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McCain Concerned Obama Administration ‘Selectively’ Enforcing Sanctions on Russia

U.S. sending taxpayer dollars to Russian entities controlled by sanctioned individuals, lawmaker argues

John McCain
John McCain / AP
• June 3, 2016 1:45 pm

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Sen. John McCain (R., Ariz.) on Thursday penned a letter to Treasury Secretary Jack Lew expressing concern that the U.S. government is "selectively" enforcing sanctions on Russia for its invasion of Crimea.

McCain suggested that the Obama administration is giving special treatment to a Russian rocket manufacturer that due to a recent restructuring fell under control of Russia’s federal space agency, Roscosmos. The United States currently purchases Russian RD-180 rocket engines from the manufacturer, known as NPO Energomash, to use during national security space launches.

"I write to express my concern with the appearance of selective enforcement of sanctions imposed in response to the invasion of Crimea by the Russian Federation," McCain wrote. "I am particularly troubled that, today, the Administration is allowing for the procurement of rocket engines for military space launches that result in the payment of money to a Russian state-owned corporation controlled by officers and directors who have been individually sanctioned in connection with the invasion."

A pair of executive orders signed by President Obama in March 2014 placed economic sanctions on individuals and entities deemed by the U.S. government to have contributed to the conflict in Ukraine.

The Treasury Department’s Office of Foreign Assets Control concluded in March that the recent restructuring of Russia’s space program did not lead to an "affirmative determination" to impose economic sanctions on NPO Energomash or Roscosmos. However, the department did note that the control of the rocket manufacturer by sanctioned individuals "could be a potential basis" to impose sanctions, a basis that McCain sought to prove in his letter to Lew.

McCain wrote that "numerous Roscosmos board members and executives" have either been subject to economic sanctions for Russia’s invasion of Ukraine or are connected to Russian corporations targeted by sanctions.

Among them is Sergei Chemezov, a member of Roscosmos’ board and CEO of Rostec Corporation, a state-owned defense company that is also subject to U.S. economic sanctions. A Rostec-owned bank that finances Roscosmos’ operations, called Novikombank, is also sanctioned by the United States.

"This is very troubling. When examining the organizational structure of Roscosmos after Putin’s recent restructuring initiative, it becomes abundantly clear that we are funneling U.S. taxpayer dollars to a Russian space agency that is financed by a sanctioned Russian bank, which is owned by a sanctioned Russian defense company, and which is controlled by a sanctioned Russian CEO, who also happens to be a close personal friend of Vladimir Putin," McCain wrote.

McCain said that other Russian companies owned by Chemezov’s corporation have been targeted by U.S. sanctions, including a state-owned arms exporter and Kalashnikov, the country’s biggest manufacturer of automatic and sniper weapons and guided artillery shells.

"Why, then, is Russia’s space industry receiving such disparate treatment, especially in light of how it is financed and controlled?" McCain asked.

"Considering the relationship between Sergei Chemezov and [Russian Deputy Prime Minister] Dmitry Rogozin, as well as numerous other Roscosmos board members and executives who have been targeted by U.S. sanctions or who have ties to sanctioned Russian corporations, OFAC’s decision to date not to enforce current sanctions against Roscosmos and NPO Energomash appears disturbingly arbitrary and hypocritical," McCain concluded.

Dmitry Rogozin, who oversees Russia’s defense industry, is among seven Russian government officials sanctioned by the United States for contributing to the conflict in Ukraine.

McCain requested that the Treasury Department determine whether taxpayer dollars sent to Russia for space launch activities are "being used for a purchase from, or payment to, any entity owned or controlled by any person included on the list of specially-designated nationals and blocked persons" sanctioned in response to Russia’s invasion of Crimea. McCain asked that the office report its findings to the Senate Armed Services Committee, which he chairs.

The Pentagon’s use of Russian rocket engines to launch national security satellites has become a flash point during the debate over annual defense legislation.

Lawmakers have sparred over whether the government should be able to purchase more RD-180 engines so that the United Launch Alliance, a joint venture of Boeing and Lockheed Martin for military space launches, can continue to launch its preferred Atlas V rocket as it develops a replacement made from American parts. The launch alliance and SpaceX, which already manufactures rockets using American parts, are the only companies with government contracts to conduct national security space launches.

Congress capped the purchase of Russian engines at nine after Russia intervened in Ukraine. However, House lawmakers recently approved a version of the fiscal 2017 National Defense Authorization Act that would allow for the purchase of 18 RD-180 engines from Russia. The purchase would cost roughly $540 million.

The Senate Armed Services Committee’s version of the bill would maintain past limits on the purchase of Russian engines and allocate funds to help offset any resulting increase in launch costs. The full Senate is expected to debate the legislation next week when Congress returns from recess.

The issue has divided Republicans. Some have argued that the United States risks losing access to space by limiting its purchase of Russian engines, while others have argued that the practice rewards Russian aggression and discourages American innovation.

Several former U.S. officials, including former Defense Secretary Leon Panetta and former CIA Director Michael Hayden, recently endorsed McCain’s effort to limit U.S. reliance on Russian rocket engines.

"We have an American industrial base with multiple providers that can produce All-American-made rocket engines," the former officials wrote McCain and the Armed Services Committee’s ranking member in a May 20 letter, Bloomberg reported. "There is no need to rely on Putin’s Russia for this sensitive, critical technology."