The US Senate passed a bill imposing sanctions on Russia, Iran, and North Korea two votes short of unanimous approval 2 days after it was approved by the US House. Sens. Rand Paul (R-Ky.) and Bernie Sanders (I-Vt.) cast the only nay votes in the July 27 balloting for HR 3364. The measure won House approval by 419 to three votes 2 days earlier (OGJ Online, July 26, 2017).
The bill is headed next to the White House, where it was not immediately clear whether President Donald J. Trump would sign it. Margins of passage in both houses of the 115th Congress indicated that a veto could be overridden.
The measure matters to the oil and gas industry because Russia and Iran are both major exporters. But its Senate passage renewed concerns the American Fuel & Petrochemical Manufacturers expressed earlier that US sanctions might be imposed on Venezuela and inadvertently harm domestic refiners (OGJ Online, July 10, 2017).
In a July 27 letter to Trump and other administration officials, AFPM Pres. Chet Thompson said that the trade association supports the administration’s goal of bringing stability to Venezuela but warned that sectoral sanctions could harm US businesses and consumers because:
• Venezuelan crude supplies more than 20 US refineries primarily along the East and Gulf Coasts that have made substantial investments to process the heavy grade.
• Sanctions could destabilize heavy crude markets as the refiners seek replacement supplies elsewhere at likely higher prices.
• US heavy crude refiners would need to turn to Canada, which supplies about half of what the US imports of that grade; Mexico, which supplies 12%; and Colombia, which supplies 8%. “East Coast refineries lack direct access to Canadian production, and as a result, transportation would be shipped using some combination of rail and marine that would be prohibitively costly,” Thompson said.
• Higher crude costs likely would lead to higher retail oil product prices and make US processors less competitive in the global refined products market.
• And extending sanctions beyond crude imports likely would have additional adverse impacts because US refineries supply 50,000-75,000 b/d primarily of gasoline and diesel fuel to Venezuela. That country could make that up easily from the well-supplied Atlantic Basin product market while US refiners try to find alternative, less economic outlets, AFPM’s president explained.
“In short, sanctions on Venezuela’s energy sector will likely harm US businesses and consumers, while failing to address the very real issues in Venezuela,” Thompson said in his letter.
Contact Nick Snow at [email protected].