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Country Risk

Russian energy and infrastructure sectors targeted by new US sanctions, aimed at expanding their scope and scale

16 June 2017

Key Points

  • If the new sanctions become law, they will increase the scope and scale of the current US sanctions against Russia and make them much harder to be removed or eased.
  • The expanded sanctions are likely to be designed to cause a long-term negative effect on the Russian economy, as they will target development of next generation hydrocarbon fields and key energy infrastructure.
  • Due to the global regulatory reach of the US legislation, EU, Canadian and Japanese firms are likely to opt to comply with these restrictions while dealing with Russia.

EVENT

On 14 June 2017, the US Senate approved a new package of sanctions against the Russian government for allegedly meddling in the 2016 US presidential election.

New US sanctions aim to restrict in investments in the new generation oil and gas fields in Russia, such as those in the Arctic offshore (PA)New US sanctions aim to restrict in investments in the new generation oil and gas fields in Russia, such as those in the Arctic offshore (PA)

The new bill was passed with 97 votes in favour and 2 against, was attached to a bill to strengthen US economic restrictions against Iran. The Russia sanctions bill was a bipartisan initiative aimed to introduce new economic restrictions against Russia for its alleged role in the US presidential election in 2016.

The passing of the bill by the US Senate does not guarantee that it will become law, as it would need to be passed by the US House of Representatives and signed by the President. Senators in both parties have urged him to avoid vetoing the bill. Nonetheless, the margin of the vote's victory is likely to ensure that Congress could override his veto. Following the Senate vote, US secretary of state Rex Tillerson warned that the new legislation had the potential to shut off communications with Russia, including anti-terrorism efforts and on the Middle East. Accordingly, there exists a growing probability that the White House will press the House of Representatives to mollify some of the language within the bill to expand the president's ability to waive the sanctions.

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