The US Senate approved amendment S. Amdt 232 to S.722 (Iran Sanctions bill) on June 14, 2017 on a 97-2 vote (No. 144) and it’s worth our while to look at precisely what this amendment provides [Congressional Record]:
The amendment would do a number of things. It would codify and
strengthen six existing Obama administration Executive orders on Russia
and Ukraine and on Russian cyber activities and the sanctions flowing
The Obama Administration imposed sanctions on Russian in the wake of Russia’s incursions and take over of Crimea, described by Reuters on December 20, 2016. The article notes that the incoming administration, Rex Tillerson included, were in favor of easing these sanctions.
It would provide for strict congressional review of any effort by the
President to relax and suspend and terminate or waive Russian sanctions
patterned after the Iran Review Act.
This provision likely won’t be well received at the White House, as it removes the administration’s power to unilaterally ease the sanctions, including the ones added in the aftermath of Russian meddling in the 2016 election. The ‘cyber’ sanctions included the removal of 35 Russian diplomats and the closing of two Russian properties identified as “rest and recreation” locales, but commonly believed to be intelligence centers by US authorities. It was reported last May that the administration was giving consideration to returning the two controversial properties to the Russians.[WaPo]
It would require mandatory imposition of sanctions on malicious cyber
activity against the United States, on corrupt Russian actors around
the world, on foreign sanctions evaders violating the Russia, Ukraine,
and cyber-related sanctions controls, on those involved in serious
human rights abuses in territories forcibly controlled by Russia, and
on special Russian crude oil projects around the world.
The use of the term “mandatory” is important in this context. The message is clear, should the Russians or their agents engage in further acts of “malicious cyber activity, then imposition of sanctions is an absolute, non-negotiable, manner. Notice, please, the list of activities which would trigger sanctions: Violating sanction controls, human rights abuses, and Crude Oil Projects. The latter will be of great interest to the Russian oligarchs and “comrade” Putin.
It would authorize broad new sanctions on key sectors of Russia’s
economy, including mining, metals, shipping, and railways, as well as
new investments in energy pipelines.
The inclusion of “metals” is interesting, considering the Trump promise to build oil pipelines with American steel. The promise has a compromise: On March 31, 2017 the Los Angeles Times reported that about half the steel for the Keystone Pipeline would come from an Arkansas plant and the rest will be imported. The rationale?
“The steel is already literally sitting there” waiting to be used, White House spokeswoman Sanders told reporters, explaining the reversal. Evraz Steel, a Canadian subsidiary of Russia’s Evraz PLC, had signed on to provide 24 percent of the steel before the project was rejected under Obama, according to Reuters, and some pipe segments have already been built.” [CSMonitor]
It would crack down on anyone investing in corrupt privatization
efforts in Russia–something we have seen a lot of over 20 years.
It would broaden the Treasury Department’s authority to impose
geographic targeting orders, allowing investigators to obtain ATM and
wire transfer records so Treasury can better target illicit activity of
Russian oligarchs in the United States.
A few translations might be in order. “Corrupt privatization” is an analytic term used to describe Russian versions of privatization as essentially corrupt — “corruption has resulted from the privatization of public assets whether “bought” (typically at grossly undervalued prices) or by government officials in effect taking private control of assets still officially publicly owned.” “Geographic targeting” refers to the authority given to the Department of the Treasury to regulate sanctions over regions, and not just specific countries or companies. ATM and wire transfer records are of great interest to FINcen, and FINcen is the division of the Treasury which investigates financial fraud and other illegal activity. (See also OFAC FAQ compliance) At the risk of unsupported speculation, we can muse that if FINcen has the power to investigate wire transfers to Russia, and if the Special Counsel has access to FINcen investigations, then any attempts to evade sanctions can end up in the hands of the Special Counsel’s investigation. This might get messy indeed.
It would require Treasury to provide Congress with a study on the
tangled web of senior government officials from Russia and their family
members and any current U.S. economic exposures to Russian oligarchs
and their investments, and that includes real estate.
This portion of the amendment widens the net. “Any current US economic exposure to Russian oligarchs and their investments” is sufficiently broad to include anyone, any company, any corporation, and any family. And, while we’re discussing real estate, this opens the possibility — even the probability — of a report on the transaction in which Russia’s “Fertilizer King” bought a Trump property in Florida at a price well over the market. [Miami Herald] The term exposure could also extend to the fine art of money laundering, succinctly explained by this Business Insider article. When the word “investments” pops up we can assume that the powers thus authorized in the Amendment can look into shell corporations. “The real big shots don’t bother with casinos, crooked bank managers, junkets, or smurfs. They manage to transfer millions, or billions, without handling cash or involving banks at all, instead funneling their money through corporate deals (bribes, kickbacks, and embezzlement schemes), which are exempt from currency controls.”
It would require the administration to assess and report to Congress
on extending secondary sanctions to additional Russian oligarchs and
state-owned and related enterprises.
We can also safely assume that an administration which wanted to ease sanctions on Russia will not be best pleased with having to self-report on the possibility of extending secondary sanctions to “additional Russian oligarch,” etc. For clarification, “secondary sanctions” are defined as follows: “Secondary sanctions are a relatively new kind of sanction that has been implemented frequently over the past five years, particularly relating to Iran. These kinds of sanctions supplement other sanctions programs by targeting non-U.S. persons (primarily foreign financial institutions and foreign sanctions evaders) who do business with individuals, countries, regimes, and organizations in Iran.” [OFACnet] The Amendment provides for an administration report of the relative effectiveness of levying such secondary sanctions.
So, what to expect? Since the administration failed to apply the brakes on the Senate, we could reasonably expect it to try to ameliorate these provisions in the House. This should separate the Reagan Would Be Spinning In His Grave Republicans from the Dear Leader Trump Is Always Right Crowd. Speculation Warning: Trump friendly representatives may try to argue that the Senate Amendment is “too broad,” or “too vague.” The problem with this is that the Senate amendment is neither too broad or “void for vagueness.” There will be the “sanctions don’t work” argument perhaps — but this falters if those in favor of reverting to the old level of Cuban sanctions try to have it both ways — Cuban sanctions OK, Russian sanctions not OK.
Not to put too fine a point to it, but 97 members of the US Senate have just elevated the administration’s Russian sanctions headache to a full bore hemiplegic migraine.
Update: S. 722 (Iran Sanctions Bill with Russian Sanctions Amendment) passed the Senate on a 98-2 vote (number 147) The only members of the Senate voting against the bill were Sanders (I-VT) and Paul (R-KY).