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New US Sanctions against Russia: Problems, Consequences and the Future

August 3, 2017
<p>New US Sanctions against Russia: Problems, Consequences and the Future</p>

Ivan Sichen, Military and Political Expert

The main deterrent to the Putin regime's aggressive policy, including on the Ukrainian direction, remains US and EU sanctions against the Russian Federation. Within the framework of such a policy, the United States is actually using the “turn of the screw” strategy, which is systematic in nature and provides for a consistent increase in pressure on Russia to force it to make concessions.

The next step (of a qualitatively new nature!) along this path was the adoption on 27 July 2017 by the US Congress of the bill “Counteracting America's Adversaries Through Sanctions Act”. August 2, 2017, President of the United States Donald Trump signed this law, providing for the imposition of new sanctions against Russia, Iran and North Korea.

The document includes a number of unprecedented provisions that directly affect the interests of the ruling elite of the Russian Federation, undermine the work of the leading sectors of the Russian economy, and also limit the opportunities for Russian influence in Western countries.

Thus, the new law requires the US President and government to prepare annual reports (with participation of special services) to the US Congress about Russian oligarchs, senior political figures and “parastatal” organizations, including: their closeness to V. Putin and other members of the Russian ruling elite; the scope of ownership and sources of income; list of relatives, their assets and business interests (including foreign companies affiliated with them). It is planned to establish a system for finding persons engaged in business operations on behalf of or in the interests of organizations associated with the intelligence and defense departments of Russia.

Along with this, it is planned to impose more stringent restrictions on the transfer of US technologies to the Russian Federation for exploration and production of oil at great depths and the Arctic shelf, as well as development of shale deposits. There are growing restrictions on the supply of equipment, materials, services, licenses, information and technology for the construction of Russian export gas pipelines. In this regard, for the first time the US intentions to counteract the implementation of the Russian project “Nord Stream-2” as threatening energy security of Europe and Ukraine, are directly mentioned.

To counteract energy projects of the Russian Federation, it is planned to reduce the maximum repayment periods for loans by Russian banks from 30 to 14 days and by oil and gas companies from 90 to 30 days. In addition, individual investments in such projects are limited to 1 million US dollars, and in general — no more than 5 million US dollars.

It is also planned to introduce anti-Russian sanctions in a number of other areas, including: against state-owned enterprises of the Russian Federation that carry out operations in the metallurgical and mining industries and railway transport; against the government of the Russian Federation for undermining the cyber security of other countries; in respect of persons guilty of human rights violations in the territories occupied by Russia.

At this, the bill prohibits the US President from easing or canceling sanctions against Russia without coordination with the US Congress.

A separate section of the document concerns strengthening of the US counteraction to Russia's measures to influence on Europe and Eurasia by supporting political parties, think tanks and other pro-Russian non-governmental organizations.

In 90 days after the adoption of this law, the US President must submit to the US Congress a report “On the Media Organizations Controlled and Funded by the Government of the Russian Federation”. It should include information about the Russian media, through which the influence on electoral companies in the countries of Europe and Eurasia, including support for political parties, candidates, lobbying companies and non-governmental organizations, has been exerted. In this context, it is proposed to encourage the establishment of the Commission for Media Freedom within the Council of Europe, modeled on the Venice Commission regarding rule of law issues. Based on the importance of the issues raised, US Congress supported the financing of the “Countering Russian Influence Fund” in the amount of 250 million US dollars for the 2018 and 2019 financial years.

The document clearly determines the USA's policy aimed at supporting the Ukrainian government in restoring the sovereignty and territorial integrity of the country, condemning Russia's destabilizing actions in Ukraine, and also confirms the USA's non-recognition of the legality of Russia's annexation of the Ukrainian Crimea. Along with this, it provides for assistance in reforming the energy sector in Ukraine. For this purpose, 30 million US dollars are allocated.

 

In the context of the general increasing of pressure on Russia, all this is aimed at achieving a number of important political and economic results important for the United States.

Firstly, it demonstrates the US intentions to continue the policy of restraining Russia by further increasing pressure on it, including critical consequences for the Russian economy. According to Western experts, the USA's next step may be imposition of an embargo on the import of Russian energy carriers, and subsequently — excluding Russia from the international payment system SWIFT.

