Sanctions don't stop Russia's lobbyists in U.S.

WASHINGTON — The Kremlin and Big Oil are stuffing more money into Washington's influence machine as Europe and the United States renew their commitment to Russian sanctions.

While Russia may be angry about international sanctions over the Ukraine conflict, Beltway lawyers are mopping up, and big names in lobbying are piling in.

Last year the Washington lobbying firm of former Senate Majority Leader Trent Lott, R-Mississippi, raked in $300,000 from Kremlin-controlled Gazprombank, which was a target of sanctions. The Gazprombank billings for Lott's firm are about double what Lott made in annual salary during any of his 18 years in the Senate.

Other high-profile former senators like John Breaux, D-Louisiana, and Don Nickles, R-Oklahoma, are getting in on the Russian action, as is former Mississippi Gov. Haley Barbour, R.

What's driving this is no mystery. While the West expresses displeasure at President Vladimir Putin's deadly Ukraine adventuring and the human toll it is taking, other things are at stake — notably billions of dollars of investments on both sides of the Atlantic in Russia's energy and finance sectors.

“Rather than send troops, we impose sanctions,” Matthew Sagers, head of the Russian energy advisory service for consultant IHS Inc., said of Washington's foreign policy weapon of choice.

That explains why top U.S. energy firms and companies associated with the Russian government are spending millions of dollars trying to influence the complex sanction rules aimed at individuals and enterprises considered close to Putin.

“Everybody's trying to get on the bandwagon,” said Sarosh Zaiwalla, a London lawyer whose past clients have included Saddam Hussein's Iraqi government and who now works with the Russian oil giant Rosneft.

For now, the United States and European Union are holding firm and even threatening to double down — bad news for many ordinary Russians and some Russian plutocrats but a continuing windfall for ex-lawmakers and former political aides who populate Western capitals.

Perhaps unsurprisingly, registration documents on file in Congress show some energy giants and banks using their lobbying firms to follow every utterance about sanctions as if they were the play-by-play of a professional tennis match.

Sanctions may also be proving to be among the great high-level conversation starters. For example, Rex Tillerson, Exxon Mobil chief executive officer, spoke with Treasury Secretary Jack Lew — whose department administers sanctions — seven times in the second half of 2014, according to disclosures. That's more than twice as many conversations as Lew had with Jamie Dimon, CEO of JPMorgan Chase & Co., the biggest American bank.

Neither Exxon, which has huge Russian lease holdings, nor Treasury would comment on the conversations.

After the U.S. slapped sanctions on Gazprombank last summer, the company hired Squire Patton Boggs, the Washington- based lobbying firm where Lott and Breaux serve as co-chairs of the public policy practice. It received about $450,000 for the work in the nine months through March. Angelo Kakolyris, a spokesman for Squire Patton Boggs, declined to comment.

Novatek, one of Russia's largest private oil producers and a target of U.S. sanctions, paid about $560,000 to Publicis Groupe's Qorvis/MSLGROUP for work related to the Ukraine crisis in the second half of 2014. The company, partly owned by billionaire Gennady Timchenko, paid another $180,000 in the first quarter of this year, according to lobby registration documents.

Western oil companies have also been tapping well-connected insiders. Exxon, which has worked with Lott and Breaux, paid Nickles' firm more than $190,000 to represent it on “issues related to Russian sanctions impacting the energy sector” as well as other matters.

Exxon also worked with former staffers to Secretary of State John Kerry and current Senate Majority Leader Mitch McConnell, R-Kentucky.

Chevron turned to BGR Group, the lobbying outfit run by Barbour, a former National Republican Committee chairman. A Chevron project in Kazakhstan sends oil through Russia via a pipeline in which Kremlin-controlled OAO Transneft is a major player. Chevron and its lobbyists convinced U.S. officials to spare Transneft, which is subject to financial penalties, from more onerous restrictions that would have prevented U.S. companies from doing business with it, according to three people familiar with the matter who asked not to be identified.

Kurt Glaubitz, a company spokesman, said, “Chevron engages with the administration and U.S. Congress to provide perspectives on complex energy issues to help shape an effective and responsible U.S. energy policy.”

As a substitute for sending troops, sanctions are proving a major growth industry for firms peddling expertise and influence. The Obama administration recently expanded sanctions on Venezuela while existing measures against Iran and Cuba are being reconsidered amid diplomatic talks.

The big money, though, lies in Russia. Unlike longstanding pariah states like Iran or Cuba, where Western business activity is relatively light, Russia is home to tens of billions of dollars in foreign investment. It has also built a clutch of international companies, largely controlled by the state. ‎

“It's the first time we've tried to set sanctions against a country that's so large and so elaborately integrated into the global economy,” IHS's Sagers said.

BP Plc also has much at stake. The British oil producer, which owns a 20 percent share in Rosneft, worked with former George W. Bush staffer Dan Meyer to lobby on sanctions, paying his firm about $100,000 in the fourth quarter of 2014 alone.

According to public filings, BP made its views on isolating Russia known directly to the British government through two meetings last year to discuss the Ukraine crisis with Kim Darroch, national security adviser to Prime Minister David Cameron. BP CEO Robert Dudley sits on the board of Kremlin-controlled Rosneft.

In an e-mailed statement, BP said it engages in “policy debate on subjects of legitimate concern or opportunity.”

Rosneft CEO Igor Sechin, a longtime Putin associate, has been personally sanctioned by the U.S. government but remains off the EU list, and thus is free to travel in Europe.

The sanctions regimes are anything but straightforward, making them perfectly suited to government relations specialists, and vary from country to country. While the oil majors appear to have won a round or two, the ability of companies like Exxon and Total SA to operate freely in Russia has been seriously limited.

“U.S. and European companies were surprised at how harsh the sanctions were, and it's been difficult for them to get approvals to modify the rules,” said Richard Burt, a former U.S. ambassador to Germany and managing director at consulting firm McLarty Associates. “They've had to focus a lot of time and attention working in Washington and reaching out to lobbyists and other consultants who can help them.”

Russian companies are also turning to the courts in Europe to challenge the legality of the sanctions. Rosneft as well as state-controlled lenders VTB Group and OAO Sberbank are pursuing claims. Zaiwalla, the London lawyer who's working with Rosneft, says a moral issue is involved.

“You can punish the government, to force the government's hand. But you should not injure the property rights, including the businesses, of innocent citizens,” Zaiwalla said.

With Western governments now considering their next step on Russian sanctions, the job of influencing outcomes has lost none of its value. U.S. energy companies are particularly concerned Europe could adopt a softer approach than Washington.‎

At a private dinner in London in February, U.S. State Department officials listened as executives emphasized that if the White House wouldn't relax its own rules, it needed at least to make sure the EU sanctions were as tough so American companies wouldn't be disadvantaged, according to two people who attended. The people asked not to be identified because the discussion was private.

The dinner, organized by the British-American Business Council, was held in the London offices of Squire Patton Boggs.