WASHINGTON -- As members of Congress and the Obama administration scramble to respond to the increasing threat posed by the Russian military in Ukraine, economic sanctions are emerging as the United States' preferred method of exercising its leverage.
Late Monday, the Senate moved ahead on approving President Barack Obama's request to enact broad penalties in the future against Russian officials and businesspeople who are engaged in what the Treasury Department deems corruption, bribery or misuse of public funds. The House has passed a similar measure and is considering further steps in legislation scheduled for a markup Tuesday in the House Foreign Affairs Committee.
But for a half-dozen members of Congress, including three on the Foreign Affairs Committee, who hold significant amounts of stock in Russian companies, these sanctions could prove a sticky problem. A Huffington Post analysis of personal financial disclosure forms filed by lawmakers revealed that six members -- five representatives and one senator -- hold between them a total of as much as $800,000 worth of stock in Russian companies.
This stock includes corporations that have been floated recently as potential targets for international sanctions, including the Russian state-controlled gas giant Gazprom and the state-controlled Sberbank, Russia's largest bank. Holdings also include the Internet giant Yandex, the international wireless company Mobile Telesystems, and Russia's second largest oil company, Lukoil, which operates a chain of gas stations in the Eastern U.S.
Asked Monday by The Huffington Post about their investments, only one of the six lawmakers, Rep. Jim Renacci (R-Ohio), responded. The other five did not comment or ignored calls and emails from HuffPost about their holdings and their plans in the event that the U.S.-Russia relationship deteriorates further.
The refusal to comment on their investments in Russian companies underscores the sensitivity surrounding the personal wealth and investment portfolios of both senators and representatives in Washington. Earlier this year, the Center for Responsive Politics revealed that for the first time, more than half of all members of Congress had an average net worth of over $1 million.
Among the wealthiest is Texas Republican Rep. Mike McCaul, a member of the Foreign Affairs Committee whose estimated net worth in 2013 was at least $114 million. Compared to most of his colleagues, McCaul is an especially active investor, buying and selling stock in dozens of companies every month, according to his public financial transaction reports. His 2012 annual report was over 100 pages long, and revealed McCaul's investment in Russian oil company Lukoil. McCaul bought or sold Lukoil 18 times in 2012, in transactions worth between $1,001 and $15,000 in most cases, and $15,001 and $50,000 in three instances.
A spokesman for McCaul refused to cite a dollar range for McCaul's current investments in Lukoil, telling HuffPost the office does not comment on the congressman's personal finances.
McCaul also owns between $50,001 and $100,000 worth of Yandex, known as Russia's Google, founded by the old Soviet Union.
Florida Democratic Rep. Alan Grayson, another Foreign Affairs Committee member, also holds a significant interest in Lukoil, having reported owning between $500,000 and $1 million in Lukoil stock in 2012, the most recent year for which full disclosure reports are available. This past January, Grayson reported selling between $250,001 and $500,000 of the stock, but his office would not discuss how much he still owns. Like McCaul, Grayson regularly appears on the list of the wealthiest members of Congress.
Among the senators who backed further sanctions on Monday was another wealthy member, North Carolina Democrat Sen. Kay Hagan, whose net worth in 2013 was reported to be at least $8 million. Hagan owns between $1,001 and $15,000 worth of stock in Mobile Telesystems, the Russian cell phone behemoth. The senator's office did not immediately answer questions from HuffPost about whether she would be willing to sell the stock, but told HuffPost they were looking into the matter.
Hagan's investment in a cell phone company isn't nearly as risky, however, as Kentucky Republican Rep. Hal Rogers' investment in the Russian state-controlled oil company Gazprom. According to his disclosure reports, the powerful chairman of the House Appropriations Committee has bought and sold Gazprom stock at least twice during the past two years. As Russia's largest and most visible company, Gazprom is at a particularly high risk for any increased sanctions.
