K Street was fine taking Russian cash — until it couldn't

Russia’s invasion of Ukraine has done something previous tensions between Moscow and Washington could not: convince American lobbyists to turn down money from Kremlin allies. Even after the annexation of Crimea in 2014 and reports that Russia interfered in the 2016 election, the spigot of Russian money to K Street kept flowing.

Over the past eight years, firms doing legal, lobbying, and PR work reported payments of roughly $18 million to do work for six Russian entities: Sberbank, Gazprombank, Nord Stream 2 AG, Vnesheconombank, VTB Bank, and the Russian Direct Investment Fund.

Those six entities have now been targeted by sanctions from the Biden administration. And, virtually overnight, any remaining ties they had with D.C. lobbying shops have been severed.

The termination of those contracts may be one of many ripple effects from the war currently being waged by Russia against Ukraine. But for good government advocates, it represents a potentially watershed moment on K Street, while posing a number of key questions: Why did it take sanctions to make the firms drop their clients and, if the administration lifts those sanctions, how long will it be before K Street jumps back in the game?

“What took so long?” asked Ben Freeman, director of the Foreign Influence Transparency Initiative at the Center for International Policy. “In most cases, the firms representing these Russian clients — they knew exactly who they were working with. They knew they were working with folks that were very close to Putin. They knew exactly who these financial sector clients were. … They knew exactly what they were doing, and that didn’t stop them.”

“It almost took the start of World War III for them to actually drop their clients,” he added.

K Street firms who benefited from Russian cash over the past decade were not violating any law. It is proper for countries and companies of varying levels of nefariousness to purchase representation in the halls of Congress and the corridors of power in D.C., provided they abide by disclosure and ethics rules. The recent terminations of the contracts were in response to U.S. sanctions on those companies — not, necessarily, moral judgments that the firms themselves made about serving clients tied to Russian President Vladimir Putin.

For that reason, lobbying experts suspect that the same Russian institutions will find representation once again from lobbying shops eager to accept their hefty payments when the sanctions are lifted. A number of groups cut ties with Saudi Arabia amid pressure in the wake of the 2018 slaying of Washington Post journalist Jamal Khashoggi. But some retained their Saudi clients, and the country has found itself a slate of new firms in the intervening years.

The lobbyists who had represented Russian interests were far from persona non grata in Washington, D.C. In fact, many carried clout in the nation’s capital. Former Rep. John E. Sweeney (R-N.Y.) represented Vnesheconombank. Former Rep. Toby Moffett (D-Conn.) and former Sen. David Vitter (R-La.) represented Sovcombank.

Though foreign nationals cannot contribute to U.S. elections, lobbyists for those entities are under no such restrictions. And, as such, they continued to give. Vincent Roberti, a former lobbyist for Nord Stream 2 AG whose firm's website, until recently, said he advised President Joe Biden’s 2008 presidential campaign — a detail that has since been scrubbed from his online bio — gave $100,000 to the Democratic Congressional Campaign Committee in November 2019 as a “headquarters/building fund contribution,” according to the Federal Election Commission. He also gave $46,100 to the Nancy Pelosi Victory Fund in 2019, among other contributions in recent years.

Roberti’s firm was paid more than $9 million to lobby on issues “related to the U.S. position toward the Nord Stream 2 pipeline,” including potential sanctions.

“Our engagement with Nord Stream 2 was never about or on behalf of Russia,” a spokesperson for Roberti Global said in a statement. "Rather it was an engagement with a commercial entity with Western European management and debtholders that worked to support Western Europe’s effort to control its own energy needs. We terminated our engagement on the Nord Stream 2 project in accordance with US sanctions.”

Up until the past two weeks, that type of money flow barely registered as politically problematic. But activists said that it shouldn’t have taken the invasion of Ukraine — as horrifying a specter as it is — to have set off alarms about K Street’s ties to the Russian Federation and Russian financial institutions. Jeff Hauser, founder of the left-leaning watchdog group Revolving Door Project, questioned whether the current crisis would finally be a wake-up call for lobbying firms as they decide whether to get into business with problematic companies and political leaders. He suspects not.

“The Democrats who continue to work with these lobbyists who’ve been working with Russia since 2016 underscores the fact that the Democratic Party itself — the victim of 2016 — didn’t take it seriously enough,” Hauser said. “People are not being treated as persona non grata for working closely with Putin-aligned business interests. If you were working with a Putin-associated oligarch in 2017 to 2022 that meant that you were fundamentally not that offended by Russia's intervention in the 2016 election.”

The work that K Street did for Russian business was, on occasion, directly tied to shielding companies from the type of financial punishment they’re now experiencing. Sweeney spoke with former White House chiefs of staff Mick Mulvaney and Mark Meadows, among others, regarding U.S. sanctions against Russia on behalf of Vnesheconombank, or VEB, according to a filing with the Department of Justice. The Treasury Department said the institution and another sanctioned entity, Promsvyazbank Public Joint Stock Company, “play specific roles to prop up Russia’s defense capability and its economy.”

In a letter to Peter Harrell, senior director for international economics and competitiveness at the National Security Council, just last month, a lobbyist at the firm Mercury defended Sovcombank in an effort to fight “any unwarranted imposition of sanctions,” saying that the bank only has five individual account holders — all business owners and entrepreneurs — with total deposits above $10 million. Vitter, referring to himself as a “Former Senator,” followed up with an unnamed recipient, according to a disclosure from Mercury, in which he argued against Sovcombank being named in sanctions legislation before Congress.

The contract with Mercury did not begin until Jan. 26 of this year, right as the White House was warning of a potential Russian invasion of Ukraine and as lawmakers were considering preemptive sanctions legislation. Under the contract, the firm would receive $90,000 per month and a $5,000 one-time compliance fee. The administration still sanctioned Sovcombank and its subsidiaries.

Sidley Austin, which has reported $2,120,867.41 in payments from VTB Bank since 2016, said it provided “a weekly policy memorandum explaining developments in U.S.-Russia relations” for the bank, which is majority-owned by the government of the Russian Federation. A contract dated April 2015 noted that the firm would provide counsel and lobbying before Congress and the administration “regarding the imposition of sanctions by the US government on Russian-affiliated banks.” The Treasury has called VTB a “critical artery of Russia’s financial system.” Its lobbyists included former Rep. Rick Boucher (D-Va.) and George W. Madison, former Treasury Department general counsel under President Barack Obama.

A number of firms ended their work with Russian entities far before the recent sanctions were announced. Sweeney formally terminated his relationship with Vnesheconombank in 2020. The firm Squire Patton Boggs was paid $1.5 million between 2014 and 2017 to work on behalf of Gazprombank. The firm reported lobbying around “Banking laws and regulations including applicable sanctions.” Though Squire Patton Boggs has not reported activity on behalf of the institution since 2017, the relationship is not formally terminated, according to public disclosures. A spokesperson for the firm declined to comment.

But the decision to work on behalf of these clients in the first place is now being questioned, as the rest of the political system reassesses the recent history of U.S.-Russian relations. Daniel Vajdich, president of Yorktown Solutions, a firm which represents Ukraine’s state-owned energy industry, called work on behalf of Russian state interests or oligarchs “nothing short of treasonous.”

“Can you accept that by taking on this thing you’re also doing something that is immoral? And some people can,” said Adrian Karatnycky, senior adviser to KARV Communications, a New York-based firm that represents the Ukrainian oil and gas industry (KARV at one point also represented a Saudi client). “A lot of people that are considered to be morally upstanding citizens do — when cash comes — kind of unusual things.”