EU Cautions U.S. on Russia Sanctions Bill

By Laurence Norman Features Dow Jones Newswires

The European Union stands ready to act "within days" if its concerns about the U.S. bill to impose new sanctions on Russia aren't addressed, European Commission President Jean-Claude Juncker said Wednesday.

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The bill, which was passed Tuesday, includes provisions allowing President Donald Trump to sanction European companies who work on the development, maintenance, modernization or repair of energy export pipelines -- language European officials believe could apply to a range of current energy projects.

The EU executive's top officials said they would keep a close eye on the legislative process and will be ready to act swiftly if and when needed.

"The EU is fully committed to the Russia-sanctions regime. However G-7 unity on sanctions and close coordination among allies are at the heart of" making the measures effective, Mr. Juncker said. "The U.S. bill could have unintended unilateral effects that impact the EU's energy security interests," he added.

"This is why the Commission concluded today that if our concerns aren't taken into account sufficiently, we stand ready to act appropriately within a matter of days. 'America First' cannot mean that Europe's interests come last," Mr. Juncker said

In an overwhelmingly bipartisan vote, the House of Representatives passed new sanctions that would punish Russia, after the U.S. intelligence community concluded that Moscow had sought to interfere in the 2016 presidential election.

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It remains unclear if President Trump will sign the bill or veto it. In an interview with The Wall Street Journal on Tuesday, the president said he hasn't yet decided whether to sign the legislation into law. The bill can still become law without Mr. Trump's signature if it goes unsigned for 10 days.

After Russia's intervention in Ukraine and its annexation of Crimea in 2014, the EU and the U.S. moved in parallel to ratchet up economic sanctions on Russia. EU officials say the bloc has paid the highest price of those sanctions since EU-Russia trade was much higher than U.S. economic ties before Ukraine crisis.

The EU and the U.S. have tied the easing of sanctions to Russia's implementation of the Minsk cease-fire and peace agreements from February 2015. The bloc recently extended its sanctions regime for an extra six months. The U.S. bill was aimed partly at tying Mr. Trump's hands on sanctions, forcing him to seek congressional approval before lifting restrictions.

The EU acknowledged that a number of changes were made to the draft bill in recent days to lower the risk of U.S. legal action against European firms. French, German and Austrian officials had complained forcefully about earlier drafts of the bill.

However the EU said the final wording of the bill potentially opened the way to sanctions on companies building infrastructure that may transport energy resources to Europe -- including the maintenance and upgrade of pipelines in Russia that feed Ukraine's gas transit system, which provides a vital source of revenue for Kiev. Officials also say the bill could have an impact on critical plans for energy-source diversification, like liquefied natural-gas projects in the Baltic states.

The EU hasn't spelled out what action it would take if the legislation enters effect -- or if they would only act if European companies are affected by the decision. The bloc has long complained about U.S. legislation that has extraterritorial effect -- meaning it gives the U.S. the power to sanction foreign companies for activities that U.S. firms are banned from carrying out.

However there are a couple of channels open for potential retaliation.

One is to take a case to the World Trade Organization. The EU also could apply legislation drawn up over a decade ago -- the so-called blocking statute -- which orders European companies to not obey U.S. extraterritorial sanctions.

The effectiveness of the latter measure in protecting European companies is questionable. It could end up in a situation where a European company is sanctioned by the U.S. and fined by the EU for obeying the U.S. measures.

Write to Laurence Norman at laurence.norman@wsj.com

(END) Dow Jones Newswires

July 26, 2017 08:15 ET (12:15 GMT)