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US risks EU rift on new Russia sanctions

Geoff Dyer

President Barack Obama is to sign a bill authorising new sanctions on Russia and offering further aid to Ukraine, despite concerns that it could cause a rift with Washington’s European allies. The bill will have limited immediate impact but sets the groundwork for Congress to impose a much tougher set of Iran-style sanctions on Russia next year if the crisis in Ukraine escalates.  The strong support among both parties for the legislation indicates that Mr Obama could find himself drawn into a foreign policy confrontation next year with the new Republican-controlled Congress not just over his nuclear diplomacy with Iran but also over Russia. Before the Democrats’ losses in November’s midterm elections, Democratic leaders in the Senate had been able to block such votes for tougher sanctions. The new sanctions come as the Russian economy is teetering from the impact of falling oil prices and a rapid depreciation in the rouble, which forced the central bank to raise interest rates to 17 per cent on Tuesday. Western sanctions have played a role in prompting capital flight and undermining confidence in the Russian economy. Mr Obama hedged for a number of days over whether to sign the bill, which was passed unanimously by both houses of Congress on Saturday. However, White House spokesman Josh Earnest said on Tuesday that the final version of the text contained enough “flexibility” to allow the president to sign the bill. The most immediate impact of the legislation is to require the Obama administration to impose sanctions on Rosoboronexport, the main Russian state arms exporter. The company has been kept off previous sanctions lists, in part because of its role in supplying helicopters to Afghanistan. Under the bill, the Obama administration will have to impose sanctions on Gazprom if it significantly reduces the flow of gas to Ukraine, Georgia, Moldova or Nato countries. It also authorises the sending of $350m of military aid to Ukraine, including anti-tank weapons — an issue that has been the subject of intense dispute with the administration but which Mr Obama has so far blocked because of fears that it could provoke an even more aggressive response from Russia. However, this section of the legislation — which was watered down in last-minute negotiations — does not actually require the administration to provide lethal weaponry to Ukraine. “Meaningful assistance for the Ukrainian people is a significant step closer to becoming reality,” said Roberto Menendez, the Democratic chairman of the Senate foreign relations committee. The Obama administration had been keen to avoid new sanctions legislation because they feared it could damage the unified front the US has managed to construct over Ukraine with the EU. The European bloc is required to renew its toughest sanctions next summer, and US officials are worried that unilateral moves by Washington could undermine transatlantic support for maintaining economic pressure on Russia. “While it preserves flexibility, the bill does send a confusing message to our allies,” said Mr Earnest. Analysts said one of the most potentially important elements of the bill was the section that authorises — but does not require — the imposition of secondary sanctions on companies from third countries that contravene US sanctions on Russia. If taken to the next stage, this could oblige the US to sanction a foreign bank involved in areas such as deep-sea oil exploration now covered by US sanctions. “It sets the table for the new Congress to mandate secondary sanctions on Russia that will create a serious rift with the Europeans,” said Cliff Kupchan, a former congressional aide now at the Eurasia Group in Washington. “This would be like the sanctions the US has imposed on Iran. Congress is beginning to move in that direction with Russia.” Russia has lashed out at the prospect of new sanctions, which it has blamed for some of the country’s economic problems. “Russia will not only survive but will come out much stronger,” said Sergei Lavrov, Russian foreign minister. “We have been in much worse situations in our history and every time we have got out of our fix much stronger.” “They are between a rock and a hard place in economic policy,” said Jason Furman, chairman of the White House council of economic advisers. “The combination of our sanctions, the uncertainty they’ve created for themselves with their international actions and the falling price of oil has put their economy on the brink of crisis.”

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