Secondly, the bill confirms the firmness of the US positions on supporting Ukraine on the most important for the latter issues. Based on the statements and actions of representatives of the US leadership, as well as on Washington's efforts to strengthen sanctions against Russia, in addition to helping Ukraine in its energy security, there is a possibility of the USA's direct participation in resolving the crisis in the Donbas (including within the framework of the “Normandy” group), as well as the transfer to Ukraine of lethal weapons.

Thirdly, favorable prerequisites are created for expanding the American presence in the European gas market. Thus, by 2020 the USA plans to start full-scale export of gas and has already begun delivering liquefied natural gas to a number of European countries (Spain, Portugal, Italy, Netherlands, Poland, Lithuania) and Turkey. In this regard, the new sanctions against Russia in fact block the possibility of implementing Russian projects “Nord Stream-2” and “Turkish Stream”, which directly compete with American plans to increase the volume of gas supplies to Europe.

Fourthly, a powerful blow is being struck on the main branches of the Russian economy, which, unlike previous sanctions (mostly formal ones), can inflict real substantial losses on them. Besides, obstacles are created in the work of the financial system of the Russian Federation.

Fifthly, the disagreements in the ruling elite of Russia, including directly in V. Putin's environment, deepen. The US plans to investigate the relationships of Russian oligarchs and politicians, as well as members of their families and close associates, actually deprive them of the opportunity to bypass Western sanctions. From now on, each of them is clearly aware of the impossibility of normal conduct of business and preservation of security guarantees for their assets abroad, as long as Putin remains in power.

 

These issues are of a fundamental nature, both for US President D. Trump (from the point of view of the implementation of his strategic concept “America — above all” and in the context of his being accused of relations with Russia) and the United States Congress (in terms of pursuing a tough policy towards the Russian Federation). At this, the USA openly ignores such consequences of the imposition of new sanctions against Russia, as obvious prospects for further aggravation of US-Russian relations and possible problems in relations with the EU.

Thus, the US plans to bring anti-Russian sanctions to a qualitatively new level have caused Russia's sharply negative reaction of an undisguised hysterical nature. According to the Russian President V. Putin, they are “...absolutely illegal from the point of view of international law, they violate the principles of international trade and are an attempt of the USA to use geopolitical advantages in the competitive struggle”. Such actions were called V. Putin “rudeness in relation to the Russian Federation”. Proceeding from this, the Russian President expressed Russia's intention to “provide a tough response to the United States”

There are the following possible options of such a response: Russia's termination of deliveries of enriched uranium to US nuclear power plants; introduction of a ban on the export of titanium and its alloys to the United States (currently about a third of the needs of the American Boeing Corporation is covered by the titanium of Russian production); closure of the Russian market for American goods, including computer equipment and communications. Besides, Russian experts do not exclude the possibility of expulsion of a number of American diplomats, sequestration of US property in Russia, and termination of Russia's cooperation with the United States on countering the DPRK’s nuclear program. For example, Moscow has already put forward a demand for the US to reduce its diplomatic staff to 455 people since September 1 of this year, and also has banned the US Embassy in Russia to use the dacha in Sosnovy Bor and warehouses in Dorozhnaya Street in Moscow.

In addition, the leadership of the Russian Federation hopes for the possibility of aggravation of the contradictions between the US and the European Union, which demonstrates concern over the negative consequences of the new sanctions for the EU countries economies. Thus, according to the European Commission, the adoption of the bill “Countering America's Adversaries Through Sanctions Act” creates obstacles to the implementation of plans to diversify Europe's energy supply, and also affects the interests of European companies involved in the joint projects with Russia. First of all, this concerns Germany, France, Austria and the Netherlands, which are most closely involved in Russian energy projects. In particular, German companies Wintershall and Uniper, French Engie, Austrian OMV and British-Dutch Shell are involved in such projects. Given this, the European Commission also expresses intentions to take adequate measures in response to US actions.

 

Despite this, both branches of the US government and both parties in the American parliament supported the new law on strengthening sanctions against Russia. According to the American experts' estimates, the consequences of new sanctions for V. Putin's regime will exceed in their significance the USA's possible losses from their application.

