Washington, 2 August (Argus) ― Legislation
expanding the scope of US >sanctions on Iran, Russia and North Korea went
into effect following President Donald Trump's signature today.
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The bill would prohibit providing deepwater, Arctic and shale exploration technology
to any project in the world where a Russian entity on the US sanctions list
holds 33pc or higher in equity. Restrictions on the technology transfer
previously applied to projects in Russia only.
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The legislation would also prevent Trump, and his successors, from unilaterally
waiving sanctions targeting the Russian oil sector by giving Congress the
ability to pass a veto-proof resolution of disapproval.
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The administration had lobbied against the legislation, mostly out of concern
that it would restrict the power of the president. But both the House of
Representatives and the Senate passed the bill with veto-proof majorities.
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In the end, Trump signed the legislation but called it flawed and said parts of
it are unconstitutional for encroaching on the president's prerogatives.
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"I built a truly great company worth many billions of dollars," Trump
said in his signing statement. "That is a big part of the reason I was elected.
As president, I can make far better deals with foreign countries than
Congress."
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The new bill would expand the scope of sanctions by further cutting off the
Russian energy companies from international debt markets. It prods the US administration
to impose sanctions on pipelines delivering Russian energy commodities to
markets in Europe, but to do so "in coordination with allies of the
US."
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Russian state-owned Gazprom's proposed 55bn m³/yr Nord Stream 2 natural gas
pipeline to Europe is an explicit target of the bill. The legislation also
recommends sanctions on entities providing maintenance on existing natural gas
and other pipelines into Europe.
The legislation, which cleared Congress with strong bipartisan support, reflected
concerns that Trump would lift sanctions on Russia as part of a broader
agreement with Russian president Vladimir Putin. Former president Barack Obama
imposed the oil sector sanctions in 2014 over the conflict in eastern Ukraine.
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Those sanctions were imposed in coordination with the EU and designed to minimize
the direct impact on European buyers of Russian energy. The new legislation is
prompting concerns and even threats of retaliation from the European
Commission, as well as Germany and Austria, as it could affect pipelines
supplying natural gas and oil to Europe. Utilities in Germany and Austria are
backing Nord Stream 2.
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"Our priority is to overcome the Ukraine crisis and to maintain the political
pressure on Moscow that sanctions cause," German foreign minister Sigmar
Gabriel said yesterday. "That is only possible if we present a united
front and work together."
Gabriel said Germany "will oppose an 'America first' industrial policy under
the pretext of sanctions." The bill includes a provision encouraging the
administration to "prioritize the export of US energy resources in order
to create American jobs, help US allies and partners, and strengthen US foreign
policy."
French energy company Engie said it could withdraw its backing for Nord Stream
2 so as not to be affected by the new US sanctions.
In response to the new sanctions, Putin ordered US diplomatic missions in Russia
to pare down personnel by two-thirds and shut a US diplomatic compound,
mirroring actions Obama took in December 2016.The decision "makes our life
difficult," US secretary of state Rex Tillerson said. But "from
[Putin's] perspective and how he looks in the eyes of his own people, he felt
he had to do something," Tillerson said.
The bill would impose penalties on companies supplying crude oil and products
to North Korea, or purchase coal from that country.
The legislation also mandates sanctions on entities supporting Iran's ballistic
missile program, as well as stricter sanctions against the Islamic
Revolutionary Guard Corps, a security force with extensive holdings in Iran's
economy.