New Russian Sanctions Show Putin Exactly Where To Retaliate

Source: CNN

The new Russian Sanctions law (officially named the “Countering America’s Adversaries Through Sanctions Act”) is hardcore, but the worst of it may cripple the U.S. Space Program and harm U.S. national security and the U.S. economy. It all depends on how Russian President Putin decides to respond.

The most obvious target will be NASA and companies in the U.S. Defense Industrial Base that have significant contracts with Russian suppliers. The bill has a waiver for NASA.

Silicon Valley and other U.S. tech hubs like Seattle have enjoyed Russian VC investment for many years. All of that could change in a matter of months according to Section 241 of the bill.

NOTE: If you want to learn where the U.S. is most susceptible to Russian retaliatory sanctions, just look for anything in this bill that says “Waiver”.

Let’s start with Russian oligarchs who have been making investments in U.S. companies. Here’s what the new law says:

SEC. 241. REPORT ON OLIGARCHS AND PARASTATAL ENTITIES OF THE RUSSIAN FEDERATION.
(a) In General. — Not later than 180 days after the date of the enactment of this Act, the Secretary of the Treasury, in consultation with the Director of National Intelligence and the Secretary of State, shall submit to the appropriate congressional committees a detailed report on the following:
(1) Senior foreign political figures and oligarchs in the Russian Federation, including the following:
(A) An identification of the most significant senior foreign political figures and oligarchs in the Russian Federation, as determined by their closeness to the Russian regime and their net worth.
(B) An assessment of the relationship between individuals identified under subparagraph (A) and President Vladimir Putin or other members of the Russian ruling elite.
(C) An identification of any indices of corruption with respect to those individuals.
(D) The estimated net worth and known sources of income of those individuals and their family members (including spouses, children, parents, and siblings), including assets, investments, other business interests, and relevant beneficial ownership information.
(E) An identification of the non-Russian business affiliations of those individuals.
(2) Russian parastatal entities, including an assessment of the following:
(A) The emergence of Russian parastatal entities and their role in the economy of the Russian Federation.
(B) The leadership structures and beneficial ownership of those entities.
(C) The scope of the non-Russian business affiliations of those entities.
Section 231 calls for sanctions against anyone who engages in transactions with the Intelligence or Defense sectors of the Russian government.

Here are a few very well-known and respected Russian oligarchs to whom U.S. companies owe quite a lot of money.

Alexander Galitsky (Almaz Capital)

According to Dr. Galitsky’s LinkedIn profile:

Alexander Galitsky is a co-founder and Managing Partner of Almaz Capital Partners with offices in Moscow, Russia and Menlo Park, CA, backed by Cisco Systems, EBRD and IFC, which he co-founded in 2008. He is well-known innovator, entrepreneur and investor in Russia/CIS, Europe and USA. Prior to Almaz, Alexander formed the ICT investment practice at Russian Technologies, one of the first venture capital funds in Russia and made a several private successful investments. His past and current investments include: Parallels, Yandex, QIK (sold to Skype), Vyatta (sold to Brocade), Acumatica, Jelastic, NavMaps (sold to TeleAtlas), 2Can, Alawar, AlterGeo, SJLabs (sold to VocalTec), EverNote, GridGain, WikiMart, etc.
Prior to investment career, he founded and led as CEO five successful high-tech companies, including ELVIS+, TrustWorks Systems (sold to Hamsard), EzWIM (sold to TMT Ventures), ELVIS Telecom (sold to Telenor), NPC ELVIS. He pioneered in WiFi and Virtual Private Network technology and product development on the Global market in partnership with Sun Microsystems and was a pioneer of Russian Internet industry back in 90th. Prior to becoming an entrepreneur, Alexander served as one of the top Technical Executives for the Soviet Space industry, including space station MIR and Soviet “Star War” response.

Alisher Usmanov and Yuri Milner

Alisher Usmanov and Yuri Milner founded DST; a Russian VC firm that made substantial investments in Silicon Valley startups like Facebook, Twitter, GroupOn, and many others. In fact, in 2011, DST started investing $150K in every startup that graduated from YCombinator until Milner ended it in 2013.

