use) located under U.S. jurisdiction and owned by the sanctioned person or entity will be prohibited.
e. Any banking operations in financial institutions under U.S. jurisdiction will be prohibited. (This means that Rosoboronexport will not be able to hold accounts or obtain financing from American banks.)
f. The purchase of shares or debt instruments issued by the sanctioned person or entity will be prohibited.
g. If an individual is sanctioned, they will be expelled from the United States and their visa will be revoked. (An individual could fall under these sanctions if, for example, they supply weapons or finance such activity.)
h. Any of the measures listed above may also be applied to the executives of legal entities placed under sanctions. (This means that if some Rosoboronexport executive has a little house or a bank account in the U.S., the house becomes off-limits and the account gets frozen.)
● Also, if the President of the United States determines that GAZPROM (mentioned separately) has substantially reduced gas supplies to NATO countries, Ukraine, Georgia, or Moldova, then within 45 days Gazprom may be subjected to the sanctions listed in point f (and that is the really brutal one), plus any one other measure from the list above.
● Exceptions may be made for the procurement of goods and services if the contract was concluded before the law was signed, and if the President of the United States explains in writing that such procurement is necessary in the interests of national security and that no alternative supplier can be found. (For example, this could apply to Russian engines used in American Atlas V rockets.)
● The President of the United States may also impose the sanctions listed below on foreign financial institutions that conduct significant transactions with persons or entities sanctioned under this law, as well as transactions carried out on their behalf.
● The sanctions listed below may also be imposed on any financial institutions that, 180 days after this law is published, conduct significant transactions with Russian legal entities and individuals from the “Specially Designated Nationals and Blocked Persons List” (SDN) who were included there because of the crisis in Ukraine.
● Sanctions measures at the discretion of the President of the United States a. The financial institution will be prohibited from opening correspondent accounts in U.S. banks, or restrictions may be imposed on the use of and transactions through an existing account, up to and including a full block.
This section means that if some Chinese or Indian bank transfers money for Yakunin or Sechin, and the U.S. finds out about it, then at the discretion of the President of the United States that bank’s correspondent accounts and operations may be blocked. Now no bank in the world will want to get involved with Sechin’s enormous salary and risk having its U.S. accounts blocked.
Yes, none of these measures becomes mandatory the moment the law takes effect. But the law gives the President of the United States the power to apply them at any time. In my view, the passage of this law is an extremely serious warning to banks and companies around the world that they should avoid dealing with Russia in certain sectors and with certain individuals and legal entities. If our authorities used to say they would work through, say, China and that sanctions were nothing to fear, now any bank—not just a Chinese one—will think very carefully before processing payments for ROSOBORONEXPORT or servicing the accounts of companies from Yakunin’s offshore empire.
The bill also provides for the delivery to Ukraine of certain types of weaponry, including anti-tank systems, counter-battery radars, and drones for tactical reconnaissance, with a total value of $350 million.
P.S. ACF’s previous explanations of the sanctions can be read here and here.