US Companies Urge Biden to Consider ‘Wind-Down Periods’ to Dodge ‘Spillover’ From Russia Sanctions

Amid heightened tensions between the US and Russia fuelled by unsubstantiated claims from America and its NATO allies that a Russian invasion of Ukraine is an increasing possibility, Joe Biden said he would consider sanctioning President Vladimir Putin directly, warning of "enormous consequences" in the event of an incursion.

A group of large companies and business groups that do business with Russia are urging the Joe Biden administration and US lawmakers to tread with caution amid threats to impose “devastating” sanctions on Moscow.

Last week, the US POTUS warned that Moscow would face sanctions unlike any ever seen before if it “invaded” Ukraine – something the Kremlin has repeatedly denied any intention of seeking to do.

The trade group representing Chevron, General Electric and other big US corporations have asked the White House to consider allowing them to fulfil commitments, limit the scope and time frame of the sanctions being mulled, while possibly exempting certain products.

The Biden administration and Congress need to "get the details right in case they must follow through on the threat of sanctions", Jake Colvin, president of The National Foreign Trade Council, was cited by Reuters as saying. He added:

"Those details should include consideration of safe harbours or wind-down periods to enable companies to fulfil existing contracts and obligations, as well as carve-outs for lifesaving medicines and other humanitarian considerations consistent with longstanding US policy," Colvin said.

The need for a "cool down" or "wind down" period has been emphasised by energy companies, who have warned lawmakers of the fallout to business agreements if their assets were to be seized as a consequence of the sanctions, a congressional aide was cited as saying.

The American Petroleum Institute (API) has also purportedly discussed potential scenarios triggered by Russia sanctions with congressional offices.

"Sanctions should be as targeted as possible in order to limit potential harm to the competitiveness of U.S. companies," the outlet quoted an API spokesperson sas saying.

While typically export sanctions are phased in, to allow for existing contract deliveries, if sanctions are applied suddenly, a "wind down" period becomes more challenging, according to William Reinsch, a former senior US Commerce Department official.

In this case, reference is made to mitigation measures that were provided by the US Treasury, for example, when licenses were granted protecting senders of humanitarian aid to Afghanistan, despite sanctions against the Taliban* Islamist group, which returned to power in the wake of US pullout from the country.

According to Reinsch, a possible "safe harbour" measure could be protecting companies from legal liability for sanctions violations if certain conditions were met. Accordingly, said Reinsch, such as showing that a shipment went to the sanctioned country without permission, perhaps from a third country.

‘Unwanted Spillover’

Oil companies cited fallout from the US sanctions on some of Russia's drilling operations after the Crimea developments in 2014.

In February 2014, when US and European Union-backed forces brought down the democratically elected Yanukovych government for its attempt to pivot away from European integration in favour of the Russian-led Eurasian Economic Union, the coup prompted authorities in Crimea to organise a referendum to break off from Ukraine and rejoin Russia. A civil war was also triggered in Ukraine's Donbass region after Kiev sent in troops to forcefully quell local pro-independence forces.

The measures introduced by Washington at the time forced Exxon Mobil to wind down drilling in Russia’s Arctic in 2014, despite it seeking waivers, and ended the company's collaboration with Russian state oil company Rosneft.

Exxon argued the sanctions had unfairly penalised US companies while allowing foreign companies to continue to operate in the country. Now, fresh sanctions against the Kremlin could be tricky to pull off without hurting Western companies, warn US trade groups.

A US Treasury official, when questioned on the impending sanctions, was quoted as saying:

"We are prepared to deliver severe costs to the Russian economy while minimizing unwanted spillover."

Western officials and the media have been claiming for months that Russia is gearing up to invade Ukraine, pointing to the large number of troops stationed near its western border, while threatening Moscow with ‘never before seen’ sanctions.

The Kremlin, which says it is performing military drills in the region and has no plans to intervene in Ukrainian affairs, has slammed the US and its allies over the unsubstantiated ‘invasion’ claims, accusing them of artificially fuelling hysteria as a pretext for expanding NATO’s presence in countries that ring Russia’s western frontiers.

Earlier this month, US President Joe Biden stated that his Russian counterpart would face "sanctions he has never seen" in the event that he decides to "invade" Ukraine, and did not rule out imposing restrictions targeting Vladimir Putin personally. In response, the Kremlin slammed the US calls as “politically destructive”.

*The organisation is under UN sanctions for terrorist activities