Ukraine invasion leads US lobbyists to sever ties with Russian clients

A half-dozen US lobbying firms severed ties with Russian-linked businesses over the past week, a dramatic pullback for an industry that often has few qualms about representing controversial interests.

The rush offers a measure of the potency of the Biden administration's new sanctions, which were levied after Russian President Vladimir Putin ordered the invasion of Ukraine last week.

They make it difficult, if not outright illegal, for US companies to do business with Russia-based ones.

Firms including McLarty Associates, BGR Group and Venable LLP abruptly cancelled arrangements that have collectively yielded millions of dollars in lobbying fees in recent years, records show.

 

Among their former clients are investors and operators for the now-cancelled Nord Stream 2 gas pipeline, which was supposed to deliver Russian gas to Germany, as well as Russian state-controlled banks and others.

Thus far, it's reversed the normal order of business when war breaks out, which often spurs foreign governments to enlist Washington-based firms to lobby the US government, a review of lobbying records shows.

These lobbying firms and lobbyists were pulling in huge amounts of money, said Craig Holman, a registered lobbyist for the good government group Public Citizen, who closely tracks the industry.

I really have a hard time believing that they suddenly became altruistic once Russia invaded Ukraine."

Holman said a more likely scenario was that the firms were lobbying on behalf of the sectors, industries and projects that were covered by the sanctions, and thus required to cease their work.

It's difficult to assess just how many Russian companies or Russian-linked companies are still being represented by US lobbyists.

But the recent exodus suggests that the Ukraine invasion may have made representing the country's interests too toxic even for an industry that has in the past welcomed payment from defense companies, despots and rebel groups.

In 2019, for example, a Libyan general seeking to consolidate his power in the North African country spent $2 million hiring a Texas-based firm to forge closer relations with the U.S.

Many of the Russian-linked companies that were dropped were involved in the Nord Stream 2 project, a completed undersea pipeline that would bypass Ukraine to send Russian gas supplies to Europe via Germany.

The opening of the pipeline, which would have given Russia tremendous leverage by making it an even larger energy supplier to Europe, was suspended by Germany after last week's invasion, leading the US to issue sanctions against the company operating it.

McLarty quickly dropped five European energy companies that were investors in the project, which have paid the firm at least $3.4 million in fees since 2017, records show.

For months, Republicans in the Senate have railed against the pipeline and sought sanctions on businesses involved in the project.

But the effort, including legislation sponsored by Sen. Ted Cruz, R-Tex., went nowhere because it was opposed by President Joe Biden as well as Senate Democrats, who hold the majority.

Lobbying records indicate McLarty lobbied Congress and the executive branch to protect and further the company's interest in the debate over natural gas as an element of European energy security.

We felt the honourable thing to do in the aftermath of the Russian invasion was to support US policy and withdraw from the pipeline project, Richard Burt, who leads a wing of McLarty focused on foreign interests, wrote in an email.

Burt had donated $14,000 to Biden's 2020 election efforts, record show.

The firms BGR Group and Roberti Global also dropped the pipeline project's construction and operating company, Nord Stream 2 AG.

The company is controlled by a subsidiary of the Russian state-owned company Gazprom, whose fuel sales support the Russian government budget.

A representative of Roberti Global, which has collected at least $9.8 million in lobbying fees from Nord Stream 2 AG, did not respond to a request for comment.

BGR President Jeffrey H. Birnbaum said in an email that his firm, which has collected at least $1.5 million in lobbying fees from Nord Stream 2 AG, ended its relationship to be in "compliance with economic and trade sanctions announced by the U.S. government.

Firms representing Russian banks also dropped clients. That includes Sberbank and VTB, Russia's two largest state-run banks, which were targeted last week by sanctions aimed at limiting their businesses internationally.

Venable LLP last week dropped an affiliate of Sberbank.

The firm has collected at least $800,000 in lobbying fees and closely tracked legislation in Congress of interest to Russia, including economic sanctions issues and a bill called the Defending Ukraine Sovereignty Act.

The two lobbyists who worked on the account, Gregory M. Gill and D. Edward Wilson, did not respond to requests for comment.

The firm Sidley Austin also ended its roughly seven-year relationship as a registered foreign agent for VTB last Friday.

The firm, which has represented the bank since 2015, was on a $40,000 a month retainer and typically collected about $360,000 or more a year in fees from the company.

The firm provided government strategies counsel" and lobbying directed toward the US Congress" as well as the White House regarding the imposition of sanctions by the US government on Russian-affiliated banks," according to Justice Department filings.

A representative of Sidley Austin did not respond to a request for comment.

Mercury Public Affairs, LLC similarly dumped clients. Late last week the firm filed paperwork with the Justice Department to end its status as a foreign agent working on behalf of Sovcombank PJSC, as well as the metal and energy producer EN+ Group, which collectively paid the firm $100,000 a month on retainer.

A Mercury representative did not respond to a request for comment.

Filings state the firm provided strategic consulting and government relations services, including outreach to US Government officials.