Of the six members of Congress with Russian investments, freshman Democratic Rep. Lois Frankel (Fla.) has the most diversified Russian portfolio, with holdings in six different Russian companies, according to her 2012 financial disclosures, submitted in May of last year. According to the forms, Frankel owns shares of Gazprom, Lukoil, Mobile Telesystems, Yandex, Sberbank Russia and MMC Norilsk Nikel, a Russian mining conglomerate, all through a series of Morgan Stanley IRA funds. Frankel is also a member of the Foreign Affairs Committee. Her office did not respond to questions about her investment plans, or her position on any further U.S. sanctions against Russia.
Part of the reason that so many members of Congress did not comment on their Russian investments may be that they did not make the investment decisions themselves. In 2012, Renacci owned more than $90,000 worth of stock in two Russian companies, Mobile Telesystems and Sberbank Russia. In July of last year, records show that some of Renacci's Sberbank stock was sold, but a spokesman for Renacci told HuffPost the congressman had no part in the decision to buy or sell.
"Congressman Renacci's holdings are managed by financial advisers with the authority to buy and sell independently," a Renacci spokesman told HuffPost, adding that "[Renacci] does not manage his own holdings." The spokesman noted that Renacci supports tougher sanctions on Russia.
Yet even as Renacci claims to be a hands-off investor, House Majority Leader Eric Cantor (R-Va.) made it clear in a memo sent out late last week that he expects the GOP-controlled House to do more to push back against powerful Russian business interests. "If Mr. Putin's ambitions are to be checked, we must take more steps to put pressure on Russia," Cantor said in the memo, which was obtained by HuffPost. "Thus I expect the House to move to impose greater costs on Mr. Putin and the oligarchs from Russia."
The only obstacle in the way of tougher sanctions on Tuesday morning was a disagreement between the House and Senate over the International Monetary Fund, and how U.S. funding should be used there. Negotiations between the two chambers are ongoing.
In the coming months, however, members of Congress with investments in Russian companies could experience two major downsides. The first risk is that they will lose money -- Russian stock markets tumbled last week on investor fears of further sanctions.
This likely came as good news to Tea Party-backed Rep. Dan Benishek (R-Mich.), who purchased between $1,001 and $15,000 of stock in Russia's largest exchange-traded fund, Market Vectors Russia ETF in April of 2012: According to Benishek's spokesman Kyle Bonini and disclosure forms, Benishek sold his stock and got out early. He reported less than $200 in capital gains on the sale. During the span of just two days last week, however, concerns over future Western sanctions caused Market Vectors Russia ETF to lose more than 5 percent of its total value, a huge drop for this type of ETF.
The second potential downside of Russian investments may be harder for politicians to quantify than lost money, but also carries a greater risk. Come November, investment holdings in Russian companies could become a political liability, especially if the U.S.-Russia standoff escalates into a full-blown economic showdown. In that scenario, such investments could provide easy fodder for candidates looking to unseat these members, and could raise doubts among voters as to whether their representative actually puts his or her money where their mouth is, at least when it comes to Russia.
On the subject of the political and financial liabilities that could accrue due to their Russian investments, all six members of Congress declined to comment.
UPDATE: Hagan's office offered the following explanation later Tuesday for the holdings mentioned in her financial disclosure:
This is a spousal asset that Senator Hagan has no control over. The stock is part of a trust in which Senator Hagan's husband has a partial stake, and he does not control its day to day transactions. Additionally, the trust is listed as "proportional income interest only" which means Senator Hagan's husband does not actually own the assets, and as you can see, the income it generated was between $0-$201, which is far less than the listed value of $1,001-$15,000. Senator Hagan is also supportive of the bill being considered by the Senate this week that would aid Ukraine and impose sanctions on Russia.
On Wednesday, Frankel told HuffPost that her investments in Russia have a total value of $4,276, and she has requested that her broker liquidate these interests.
“I support, and voted for, the bipartisan sanctions against Russia for their aggressive actions against Ukraine," Frankel said in an email. "My holdings were purchased by a Morgan Stanley Account Manager, for many clients, long before the current crisis and are among hundreds of stocks in said portfolio that are managed by that manager."
Andrew Perez contributed reporting.
