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Explainer: The U.S. Spending Bill And Foreign Policy, From Crude Oil To Russian Rocket Engines

  • Mike Eckel

U.S. Senator John McCain is among those who are unhappy with the new U.S. spending bill, which he says panders to "[Russian President] Vladimir Putin and his gang of thugs." (file photo)

U.S. Senator John McCain is among those who are unhappy with the new U.S. spending bill, which he says panders to "[Russian President] Vladimir Putin and his gang of thugs." (file photo)

WASHINGTON -- Dig deep into the $1.1 trillion spending package that the U.S. Congress passed on December 18 and you'll find all sorts of amendments, ranging from the quirky to the substantive.

That's because the 2,000-page bill, which sets government funding priorities for the new fiscal year, is the result of plenty of horse trading and haggling by Congress's 535 representatives and senators.

But the spending package, which U.S. President Barack Obama is expected to sign into law, also includes measures with foreign policy implications. Here's a snapshot of four policy amendments, known as riders, tucked into the bill that could impact how Washington deals with the world.

Crude Oil Exports

The new spending package lifts a 42-year-old ban on exporting crude oil that was enacted shortly after the 1973 OPEC oil embargo, which led to major gas shortages in the United States and endless lines for American drivers filling up their cars.

Four decades after that ban, the United States has become one of the world's largest producers of oil and gas, thanks to the revolution in underground extraction technology commonly known as fracking. Those innovations have flooded U.S. markets with additional hydrocarbons, known as shale oil and gas, and have helped drive world oil prices to below $35 per barrel, from near $100 per barrel a decade ago.

Now the right to export will be given to U.S. crude oil producers, who generate about 9.2 million barrels a day, nearly half of which comes from fracking, according to U.S. government figures.

This glut has been good news for U.S. refineries, which have long been able to export their products, as well as petrochemical companies, which do the same and rake in bigger profits from lower-costing crude.

The immediate, short-term beneficiaries of the export ban's removal should be close-by refineries like those in Mexico, which will get cheaper, higher-quality crude than they typically use. The impact on European markets will be limited, because demand there is lower, said David Knapp, chief energy economist at New York-based Energy Intelligence Group. Asian markets are largely supplied by oil from the Middle East.

"U.S. crude is not in particularly high demand right now. I mean, there's just too many barrels out on the market," he said. "So the impact is going to be very localized, and it's going to be more regional than international."

Knapp said that both the surge in U.S. shale oil production and the looming influx of oil from Iran, which has been cut off from major export markets for years by sanctions, both factor into the current low global oil prices.

Countries whose budgets and economies are undergirded by high oil prices -- like Russia, for example -- won't be directly harmed by the lifting of the U.S. export ban, but it won't help them either.

Russia's budget for the coming fiscal year is built around a projected oil price of $40 per barrel.

The more oil on the markets, the lower prices will be. The lower prices are, the less revenue the Kremlin will bring in. That means it will be harder to pay for everything from pensions and school teacher's salaries, to advanced fighter jets and ballistic missile nuclear submarines.

Visa Waivers

The bill tightens restrictions on travelers to the United States from 38 countries -- mainly in Europe -- whose citizens qualify for the U.S. Visa Waiver Program after meeting strict requirements on biometric passports, reciprocal waivers for U.S. citizens, and other conditions. Under this program, about 20 million visitors come to the United States every year without obtaining a visa ahead of time.

U.S. lawmakers in recent months have voiced increasing concern that terrorists could slip into the United States under the waiver program. The November 13 terrorist attacks in Paris, which killed 130 people, stoked those fears. Most of the attackers were French or Belgian citizens, though there were unconfirmed reports that said some attackers may have been migrants from the Middle East.

The decision by the Obama administration to increase the number of Syrians fleeing civil war further worried lawmakers. So did the December 2 mass shooting that killed 14 people at a California social services center, even though one of the attackers was a U.S. citizen of Pakistani background, while the other -- his wife -- entered the United States on a special visa for prospective spouses.

Some U.S. lawmakers clamored for a complete halt to the visa waiver program. The spending bill tightens how the program operates, aiming to increase information sharing with the 38 participating countries. It also restricts entry for people who have traveled to countries including Syria, Iraq, and Iran.