Milner and Usmanov both have historical ties with the Russian government. Here’s a Prezi that I created back in 2014 which lays out the ones that I could discover at the time.

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A Complete Report on Russian Oligarchs in 180 Days

It’ll be interesting to see who Congress decides to target and who they don’t. But we don’t have to wait that long to see where the U.S. is most vulnerable to retaliatory sanctions by Russia, should Putin choose to act. As I mentioned above, just look for the “waivers”.

Waivers for NASA and anything that impacts U.S. National Security

Congress basically said let’s not fuck with the U.S. Space Program because we still rely upon Russian-made engines, not to mention Russian spacecraft.

Every senior official currently serving in the Air Force, Pentagon, and the Intelligence community shares the senator’s (Sen. Dick Durbin, D-IL) belief that banning the use of the RD-180 before we have a reliable domestic alternative would jeopardize assured access to space and put taxpayers on the hook for billions

Back to the law:

SEC. 237. EXCEPTION RELATING TO ACTIVITIES OF THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION.
(a) In General. — This Act and the amendments made by this Act shall not apply with respect to activities of the National Aeronautics and Space Administration.
(b) Rule Of Construction. — Nothing in this Act or the amendments made by this Act shall be construed to authorize the imposition of any sanction or other condition, limitation, restriction, or prohibition, that directly or indirectly impedes the supply by any entity of the Russian Federation of any product or service, or the procurement of such product or service by any contractor or subcontractor of the United States or any other entity, relating to or in connection with any space launch conducted for —
(1) the National Aeronautics and Space Administration; or
(2) any other non-Department of Defense customer.
SEC. 238. RULE OF CONSTRUCTION.
Nothing in this part or the amendments made by this part shall be construed —
(1) to supersede the limitations or exceptions on the use of rocket engines for national security purposes under section 1608 of the Carl Levin and Howard P. “Buck” McKeon National Defense Authorization Act for Fiscal Year 2015 (Public Law 113–291; 128 Stat. 3626; 10 U.S.C. 2271 note), as amended by section 1607 of the National Defense Authorization Act for Fiscal Year 2016 (Public Law 114–92; 129 Stat. 1100) and section 1602 of the National Defense Authorization Act for Fiscal Year 2017 (Public Law 114–328; 130 Stat. 2582); or
(2) to prohibit a contractor or subcontractor of the Department of Defense from acquiring components referred to in such section 1608.

That’s referring to the use of Russian made rocket engines by NASA as explained in the above-referenced section 1602 of the National Defense Authorization Act, to wit:

SEC. 1602. EXCEPTION TO THE PROHIBITION ON CONTRACTING WITH RUSSIAN SUPPLIERS OF ROCKET ENGINES FOR THE EVOLVED EXPENDABLE LAUNCH VEHICLE PROGRAM. Section 1608 of the Carl Levin and Howard P. ‘‘Buck’’ McKeon National Defense Authorization Act for Fiscal Year 2015 (Public Law 113–291; 128 Stat. 3626; 10 U.S.C. 2271 note), as amended by section 1607 of the National Defense Authorization Act for Fiscal Year 2016 (Public Law 114–92; 129 Stat. 1100), is further amended by striking subsection © and inserting the following new subsection: ‘‘© EXCEPTION. — The prohibition in subsection (a) shall not apply to any of the following: ‘‘(1) The placement of orders or the exercise of options under the contract numbered FA8811–13–C–0003 and awarded on December 18, 2013. ‘‘(2) Contracts that are awarded during the period beginning on the date of the enactment of the National Defense Authorization Act for Fiscal Year 2017 and ending December 31, 2022, for the procurement of property or services for space launch activities that include the use of a total of 18 rocket engines designed or manufactured in the Russian Federation, in addition to the Russian-designed or Russian-manufactured engines to which paragraph (1) applies.’’

TL:DR

This hastily-written, badly flawed, and politically motivated law has the potential to harm the U.S. far more than Russia. We have handed Putin a road map of where he can hurt us the most — in the tech and defense sectors where some of our largest Defense Industrial Base companies are heavily reliant on Russian-made products.

This is what happens when the majority of our politicians are, at best, mediocre thinkers and, at worst, ignorant illiterates, including, I hate to say it, the President of the United States.

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