BEFORE YOU GO
03/25/2014 6:18 PM EDT
Senate To Vote Thursday On Ukraine Aid
Senate Majority Leader Harry Reid (D-Nev.) set up a final vote Thursday on a bill that would provide Ukraine with up to $1 billion in loan guarantees and impose targeted sanctions against Russian officials.
Reid made the announcement Tuesday after dropping a controversial provision from the Senate bill that would have boosted the U.S. quota at the International Monetary Fund. Republicans in both chambers of Congress opposed the IMF reforms, which were specifically requested by the White House to increase Ukraine's borrowing capabilities at the institution.
Senate Minority Leader Mitch McConnell (R-Ky.) said earlier Tuesday that Republicans would still want to vote on a number of amendments, but the IMF language was the major sticking point. Without it, the Ukraine aid package is expected to pass both the Senate and the House without much drama or delay.
03/25/2014 5:24 PM EDT
Moldovan Separatists Claim They Downed Ukrainian Drone
Authorities in a pro-Russian separatist region of Moldova claim to have brought down a Ukrainian drone on a reconnaissance mission.
NovostiPMR, the news agency of Trans-Dniester says Tuesday that the region's intelligence agency downed the drone on March 23.
The region broke away from Moldova in 1990. There are 1,500 Russian troops stationed there guarding hundreds of tons of weapons.
According to the agency, the drone was "launched from Ukrainian territory by people close to the Ukrainian Security Service and the Defense Ministry."
It said the plane illegally crossed into Trans-Dniester violating its air space. It added that the authorities in the region reserved the right to use "all available methods" to defend the territory which is not internationally recognized but is supported by Russia.
03/25/2014 4:18 PM EDT
Russians Take Over Last Ukrainian Ship In Crimea
Russian forces appeared to be attempting to take over the last military ship controlled by Ukraine in Crimea on Tuesday after a Ukrainian military spokesman reported explosions in its vicinity and helicopters approaching the vessel.
Russian forces armed with stun grenades and automatic weapons have seized ships and military bases from the last remaining Ukrainian troops in Crimea in recent days as part of Russia's largely bloodless annexation of the region.
Kiev, which calls Russia's annexation of Crimea illegal, ordered its remaining forces to withdraw for their own safety on Monday, but not all troops have yet left the Black Sea peninsula and some ships have been prevented from leaving.
"Around 1900 (1600 GMT) there were several explosions from the direction of the minesweeper Cherkasy in the Donuzlav bay," Ukrainian military spokesman Vladislav Seleznyov told Reuters.
"Some Mi-35 helicopter gunships were observed hovering in the area. Speedboats and a tug were seen approaching Cherkasy," he said.
On Monday Cherkasy attempted without success to break to the open sea through a blockade at the entrance to the inlet. The Russian navy blocked the route earlier this month by scuttling three hulks in the channel.
Seleznyov said he was unable to confirm whether Russian troops had boarded the ship.
03/25/2014 3:02 PM EDT
Russian Military Holds Exercises In Moldova
Russia's military staged training exercises on Tuesday in Transdniestria, a breakaway sliver of Moldova that is a focus of tension following Russia's annexation of Ukraine's Crimea region.
NATO's top military commander said on Sunday he was worried that Russia might have its eye on Transdniestria, a largely Russian-speaking region that borders western Ukraine, after seizing Crimea, which has a narrow ethnic Russian majority.
The Interfax news agency quoted a spokesman for Russia's Western Military District, Colonel Oleg Kochetkov, as saying that Russian forces stationed in Transdniestria had "conducted an anti-terrorism drill and practiced operations to rebuff an attack on their military base".
Transdniestria, with a population of half a million, has run its own affairs since 1992 after fighting a brief war against the Moldovan government over fears that it might join Romania after the collapse of the Soviet Union, and Russia has a permanent garrison of peacekeepers there.
03/25/2014 1:02 PM EDT
No, Ukraine Will Not Have Nukes: Ministry Of Foreign Affairs
Ukraine's Ministry of Foreign Affairs confirmed, in something of a Shermanesque statement, that the country will not develop nuclear weapons, one day after the Russian Minister of Foreign Affairs seized on a proposal by some Ukrainian MPs to leave the Nuclear Nonproliferation Treaty.
