Decreasing Russian Oil Profits (DROP) Act (S.3513 / H.R.7506): A New Phase in Sanctions Enforcement
As Russia’s war against Ukraine continues, U.S. lawmakers are advancing a new legislative effort aimed at striking directly at the Kremlin’s primary revenue stream: oil exports. The Decreasing Russian Oil Profits (DROP) Act (S.3513 / H.R.7506) represents one of the most sweeping attempts yet to penalize global actors who continue facilitating trade in Russian-origin oil.
The bipartisan bill—introduced in the Senate by Senators Dave McCormick (R-PA), Elizabeth Warren (D-MA), Jon Husted (R-OH), and Chris Coons (D-DE), and in the House by Representatives Michael McCaul (R-TX10), Bill Keating (D-MA9), Mike Lawler (R-NY17), Marcy Kaptur (D-OH9), Mike Quigley (D-IL5), and Josh Gottheimer (D-NJ5)—signals broad cross-party consensus: reducing Russia’s oil profits is essential to weakening its war machine.
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Core Mechanism: Mandatory Sanctions Within 90 Days
The legislation requires that 90 days after enactment, the President must impose sanctions on any foreign person determined by the Secretaries of Treasury and State to have:
Engaged in the purchase or import of Russian-origin oil;
Knowingly facilitated financial transactions related to such purchases;
Materially supported these activities or assisted sanctioned persons engaged in them;
Served as CEO or board member of any entity involved in the above conduct.
This structure dramatically expands exposure—not only targeting buyers but also executives, financial facilitators, and service providers connected to Russian oil trade.
Scope of Covered Activities
The bill defines sanctionable activity broadly. It includes:
Transporting Russian-origin oil
Trading or commodities brokering
Financing
Shipping
Insuring
Flagging vessels
Customs brokering
Importantly, the DROP Act applies globally, not only to G7 or Western countries. This universal scope directly addresses Russia’s ability to reroute exports to non-Western markets.
Sanctions: Full Blocking Authority
The penalty mechanism is severe:
All property and interests in property within the United States—or under the control of a U.S. person—would be blocked.
This effectively cuts sanctioned actors off from the U.S. financial system and dollar-denominated transactions, a powerful deterrent given the central role of the U.S. financial infrastructure in global energy trade.
Carefully Structured Exceptions
While aggressive, the DROP Act includes limited presidential waiver authorities. The President may apply no more than two exceptions, and each is subject to strict conditions.
1. Exception for Countries Isolating Russian Funds and Reducing Purchases
This exception is designed to encourage gradual disengagement rather than immediate disruption.
All of the following conditions must apply:
Funds used to purchase Russian-origin oil must be credited to an account in the purchasing country (preventing funds from flowing directly to Russia).
The funds must facilitate transactions in agricultural commodities, food, or medicine.
The government must commit to significantly reducing purchases of Russian-origin oil.
Within 180 days, the President must certify that the country has significantly reduced purchases—or that global oil prices make significant reduction infeasible.
If certification is not made within 180 days, the authority expires.
2. Ukraine Support Account Exception
Countries may avoid sanctions if payments per barrel are deposited into a presidentially established account benefiting Ukraine—either under the REPO Act framework or for defense article purchases.
Safeguards include:
A significant portion of funds must be disbursed within 90 days;
The Secretary of State must notify Congress regarding use of funds;
Congress retains authority through a joint resolution of disapproval.
This mechanism effectively transforms oil trade revenue into financial support for Ukraine.
3. Exception for Countries Providing Significant Support to Ukraine
If the President certifies that a country is providing substantial assistance to Ukraine, sanctions may be waived.
4. Temporary Port-Specific Exception
The President may also issue limited exceptions tied to specific Russian ports, likely intended to prevent supply shocks or manage humanitarian or market risks.
A Critical Limitation: The Price Cap Clause
A key provision restricts all exceptions:
No exception may apply if the activity facilitates maritime transport of Russian-origin oil purchased above the relevant price cap determined by the Secretary of the Treasury.
This reinforces the G7 price cap regime but extends its enforcement beyond coalition members. However, the bill does not further elaborate on enforcement methodology, monitoring mechanisms, or how “relevant price cap” determinations would be operationalized in complex global trading chains.
That ambiguity could prove significant. Enforcement may depend heavily on Treasury guidance and regulatory rulemaking.
Strategic Implications
The DROP Act represents a shift from reactive sanctions to proactive secondary enforcement. Rather than focusing solely on Russian entities, it targets the ecosystem that enables Russia’s oil exports.
Three strategic implications stand out:
Global Reach: By applying to any country, the bill attempts to close loopholes exploited through rerouting and shadow fleets.
Executive Accountability: Including CEOs and board members raises personal risk for corporate decision-makers.
Revenue Rechanneling: The Ukraine account mechanism creatively converts continued oil trade into a potential funding stream for Kyiv.
At the same time, the legislation walks a tightrope. Overly aggressive enforcement risks destabilizing energy markets, while broad waiver authority could dilute deterrence if applied expansively.
Conclusion
The Decreasing Russian Oil Profits (DROP) Act reflects bipartisan recognition that Russia’s oil revenues remain the backbone of its war financing. By expanding secondary sanctions, broadening liability to service providers, and tying exceptions to measurable reductions or support for Ukraine, the bill aims to tighten economic pressure while preserving strategic flexibility.
Whether it succeeds will depend less on statutory language and more on implementation—certifications, enforcement rigor, interagency coordination, and global diplomatic engagement.
If enacted and robustly enforced, the DROP Act could mark a decisive evolution in sanctions strategy: targeting not just Russia, but the global infrastructure sustaining its oil economy.