That has worried the European Union, which is home to many dual-nationals who retain citizenship in countries like Iran. In an open letter published earlier this month, David O'Sullivan, the EU's ambassador to the United States, warned that the push may result in European nations imposing reciprocal measures on U.S. citizens.

"Such indiscriminate action against the more than 13 million European citizens who travel to the U.S. each year would be counterproductive, could trigger legally-mandated reciprocal measures, and would do nothing to increase security while instead hurting economies on both sides of the Atlantic," O'Sullivan wrote in an op-ed co-signed by other EU ambassadors to the United States.

Russian Rocket Engines

The spending package is favorable to Russian state-owned aerospace giant NPO Energomash, which manufactures engines that have been used for years by the U.S. Defense Department to launch military satellites. The RD-180 engines are provided to a U.S. joint venture between Lockheed Martin and Boeing called United Launch Alliance, which has a monopoly on the launches.

Following Russia's annexation of Ukraine's Crimea Peninsula in 2014, U.S. lawmakers sought to end the arrangement, citing national security and economic grounds. The emergence of the private U.S. aerospace company SpaceX also led to the effort to phase out the use of the Russian engines, and to encourage U.S. domestic engine manufacturing.

Americans who were held hostage in Iran after the Islamic revolution in 1979 will benefit from the new U.S. spending bill. (file photo)

Americans who were held hostage in Iran after the Islamic revolution in 1979 will benefit from the new U.S. spending bill. (file photo)

However, senators from two U.S. states -- Illinois, where Boeing is headquartered, and Alabama, where United Launch Alliance has an assembly facility -- inserted language into the spending package that will continue use of the Russian engines. Competition for the satellite launches will be open to launch-vehicle providers "regardless of the country of origin of the rocket engine."

That prompted a visibly angry Republican Senator John McCain (Republican-Arizona) to take to the Senate floor on December 16 and excoriate both Russia and his senate colleagues.

"Have no doubt, the real winners today are Vladimir Putin and his gang of thugs running the Russian military-industrial complex," McCain said.

Iran Hostages

The spending bill sets up for the first time a U.S. Victims of State Sponsored Terrorism Fund, similar to a fund established for victims of the September 11, 2001, terrorist attacks. It will be funded in part by a $9 billion fine paid by the French bank BNP Paribas in 2014 for violating U.S. economic sanctions on Sudan and other countries.

Victims of other terrorist attacks will qualify for the fund as well, including those who were among the 52 U.S. citizens and diplomats held hostage in Tehran between November 1979 and January 1981 after students stormed the grounds of the U.S. Embassy in the Iranian capital.

At the time of the crisis, then President Jimmy Carter ordered $8 billion of Iranian assets seized. The agreement that resulted in the hostages' release, known as the Algiers Accords, lifted the U.S. seizure of assets. But it also barred the hostages from suing Iran.

In the years that followed, the former hostages pressed their cases in U.S. courts. But the U.S. State Department fought the efforts, arguing that allowing the hostages to sue would hinder the ability of the U.S. government to carry out foreign policy and conclude binding agreements with other nations. The U.S. Supreme Court in 2012 let the lower court rulings stand.

Meanwhile, survivors of other terrorist attacks -- the 1983 bombing of the U.S. Marines' barracks in Beirut, the 1998 bombings of the U.S. embassies in East Africa -- also began pushing for a way to get compensation. Adding insult to injury for the former Iran hostages, victims of the 1983 Beirut bombing, responsibility for which has been pinned on Tehran, have also won legal awards.

Under the new fund set up by the spending bill, the former Iran hostages -- 39 are reportedly still alive -- and other relatives or survivors will receive money for their suffering amounting to $10,000 for each day they were held captive.

"From my point of view, this is long overdue. This is something that should have happened one way or another a very long time ago," said John Limbert, 72, the political officer at the U.S. Embassy in Tehran when it was overrun in 1979.

"There were parts of our own government which made common cause with the Islamic republic in order to prevent us from seeking compensation," Limbert added.