The US Senate and House of Representatives almost unanimously approved new sanctions against Russia. The bill also includes measures against Iran and North Korea. The bill aimed to retaliate over Russia’s annexation of the Crimea in 2014 and alleged Russian interference in the US elections and over ballistic missile tests of Iran and North Korea. To enter into force, the bill still has to be signed by the President. Although President Trump could veto it, the White House already stated that the President will sign it but only after having negotiated some ‘critical elements’, without specifying which elements that would be. Even if the President vetoes it, Congress could use its own veto to counter the President which is likely given that the bill was approved almost unanimously. In retaliation, Russian President Putin ordered 755 US diplomatic staff to leave their posts. Russia also seized holiday properties and a warehouse used by US diplomats.
Impact on country risk
If signed by the president, the bill will turn existing US sanctions, and some new ones, into law. The fact that current sanctions were imposed by Executive Orders signed by the President implies that the President had the ability to remove (or ease) the sanctions with a signature. If approved, this will no longer be the case. In this context, any rapprochement between the US and Russia seems a distant prospect. The new sanctions add restrictions on the ability of bank and energy companies to raise capital and target state-owned entities in the shipping, rail, metals and mining sector. The bill also opens the door to the imposition of sanctions on non-US companies that take part in Russian energy projects. This move raises concerns among some EU countries as it could penalise European companies that invest in energy infrastructure projects such as the Nord Stream II project. According to a leaked memo, reported by the Financial Times, the European Commission is considering three options: to ask the US to exclude EU firms from the new regime; to pass an EU law to block US jurisdiction over European companies; or to impose retaliatory sanctions on US firms, such as limiting their access to credit from EU banks. Hence, it is too early to assess the real impact of the US bill on the Russian economy as it partly depends on countermeasures that might be approved by the EU, an important trade partner of Russia. That being said, it is likely to affect investor confidence which increased after Donald Trump’s election amid expectations of a more friendly US policy toward Russia.
Analyst: Pascaline della Faille, email@example.com