March 28, 2022
As the war in Ukraine rages on, Capstone believes Congress has largely spent its sanctions bullets and will have to settle for smaller legislation that codifies what the administration has already done as well as other symbolic gestures. However, the legislative conversation around the conflict and its impact on US energy prices is changing the tone of the country’s energy debate, creating momentum for the Sen. Joe Manchin-backed Clean Energy bill, and swinging the pendulum toward a more centrist energy policy.
Since the start of Russia’s invasion of Ukraine last month, the goal post for what constitutes “getting tough” with President Vladimir Putin has shifted wildly. After Ukraine President Volodymyr Zelensky’s speech to Congress earlier this month, lawmakers immediately demanded more than President Biden’s $800 million in security assistance. Some even pressed the White House to transfer MiG fighter jets to Ukraine.
Similarly, despite President Biden surpassing what Congress proposed in its “mother of all sanctions bills,” which failed to pass, and imposing sweeping sanctions on Russia immediately after Putin invaded, Congress sought to raise the ante and ban oil imports, even though this step could hurt US consumers. This dynamic reflects more than just congressional virtue or political one-upmanship. Congress’ reaction to President Biden’s diplomacy to date reflects its longstanding role as the bad cop on foreign policy—particularly by the opposite party in power—and the political need for action.
What happens next will be driven by midterm election posturing. Democrats will seek to blunt GOP attacks that President Biden is at fault for rising energy prices, while Republicans will sharpen this attack, which ironically, will yield fruit for the president’s long-term energy goals.
Understanding where Congress goes from here requires a look back at the politics of energy sanctions. During the last decade, Congress played the energy sanctions “heavy,” rightfully forcing the executive branch to impose tough restrictions on adversaries amid White House foot-dragging. For example, in 2011, Congress forced the executive branch to sanction Iran’s Central Bank, despite objections from the Obama administration that such a move would collapse global oil markets. A similar dynamic took hold in 2012, when Congress pushed the Magnitsky Act over the Obama White House’s concerns, and again in 2017, when Congress codified Obama-era Russian energy sanctions, despite the White House lobbying against it, given fears President Trump would reverse Russian sanctions altogether.
In the case of Ukraine, Congress has followed the same script, even though President Biden immediately deployed a torrent of hard-hitting banking actions—the equivalent of economic bunker-busters delivered at the outset of the conflict. Republicans did not give President Biden the opportunity to pursue sanctions on the timeline he saw fit. For them, the president committed an original sin by not imposing sanctions before the invasion and therefore deserved no credit or grace period. Meanwhile, because of Congress’ traditional bad-cop role, Democrats were comfortable outflanking the White House on the oil ban and, shortly after, demanded more security assistance. As midterm elections loom, legislative inaction amid horrific images from Ukraine simply is not an option.
Where does Congress go from here?
Members on both sides of the aisle will likely pursue legislation targeting subsectors of the Russian economy, similar to what Congress did in the Iran context, in which sectoral sanctions were followed by a series of more surgical measures. There also will be a torrent of sanctions amendments offered on upcoming defense authorization bills in June. However, now that the most significant sanctions have been levied, it will be tough for lawmakers to outflank the White House, and there will be minimal consensus on additional measures that could box in President Biden.
There’s also talk of a no-fly zone, but members on both sides are wary of escalation and also mindful of President Obama’s 2013 demand that Congress authorize any direct US military action.
Most likely, legislative actions will be centered on energy. Republicans will continue to slam President Biden for hampering US energy production, even though there is little the federal government can do to raise current production levels, which are a function of energy investors wary of backing increased production and supply chain issues. Biden villainized the fossil fuel industry on the 2020 campaign trail, a fact which dovetails nicely with the Republican narrative that President Biden is to blame for lack of supply, and the GOP will continue to reap the dual benefit of criticizing Biden’s foreign policy while pushing its longstanding mantra, ‘drill baby drill.’
Moderate Democrats will respond by publicly demanding more domestic oil and natural gas production, accelerated permitting of critical LNG infrastructure to support the EU’s persistent gas shortfall. and renewables production. There is a fight inside the administration between climate and security hawks, and the latter could be empowered to push an all-out energy approach given Democrats’ continuing vulnerability. These would be mostly symbolic gestures but ones that could change the tone of how the White House discusses fossil fuels and, possibly, create momentum for a Manchin-blessed clean energy package.
Biden’s announcement of a US-EU task force on LNG last week was significant because it signaled an embrace of the security hawks’ position and a revival of Obama-era policies, in which the president touted LNG as a transitional energy source and promoted its export. It was no surprise that climate advocates slammed the task force (“Biden Sides with Big Oil Barons and Wall Street in EU Gas Deal”). Even though Biden’s announcement acknowledged climate advocates’ push for renewables and affirmed “production and use of clean and renewable hydrogen to displace unabated fossil fuels,” it amounted to a pendulum swing towards a centrist energy policy— one that mirrors Manchin’s “all of the above” approach.
Besides energy, expect Democrats to push anti-corruption legislation to further sever Putin supporters’ financial lifelines in the West. Never has there been more momentum to target ill-begotten gains of oligarchs and thwart their injection of dark money into our financial system. Unfortunately, these “good government” efforts usually fizzle because they require highly technical overhauls of banking regulations. With mega sanctions already done, there is running space for Democrats to enact these measures in concert with the European Union.
Congress spent its sanctions bullets with the oil ban, and disagreements that hindered Russia-focused legislation pre-invasion will stymie further measures. The Russia sanctions architecture that the Biden administration put in place is the most extensive in history; it requires dollars to enforce and political stamina to maintain. Countries will test the nation’s resolve if they sense the US is distracted. Far from enacting more sanctions, the challenge for political leaders will be to maintain support for sanctions already imposed given how long this conflict could drag on and the ongoing cost to US consumers.