US signals no sanctions relief for Russia

OREANDA-NEWS. March 31, 2016. US sanctions affecting the Russian oil industry will remain in place despite cooperation with Russia on Syria, US treasury secretary Jacob Lew said today.

Sector-specific sanctions, imposed in summer 2014, block Russian companies from developing new Arctic, deepwater and shale projects by barring access to US technology and capital.

The US and Russia in recent months have cooperated closely on the Iran nuclear deal and the resolution of the Syrian conflict. But the US still insists on Russia's implementation of the Minsk agreement on resolving the conflict in eastern Ukraine before removing the sanctions, Lew said at the Washington-based think tank Carnegie Endowment for International Peace.

Lew acknowledged that the economic challenges Russia faces have resulted primarily from the decline in oil prices. But the US sanctions "have contributed to tighter financial conditions, weaker confidence, and lower investment in Russia," he said.

US State Department officials in recent weeks expressed concerns about the flagging support in the EU for maintaining sanctions on Russia, which were imposed at the same time as the US. Lew said that the US has limited its sanctions regime against Russia to minimize the negative effect on the EU.

The US Treasury is also keen to maintain the sanctions on Iran that prevent US companies from commercial involvement in that country. "We lifted the nuclear sanctions but the others are in effect," Lew said. The bulk of sanctions the US has imposed on Iran result from its designation as a state sponsor of terrorism.

The US Treasury at the same time is working with US and international companies to ensure that the relief from the nuclear-related sanctions on Iran is fully implemented, Lew said. The Treasury earlier this month issued a clarification allowing non-US insurance providers to work with Iran. And US aircraft manufacturers as of last week will be able to discuss potential sales with non-sanctioned Iranian companies, even though the US authorities still have to clear every future sale.

But US sanctions are not the only obstacle preventing greater involvement in Iran by international companies, he said. The business situation in Iran is complicated even without US sanctions, he said.

Lew cautioned future administrations to continue to apply financial sanctions as sparingly as President Barack Obama's administration did. An indiscriminate use of sanctions may damage the US financial system in the long run, he said.

"The more we condition use of the dollar and our financial system on adherence to US foreign policy, the more the risk of migration to other currencies and other financial systems in the medium-term grows," Lew said.