Senate Passes Bill Expanding Russia Sanctions, Limiting Trump's Say

By Paul Sonne and Natalie Andrews in Washington and Anton Troianovski in Berlin Features Dow Jones Newswires

The U.S. Senate overwhelmingly passed a bill Thursday to expand sanctions on Moscow and wrest more control of Russian sanctions policy from the Trump administration, bucking criticism of the legislation from European allies, the State Department and the Kremlin.

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The bipartisan bill, which passed in the Senate in a 98-2 vote, requires that the administration receive congressional approval to lift existing sanctions on Russia. It also broadens sanctions on Russia's energy sector, mandates punishment of malicious cyber actors and crimps financing available to Russia's banking and energy sectors.

The result is the strongest rebuke yet from U.S. lawmakers to Moscow over Russia's alleged interference in the 2016 U.S. presidential campaign and over other behavior.

If the bill becomes law, it would mark a major escalation by Washington, essentially dashing any hopes in Moscow for sanctions relief and signaling Mr. Trump can't remove the penalties until Russia displays a significant change in behavior. Such a law likely would provoke a substantive response from the Kremlin, which didn't respond in kind to the final round of sanctions during the Obama administration.

The bill also marks a warning shot to the White House from the Senate, where lawmakers on both sides of the aisle have raised concerns that the Trump administration isn't responding forcefully enough to Russia.

The bill still requires passage by the House of Representatives and needs President Donald Trump's signature to become law. The House Foreign Affairs Committee is reviewing the details in the Senate bill, and Speaker Paul Ryan (R., Wis.) believes "we must do more to hold Russia accountable," his spokeswoman said.

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But the bill could run into trouble at the White House. Secretary of State Rex Tillerson said Wednesday that Russia should be held accountable for interference in the 2016 campaign but argued that Congress shouldn't tie the president's hands when it comes to applying or lifting sanctions.

"I would urge Congress to ensure any legislation allows the president to have the flexibility to adjust sanctions to meet the needs of what is always an evolving diplomatic situation," Mr. Tillerson said in testimony before the House Foreign Affairs Committee. "Essentially, we would ask for the flexibility to turn the heat up when we need to, but also to ensure that we have the ability to maintain a constructive dialogue."

Congress could theoretically override a presidential veto of the bill with a two-thirds vote in each chamber.

The legislation comes six months after U.S. intelligence agencies issued the declassified version of a report concluding Russia ordered an influence campaign to aid Mr. Trump against former Secretary of State Hillary Clinton during the 2016 election.

Russian President Vladimir Putin criticized the Senate bill before its passage, describing it as the product of domestic political battles in the U.S.

Mr. Putin, speaking Thursday during his annual call-in program on Russian state television, said sanctions against Russia are part of the West's long-running attempt to hamper Russia's growing economic power.

"This policy has always existed: restraining Russia," Mr. Putin said, calling for better relations with Washington.

Certain energy-related provisions of the Senate bill also prompted a rare public rebuke from European allies, which largely have imposed sanctions on Russia in lockstep with Washington since the Ukraine-Russia conflict erupted in 2014.

Germany and Austria issued a joint statement taking issue with a section of the bill that allows the president to sanction companies providing certain goods, services or investments for the construction of Russian energy export pipelines.

"We cannot accept a threat of extraterritorial sanctions, illegal under international law, against European companies that participate in developing European energy supplies," German Foreign Minister Sigmar Gabriel and Austrian Chancellor Christian Kern said in their statement. "Europe's energy supply is Europe's business, not that of the United States of America."

Berlin and Vienna supported the U.S. State Department's efforts to change the legislation, Mr. Gabriel and Mr. Kern said, making for a rare instance in which Europeans have been in agreement with the Trump administration in a foreign policy debate.

The legislation, they added, would have a "very negative" impact on European-American ties and damage Western efforts to resolve the Ukraine crisis. The bill's stipulation that the U.S. "should prioritize the export of United States energy resources in order to create American jobs" also drew a rebuke from Berlin and Vienna.

"It would not only be highly unfortunate, but also damaging to the efficacy of our position on the Ukraine conflict, if we do not act together and, instead, irrelevant considerations such as the economic interests of the U.S. in gas exports won the upper hand," Mr. Gabriel and Mr. Kern said.

Sen. Bob Corker (R., Tenn), chairman of the Senate Foreign Relations Committee, said he was unaware of the provision that upset U.S. allies in Europe, but said the House could change the bill if necessary.

The pipeline provision, which says the president "may" impose such penalties but stops short of mandating them, poses a potential risk to a consortium of five European companies, which pledged to provide up to EUR4.75 billion ($5.3 billion) in long-term financing to the Russian-backed Baltic Sea pipeline.

Engie SA, OMV AG, Royal Dutch Shell PLC, Uniper SE and Wintershall Holding GmbH signed their agreement in April, after Polish regulators had blocked them from owning 50% of Nord Stream 2 AG, a wholly owned subsidiary of Russia's state-owned PAO Gazprom.

"Any decision we take, like this one when we made that financing commitment, we make it by our best commercial interest, while abiding by applicable trade controls and international sanctions," said Sally Donaldson, a London-based spokeswoman for Shell.

Nord Stream 2 is seeking construction permits from Russia, Finland, Sweden, Denmark and Germany, and has begun stockpiling pipes to start construction, scheduled for early next year.

"We see absolutely no impact on the project," said Sebastian Sass, Nord Stream 2's representative to Brussels. "The bill makes clear that the objective is about American jobs and commercial projects being pursued at the expense of prosperity and jobs in Europe."

The Senate measure reiterates the continued U.S. opposition to NordStream 2 because of "its detrimental impacts on the European Union's energy security, gas market development in Central and Eastern Europe, and energy reforms in Ukraine."

Oregon Sen. Ron Wyden, the top Democrat on the Senate Finance Committee, which oversees trade policy, said "this bill is obviously not about U.S. gas exports, it's about ensuring we hit critical leverage points in countering Russian aggression."

Another portion of the bill would prohibit U.S. citizens and entities from exporting goods, nonfinancial services and technology in support of deep-water, Arctic offshore or shale-exploration projects involving Russian firms.

The Senate bill also tightens restrictions on the extension of credit to Russian entities. It reduces the maturity period of new debt issuance to Russia's financial sector from 30 to 14 days and Russia's energy sector from 90 to 30 days.

The legislation also codifies into U.S. law the executive orders the Obama administration issued in sanctioning Russia over the conflict in Ukraine and intervention in the 2016 election.

Mr. Trump would also need congressional approval to again allow the Russian Foreign Ministry to have access to compounds in New York and Maryland that were restricted by the Obama administration.

--Emre Peker in Brussels and Thomas Grove in Moscow contributed to this article.

Write to Paul Sonne at paul.sonne@wsj.com, Natalie Andrews at Natalie.Andrews@wsj.com and Anton Troianovski at anton.troianovski@wsj.com

(END) Dow Jones Newswires

June 15, 2017 15:56 ET (19:56 GMT)