ExxonMobil, Chevron and other oil majors are lobbying the U.S. Congress not to move forward with legislation that would slap new sanctions on Russia over the latter’s interference in the U.S. presidential election last year.

The U.S. Senate passed the bill by an overwhelming 98-2 vote, a shocking display of unity for Republicans and Democrats given their inability to agree on much of anything. Because of that nearly unanimous vote, the bill was expected to sail through the House of Representatives and become law, but the House is more divided on the issue.



The issue is complex for the President, who would see his power curtailed by Congress. The bill would downgrade the President’s authority to remove the Russian sanctions, putting greater power in the hands of the Congress. President Trump could try to veto the legislation if it is sent to his desk, and that is possible due to President Trump’s softer stance towards Russia. But it would also be a politically fraught move in light of the ongoing investigation into Russia’s role in the election.

But it is not clear that the bill will even make it through the House. It has faced some resistance among lawmakers from Texas, who represent the energy industry. That is because the legislation tightens the limits on oil companies investing and working in Russia. A spokesman for ExxonMobil said that the bill could “disadvantage U.S. companies compared to our non-U.S. counterparts.” Exxon had a billion-dollar project on the line in the Russian Arctic, in which they partnered with Russian oil giant Rosneft, that they were forced to abandon in 2014 when the initial U.S. sanctions were imposed. Exxon is also working with Rosneft on a project in Russia’s Far East on the island of Sakhalin.

The proposed legislation would bar such joint ventures with Russian companies and it would go further than existing sanctions by prohibiting cooperation with Russian firms even outside of Russia. The intention with the bill is to tighten the screws on Russia – by prohibiting U.S. involvement with Russian companies outside of Russia, the legislation would seek to inhibit Rosneft’s expansion around the world.

The tougher approach from the U.S. is indeed giving a leg up to their European counterparts in regard to investing in Russia. Companies like BP – which owns a sizable stake in Rosneft – Total SA, Statoil, Eni and Royal Dutch Shell are moving ahead with projects in Russia while U.S. companies are frozen out. Austrian oil company OMV told the FT a few weeks ago that they have not been held back by European sanctions on Russia. “We have made millions of legal checks, and the message is clear we are in full compliance with the sanctions,” OMV CEO Rainer Seele told the FT.

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One particular difference is that projects underway when sanctions were imposed were “grandfathered in.” Eni, for example, was allowed to proceed with a Black Sea oil project with Rosneft since it began years ago, the FT says. French oil giant Total has massive investments on the line in an LNG project on Russia’s Yamal Peninsula. And just this week Spanish oil company Repsol announced a joint venture with Gazprom for a project in West Siberia.

However, even European firms could be swept up in the proposed U.S. legislation. The bill would have an impact on the Nord Stream 2 pipeline, a major and controversial natural gas pipeline from Russia to Germany via the Baltic Sea. The U.S. legislation would sanction companies investing in Russian energy pipelines.

Germany supports Nord Stream 2, and German officials had some sharp words for American lawmakers last month when the Senate passed its version of the bill. “Europe’s energy supply is a matter for Europe, not the United States of America,’’ German Foreign Minister Sigmar Gabriel and Austrian Chancellor Christian Kern said in a joint statement in mid-June.

Against this backdrop, U.S. President Donald Trump will travel to Warsaw on Thursday for the “Three Seas” summit, a meeting of European countries that border the Adriatic, Baltic and Black Seas. Trump will promote U.S. LNG as a means to bolster European energy security. Whether or not he mentions the pipeline explicitly, the message for European policymakers is clear: ditch the Nord Stream 2 expansion and take imported American gas instead of Russian gas. That message will be welcomed by some in Eastern Europe, but it is not at all clear it will win over those already in favor of Nord Stream 2. And the legislation before the U.S. Congress, if it moves forward, will strain the already tense U.S.-German relationship.

By Nick Cunningham, Oilprice.com

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