"Ukraine has not planned, is not planning and is not going to plan to resume its nuclear status," a spokesman for the agency said at a press briefing.
Earlier this month, several opposition MPs introduced a draft bill to withdraw Ukraine from the NPT. Russia's Foreign Ministry seized on it, saying "the dysfunctional new Kiev authorities may pose a threat to the security of Ukrainian nuclear sites under the current Ukrainian circumstances," in a statement.
"We do not trust attempts of the Ukrainian delegate to dissociate from this position. The NPT is in serious danger."
Ukraine, which suddenly became the world's third-largest nuclear state after the collapse of the Soviet Union, gave its nuclear arsenal back to Russia for disposal under the 1994 Budapest Memorandum in exchange for security assurances from Russia that it would respect Ukraine's territorial integrity.
03/25/2014 12:34 PM EDT
Five Scenarios For Russia's Relations With China, Moldova And Nato
The world's industrialized nations have turned their back on Russia, following Moscow's annexation of Crimea.
Though the G8 cannot expel its members, countries can refuse a member permission to attend, effectively expelling them.
With jitters in the east of Europe about further Russian incursion, and wariness in China, the state of world diplomacy could look very different by 2015.
HuffPost UK has asked military and international relations experts on five scenarios that could occur now Russia looks increasingly isolated, and as the West looks impotent.
Read here what they predict.
03/25/2014 12:27 PM EDT
Senate Democrats Consider Dropping IMF Provision
Senate Majority Leader Harry Reid (D-Nev.) may drop a controversial reform to the U.S. share at the International Monetary Fund from the Ukraine aid package, according to Senate leadership aides.
The provision was requested by President Barack Obama and Ukrainian leaders, but faces widespread opposition from Republicans. Senate Majority Leader Mitch McConnell (R-Ky.) said Tuesday that his members would not support the aid bill unless the IMF language was dropped.
A Senate leadership aide said removing the provision is now "under consideration in order to move the bill." In exchange, Republicans would drop their demand to delay a Treasury Department rule that cracks down on the political activities of nonprofits, known as 501(c)(4)s.
The House of Representatives passed its own legislation providing aid to Ukraine earlier this month without the IMF reforms, and planned to move on a sanctions bill that also left the issue untouched. House Speaker John Boehner (R-Ohio) has said boosting U.S. funds at the IMF has "nothing to do with Ukraine," and his aides indicated they would not have enough votes to move the Senate bill through the lower chamber in its current form.
The Obama administration and Senate Democrats have been making the case that ratifying the IMF reforms, which were agreed upon in 2010, is critical to Ukraine's borrowing capabilities in a time of crisis. Still, some House Democrats acknowledged that the White House was complicating the process by renewing debate over a contentious issue when providing aid expeditiously is of the utmost importance.
03/25/2014 11:46 AM EDT
Obama Dismisses Romney's 'Geopolitical Foe' Comment
President Barack Obama dismissed the notion that former GOP presidential candidate Mitt Romney was correct in saying that Russia was "our number one geopolitical foe" Tuesday, in a response to a question from Jonathan Karl of ABC News. He said that Russia was merely a "regional power" that was acting out of "weakness."
"Russia is a regional power that is threatening some of its immediate neighbors, not out of strength, but out of weakness. Ukraine has been a country in which Russia had enormous influence for decades, since the breakup of the Soviet Union, and we have considerable influence on our neighbors," he said. "We generally don't need to invade them in order to have a strong cooperative relationship with them."
03/25/2014 11:26 AM EDT
Obama Says He's Not Interested In Putin's Motivation
At a press conference in Europe, U.S. President Barack Obama sidestepped a question on whether he "misread" Russian President Vladimir Putin, saying he wasn't so interested in his motivations.
"With respect to President Putin's motivation, I think there has been a lot of speculation. I am less interested in motivation and more interested in the facts and the principles that not only the United States but the entire international community are looking to uphold."
He added that the United States is "concerned" about further encroachment by Russia into Ukraine.
03/25/2014 10:39 AM EDT
Will Russia Annex Moldova Next?