In this regard, the already achieved results of the USA's pressure on Russia are being pointed out, namely, Moscow's actual having lost the ability to pursue a confident foreign policy to realize its neo-imperial interests. In fact, to date, Russia's actions in the foreign sphere have lost an offensive impulse, are situational in nature and are only attempts to minimize the impact of Western sanctions on the Russian Federation. The manifestation of this are considered Moscow's importunate attempts to resume the dialogue with the USA and the leading EU countries even on terms that are humiliating for it. In particular, this was characteristic of V. Putin's meetings with the new French President E. Macron on 29 May 2017 and President of the United States D. Trump on 7 July, 2017.

Besides, there is a split in the ruling elite of Russia, as evidenced by the spread of protests in the country. Thus, on the one hand, the protests of the Russian opposition are brutally suppressed by the authorities, and on the other — they are supported and funded by certain oligarchic circles of the Russian Federation, dissatisfied with Putin's policy. Thus, according to the tax declaration of the Russian “Anti-Corruption Fund”, as of early June 2017, its financial resources amounted to about 80 million rubles, which were called “contributions of A. Navalny's supporters”. At this, in May 2017 alone, such “contributions” amounted to almost 23 million rubles. On average, the fund receives 15 million rubles a month. Due to these funds, A. Navalny's pre-election headquarters and protest actions are financed, and assistance is given to activists detained by law enforcement agencies.

According to US experts, the new sanctions against Russia will become a powerful catalyst for these trends, will undermine the Putin regime's position and will force it to make concessions. At this, the USA is quite capable of overcoming all possible retaliatory actions by Russia, including finding new suppliers of titanium and enriched uranium, which is no problem under openness of world markets.

At the same time, there is also confidence in reaching an understanding with the EU over the introduction of new sanctions against Russia. In this regard, is pointed out the predominantly speculative nature of statements about the European energy security being undermined, and the emphasis is on the position of the European Union, which does not oppose increasing pressure on Moscow but just wants relevant measures to be coordinated with. Moreover, the EU leadership itself carries out a strict sanctions policy with regard to the Russian Federation.

 

An example of this was the scandal about Russia's transfer of gas turbines of the German Siemens company to the Crimea, which had previously been intended for TPP in the Krasnodar Territory of the Russian Federation. At this, Putin's personal promise to the Foreign Minister of the Federal Republic of Germany, Z. Gabriel, to abstain from such a step was violated. In response, Siemens decided to break the licensing agreement with Russian companies on the supply of equipment for combined cycle power plants. In addition, Siemens plans to sell its shares in the Russian company Interavtomatika, which offers products and services in the sphere of power plant management systems.

In turn, the German Foreign Ministry has warned Russia about the inadmissibility of violating the sanction regime, which causes additional damage to German-Russian relations. At the same time, the Federal Republic of Germany has proposed to the countries of the European Union to introduce new sanctions against Russia, in particular against the officials of the Ministry of Energy of the Russian Federation and the company Tekhnopromexport, which were engaged in the shipment of Siemens turbines to the Crimea.

In general, the EU member states have supported the proposal of the Federal Republic of Germany. Thus, the priority for the EU of restraining Russia over current economic interests was once again confirmed. Proceeding from this, one should also expect the resolution of the contradictions between the USA and the European Union regarding the law “Countering America's Adversaries Through Sanctions Act”.

 

Against this background, of interest are the Russian experts' assessments of the likely consequences of V. Putin's removing from power in Russia after the completion of his presidential term in May 2018. By the way, Putin himself does not rule out such an opportunity. In particular, in his words during a meeting with young people on 20 July 2017 in Sochi, he has not decided yet whether to participate in the presidential elections in March next year.

Of course, all this can be a pure probing of public opinion on this issue or Putin's “playing” on the feelings of Russian citizens, who for the most part consider him “the main and only backbone” of the Russian Federation. This is exactly how the Russian Tsar and Grand Duke Ivan the Terrible once played on the feelings of his subjects after the aggravation of relations with the boyar elite of the country. Thus, in January 1565, he defiantly denied the throne, explaining that step by “the impossibility of counteracting the boyars' crimes because of the obstacles from the clergy”. As Ivan the Terrible thought, the people “cajoled” him into remaining in power, because they saw him as the only hope for avoiding a catastrophe in the country.

The evidence of such parallels is beyond doubt, especially in view of the prospects for further complications of the situation in Russia under the influence of Western sanctions.

 

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