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.
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