Summary: US-Russia Sanctions Law

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U.S. State Dept. has announced new sanctions against Russia. U.S. claims Russia is behind the nerve-agent attack against a former Russian spy in the U.K. in March. The Kremlin has repeatedly denied involvement. The ruble fell 5% against the dollar on Thursday. Stocks in Russia plunged as much as 9%, led by state banks and national airline, Aeroflot, that risks losing access to U.S. markets if the sanctions escalate.

The latest sanctions ban any attempts by an American company to obtain an export license to sell anything with a potential national security purpose (gas turbine engines, electronics, integrated circuits and testing and calibration equipment). While the list of prohibited items is elaborate, the actual amount of exports affected by the latest sanctions is small because the Obama administration had already banned exports to Russia that could have military purposes. However, the law requires stricter measures (listed below) if Russia fails to prove that it is no longer using chemical weapons.

The sanctions are mandated by the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991, a U.S. law that requires action over the use of chemical and biological weapons. The law requires the U.S. President to impose certain sanctions against foreign persons if he determines that they knowingly contributed to the efforts of a country to acquire, use, or stockpile chemical weapons.

The measures announced Wednesday are the first tranche of sanctions mandated by U.S. law. A second tranche of sanctions would take effect within three months unless U.S. President certifies to Congress that Russia has met three conditions:

1) ceasing the use of chemical and biological weapons;

2) credibly assuring the U.S. that it won’t use such weapons in the future; and

3) submitting to inspections by international observers to ensure compliance.

If Russia does not comply with either of the three aforementioned requirements, U.S. President is required to impose at least three of six types of additional sanctions (although he has discretion over their severity):

1) opposing any loans or other assistance to Russia by international-development banks;

2) barring U.S. banks from issuing loans or extending credit to the Russian government;

3) prohibiting exports of goods and technology to Russia;

4) restricting imports of Russian goods;

5) downgrading or suspending diplomatic relations with Russia; and

6) termination of air carrier landing rights.

A first wave of Western sanctions against Russia since its annexation of Crimea in 2014 have wiped out half of the ruble’s value, reduced investment in the energy sector and crippled national aluminum giant United Co. Rusal PLC.

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