(Bloomberg) -- The fate of a deal freeing several Russian companies, including aluminum giant United Co. Rusal, from punishing U.S. sanctions now rests in the hands of Congress -- where Republicans and Democrats are already voicing skepticism about the agreement.
Congress has a month to decide whether to intervene to block the agreement announced Wednesday by the Treasury Department. Under the deal, Russian billionaire Oleg Deripaska will remain under U.S. sanctions and his property will remain blocked, but the Treasury department will remove financial restrictions on Rusal, En+ Group Plc and EuroSibEnergo JSC.
Lawmakers will be scrutinizing the accord for any sign that Deripaska could still hold a majority stake in En+ or somehow keep control indirectly of the companies to be freed from the list. He is required to cut his direct and indirect share ownership below 50 percent in each company under the terms of the agreement.
If Deripaska ends up in any way controlling the companies, "then we would insist that the company be re-listed at the end of the day," said Senator Bob Menendez, a New Jersey Democrat and one of the leading voices on sanctions in the chamber. "We’re going to have to see whether that’s the case."
2017 Law
The U.S. sanctioned Deripaska, along with dozens of Russian tycoons, companies and key allies of Putin in April under a 2017 law that strengthened U.S. sanctions targeting Russia.
That law -- the Countering America’s Adversaries Through Sanctions Act, or CAATSA -- requires the president to notify congressional committees and leadership of any proposed action and gives Congress 30 days to review the plan, including the ability to hold hearings and briefings and "otherwise obtain information" to fully review the report. If both houses of Congress pass a joint resolution of disapproval, then the president has to review the action, although he could veto the measure.
The sanctions against Deripaska and the entities were part of a broader U.S. effort to punish associates of Russian President Vladimir Putin for Moscow’s interference with the 2016 American elections.
Raising Prices
Aluminum markets spun into chaos after the sanctions were announced and global prices shot up by as much as 20 percent in the first week. Sanctioning the world’s largest aluminum supplier outside of China threatened a worldwide shortage of the metal, forcing Treasury Secretary Steven Mnuchin to backtrack.
The terms of the deal were spelled out Wednesday in an unusually detailed letter to Senate Majority Leader Mitch McConnell of Kentucky from Treasury’s Office of Foreign Assets Control.
David Murray, an executive at the Financial Integrity Network and a former Treasury official, said the deal will likely stand without much interference from Congress in part because of the "unprecedented" level of transparency from Treasury and the fact that sanctions could be reimposed on Rusal if Deripaska is found to be still in control.
Murray said OFAC and Treasury "rightly recognize that there’s a lot of skepticism about this administration around Russia."
Under CAATSA, Congress doesn’t have to do anything to let the deal go through. So if lawmakers take no action, Rusal stays de-listed. To stop it, they’d have to pass a joint resolution in the next month.
