Senate Wants More Sanctions on Russian Oil and Gas Industry

WASHINGTON — Only days after the U.S. government announced a fresh round of tough sanctions against Russia, a Senate committee asked Tuesday whether it’s really enough.

More revelations of torture and murder of Ukrainian civilians emerged in news reports this week.

Each one was met with more condemnations by western nations of Russia’s military invasion that started in February.

“We must continue to ratchet up this pain if Russia continues this war of aggression,” Sen. Sherrod Brown, D-Ohio, said about U.S. economic sanctions against Russia.

Brown is chairman of the Senate Banking, Housing and Urban Affairs Committee, whose hearing Tuesday focused on a proposal among the Group of Seven industrialized nations to clamp down on the Russian oil exports that help to fund its war against Ukraine.

The G7 consists of the United States, Canada, France, Germany, Britain, Italy and Japan.

After a summit in Elmau, Germany, G7 leaders on Sept. 2 issued a statement in which they “reaffirmed a shared commitment” to sanctions against Russia for its “brutal, unprovoked, unjustifiable, and illegal war of aggression against Ukraine.”

They plan to force price caps on Russian oil imports that would consist of countries receiving them paying no more than a small premium over production costs, rather than a price set by Russian exporters. The price caps also would reduce world energy prices at a time they are contributing to inflation.

G7 leaders still are debating how low they will set the price caps.

Senators at the hearing wanted to know whether the price caps could be enforced effectively to defund the Russian war machine.

The U.S. and European governments already have instituted an array of sanctions. They consist of bans on most imports and exports with Russia, severe restrictions on banking transactions and seizing personal assets of the oligarchs who provide political and financial support to Russian President Vladimir Putin’s administration.

The U.S. Treasury Department announced another round of sanctions last week when it published a list of 22 Russian business leaders and two organizations that it is banning from the U.S. financial industry. 

Despite the sanctions, lawmakers at the Senate hearing said Russia’s oil and gas industries have helped Putin elude the worst of the financial collapse other countries tried to force onto his country.

“The Russians have taken in a lot of revenue we didn’t anticipate,” said. Sen. Pat Toomey, R-Pa.

One example was the record profit reported in the first half of this year by the Russian natural gas giant Gazprom. Much of it came from exports to China and India, both of which have declined to participate in the sanctions.

Toomey and Sen. Chris Van Hollen, D-Md., said Tuesday they plan to introduce a bill to take a bite out of any Russian profits from exporting to countries whose purchases help pay for Putin’s war.

They seek to impose sanctions on countries that increase their purchases of Russian oil, oil products, gas and coal while it continues its war with Ukraine. The bill would ban transactions with financial institutions affiliated with the non-compliant countries.

Van Hollen said the bill would send a message saying, “If you are involved in some kind of scheme to avoid these price caps, you will be hit.”

Witnesses from the Treasury and Justice departments said the existing sanctions are succeeding in deterring the Russian military but must continue to help stop the invasion of Ukraine.

Russia “is burning through its fiscal buffers,” said Elizabeth Rosenberg, assistant secretary for terrorist financing and financial crimes at the U.S. Treasury Department.

Its stock market is down 35% compared with its performance before the attack on Ukraine, she said. The Russian economy will continue to shrink for at least two more years.

“This is translating into battlefield difficulties for Russia,” Rosenberg said.

Increasingly, the Russian military is looking for suppliers from rogue nations like North Korea and Iran as its equipment and weapons are destroyed or abandoned, she said.

“The soldiers on its front line don’t have access to the most modern war-fighting equipment,” Rosenberg said.

Andrew C. Adams, director of the Justice Department task force that enforces the sanctions, said about $3 billion in Russian assets are frozen in U.S. financial institutions. He pledged to continue enforcing efforts by Russians to evade the sanctions through criminal charges such as bank fraud, visa fraud or extortion.

“We will pursue any charge or seizure theory available,” Adams said.

Tom can be reached at [email protected] and @TomRamstack