Oil concerns hold up Russia sanctions push

Oil concerns hold up Russia sanctions push
© Getty

American oil and natural gas companies are pushing for changes to a massive expansion of economic sanctions on Russia, warning lawmakers that the new regulations would harm them, too.

House leaders are negotiating several fixes to a bill expanding economic penalties on Russia and Iran, which includes new limits on the extent to which American and Russian oil and gas companies can interact.

The White House has asked for several changes to the bill that would limit Congress’s ability to re-impose Russian sanctions if they’re lifted by the administration. Lawmakers have mostly rejected that request, and Democrats have cited it to raise concerns about President Trump’s potential connections to Russia.


But American energy companies say the expanded sanctions were rushed through the Senate without enough vetting and could prevent United States oil and gas companies from drilling near Russian companies, even if they’re not working together.

Originally drafted as a bill to impose sanctions on Iran, senators added Russian sanctions shortly before the bill’s final passage in June. Senate Majority Leader Mitch McConnellAddison (Mitch) Mitchell McConnellTrump second-term plans remain a mystery to GOP Eighty-eight years of debt pieties Ernst says Trump should sign defense policy bill with military base renaming provision MORE (R-Ky.) introduced the Russian sanctions as an amendment on June 12. The amendment was adopted on June 13, and the bill passed on June 15.

Energy companies are concerned with sections of the Russian sanctions that ban American investments supporting the “maintenance or expansion of the construction, modernization, or repair of energy pipelines by the Russian Federation.” The sanctions bill also bans investments that “directly and significantly [contribute] to the enhancement of the ability of the Russian Federation to construct energy export pipelines.”

Those provisions are intended to harm Russian energy companies, many of which are state-owned or closely tied to the Kremlin, and reduce Europe’s dependence on Russian oil and gas. The United States has increased crude oil and natural gas exports as a way to counter Russian influence in the region, a stated goal of the president.

But energy firms and lobbying groups say that the sanctions could prevent American companies from drilling in the same oil and gas fields as Russian companies if the firms are forced to collaborate by the host countries.

The American Petroleum Institute (API), the nation’s leading oil and natural gas lobby, is pressuring the House to take a more nuanced approach. The industry argues the Senate’s legislation would accidently harm American producers by barring them from participating in oil projects outside of Russian territory simply because Russian firms are present there as well.

“Sanctions are a valuable tool of American foreign policy,” API President Jack Gerard said in a statement to The Hill. “But U.S. Senate legislation intended to increase sanctions against Russia could harm the competitiveness of a range of U.S. energy companies working around the world, posing risks to U.S. jobs, the economy and individual Americans — and possibly benefiting Russian interests.”

Key lawmakers from leadership on down say they’re open to tweaking the package to accommodate the industry’s concerns. 

House Majority Leader Kevin McCarthy (R-Calif.) and House Minority Whip Steny Hoyer (D-Md.) are leading negotiations over the bill, and senators have expressed openness to making changes to give energy companies more peace of mind, Republicans say.

Speaker Paul RyanPaul Davis RyanBush, Romney won't support Trump reelection: NYT Twitter joins Democrats to boost mail-in voting — here's why Lobbying world MORE (R-Wis.) said last week that lawmakers were considering fixing the bill “to [make] sure that we don’t actually inadvertently help Russian oligarchs and oil firms.”

Rep. Pete Sessions (R-Texas), who is helping craft the House bill, said, “Unfortunately, the Senate version of the bill would give Russians the opportunity to weaponize these sanctions against American businesses.”

He added, “I believe we need to thoroughly look at this and make necessary changes to protect American job creators.”

The oil industry began raising objections after the Senate sent its sanctions package to the House last month. Lobbyists said they simply didn’t have enough time to push the Senate to make the changes they wanted.

But pressure has ramped up this week, with both behind-the-scenes lobbying and public appeals to lawmakers.

In a letter to McCarthy on Monday, the Petroleum Equipment and Services Association (PESA) said it wants changes “made to language contained in [that bill] that, while ostensibly targeting the Russian energy sector, would in fact threaten many ongoing and future business activities of PESA member companies and other businesses.”

In a weekend op-ed in the Washington Examiner, the industry-funded Institute for Energy Research warned the sanctions bill “has the potential to affect a wide variety of industries — up and down the global energy, manufacturing, and engineering value chain.”

Energy-related concerns aren’t confined to American companies.

European allies have also worried new U.S. sanctions could jeopardize previous oil and gas contracts and partnerships with Russian firms that provide the continent with energy.

Wolfgang Ischinger, a former German ambassador to the U.S., wrote in a Wall Street Journal column that the sanctions could do economic harm to America’s partners in restraining Russian aggression.

Senate Foreign Relations Committee ranking member Ben CardinBenjamin (Ben) Louis CardinCongress eyes tighter restrictions on next round of small business help Senate passes extension of application deadline for PPP small-business loans 1,700 troops will support Trump 'Salute to America' celebrations July 4: Pentagon MORE (D-Md.) said Wednesday that he thinks the Senate bill is flexible enough to deal with industry and European concerns, but that he’s open to making fixes to reassure them.

“There are ways we could clarify that to give them greater comfort if that opportunity presents itself,” Cardin told reporters. “We would support those modifications,” whether through a separate bill or amendment, Cardin said.

The language on energy sanctions is one of several hurdles facing the sanctions bill. Lawmakers are sparring over a provision that only allows the House majority leader, not the minority leader, to introduce a bill re-imposing sanctions lifted by the president.

The House will also need to resolve an issue regarding the Constitution’s “origination clause,” which requires any bills affecting revenue to start in the lower chamber. Since the sanctions bill started in the Senate, the House would need to pass a new version for the Senate to approve later.