Senate Passes Russia Sanctions Bill

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On June 14, 2017, the U.S. Senate passed by vote of 97-2 a measure to codify, strengthen, and expand sanctions against the Russian Federation in response to its activities in Ukraine, cyber-attacks, interference in the U.S. Presidential election, and activities in Syria. The legislation now faces a vote in the House. If enacted, the new measures will:

  • Mandate congressional review.

Proposed changes to the current Ukraine-related Russia sanctions will be subject to Congressional review.

  • Codify existing sanctions.

This new legislation codifies those sanctions measures so that they can no longer be suspended or terminated by executive action absent congressional review.

  • Strengthen certain existing sectoral sanctions.

Executive Order (E.O.) 13662 imposed sanctions on specified sectors of the Russian economy, including financial services and energy (including deep-water, Arctic offshore, or shale projects that have the potential to produce oil in the Russian Federation, or in maritime area claimed by the Russian Federation and extending from its territory). This resulted in a series of four Directives that constitute the Russian sectoral sanctions and prohibit certain types of transactions.

The new legislation modifies and strengthens the earlier directives and also adds the railway and shipping sectors to those subject to E.O. 13662 sanctions.

  • Tighten the sanctions related to debt transactions.

Previously, Directive 1—under which financial institutions are sanctioned—prohibited all transactions in, provision of financing for, and other dealings in new debt of longer than 30 days maturity of persons (including entities) determined to be subject to this Directive, their property, or their interests in property. Under the new legislation, the maturity date for new debt is changed from 30 to 14 days.

Previously, Directive 2—under which energy companies are sanctioned—prohibited all transactions in, provision of financing for, and other dealings in new debt of longer than 90 days maturity of persons (including entities) determined to be subject to this Directive, their property, or their interests in property. Under the new legislation, the maturity date for new debt is changed from 90 to 30 days.

  • Expand the scope of energy sanctions.

The new legislation expands Directive 4—under which energy companies are sanctioned—by prohibiting the provision, exportation, or reexportation, directly or indirectly, of goods, services (except for financial services), or technology in support of exploration or production for deepwater, Arctic offshore, or shale projects anywhere in the world.

The previous version of Directive 4 covered only “projects that have the potential to produce oil in the Russian Federation, or in maritime area claimed by the Russian Federation and extending from its territory, and that involve any person determined to be subject to this Directive, its property, or its interests in property.”

  • Imposes sanctions related to crude oil projects and energy- and defense-related transactions.
  • Imposes mandatory new sanctions on those conducting malicious cyber activity on behalf of the Russian government.
  • Imposes mandatory new sanctions on corrupt Russian actors.
  • Imposes mandatory new sanctions on those who seek to evade sanctions and on serious human rights abusers.
  • Imposes mandatory new sanctions on those who:

    • engage in transactions with the intelligence or defense sectors of the Russian Federation.
    • invest in privatization of state-owned assets in a manner that unjustly benefits Russian officials or their family members or close associates.
  • Imposes discretionary sanctions on those who:

    • facilitate development of pipelines in the Russian Federation.
  • Impose mandatory sanctions on those who:

    • to provide financial, material, or technological support to the Government of Syria, contributing to the ability of that government to acquire or develop chemical, biological, or nuclear weapons, ballistic or cruise missiles, and other destabilizing weapons acquisitions.

The legislation also authorizes assistance to strengthen democratic institutions, reduce reliance on Russian energy sources, and counter disinformation across Central and Eastern European countries that are vulnerable to Russian aggression and interference. Several elements of this proposed legislation mandate periodic reports to Congress if the bill becomes law.

We will continue to monitor this legislation.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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