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Getting Serious About Russia Sanctions

The US Congress is considering new legislation that would introduce a broader and potentially more effective range of sanctions against Russia than ever before. The main question now is how President Donald Trump will react to this attack on his most important foreign supporter.

KYIV – On February 13, a bipartisan group of US senators led by Republican Lindsey Graham and Democrat Robert Menendez introduced legislation aimed at holding Russia accountable for its behavior. The Defending American Security from Kremlin Aggression Act, or DASKAA, is a revised version of a similarly named bill that the two senators introduced in August 2018, but which Congress never adopted.

That first attempt came amid the uproar following the meeting between US President Donald Trump and his Russian counterpart Vladimir Putin in Helsinki last July, when Trump appeared to side strongly with Putin against America’s own intelligence services on Kremlin interference in the 2016 US presidential election. Congress is right to relaunch the sanctions discussion now.

“DASKAA 2.0” is the result of several recent developments. Russian aluminum company Rusal has just been relieved of US sanctions, prompting jubilation on the Moscow stock market. The United States imposed no new sanctions after a former Russian spy and his daughter were poisoned by a nerve agent in Salisbury, England, or in response to Russian aggression against Ukrainian ships in the Kerch Strait. More generally, the Trump administration has largely ignored many provisions of the Countering America’s Adversaries Through Sanctions Act (CAATSA), which Trump himself signed into law in August 2017.

DASKAA 2.0 is much more serious and nuanced than previous, hastily drafted congressional bills targeting Russia. The draft addresses several crucial issues, including chemical weapons proliferation, international cybercrime prevention, and combating election interference, while the range of sanctions is broader and potentially more effective than before. Five areas in particular stand out: the Kerch Strait incident, Russian debt, oil and gas, the wealth of Putin and his inner circle, and security-related issues.

A vigorous debate erupted in the US last November after the Russian coast guard illegally seized three small Ukrainian vessels with 24 sailors in international waters near the Kerch Strait, which connects the Black Sea to the Sea of Azov. The boats were traveling from one Ukrainian port to another, and the 24 sailors remain in Moscow’s Lefortovo Prison, once run by the KGB.

One proposed US response was to block Russia’s Black Sea ports. But the port of Novorossiysk exports nearly all of Kazakhstan’s oil, and the aim is not to punish that country. Another idea was to ban Russian ships, but most sail under flags of convenience. A third suggestion was insurance sanctions, but insurance is arranged in large blocks that make it difficult to identify individual ships or ports. Sensibly, DASKAA 2.0 instead proposes sanctions against 24 agents of Russia’s Federal Security Service (FSB) who were complicit in the Kerch Strait attack, as well as sanctions on Russian shipbuilding if the country continues to violate freedom of navigation in these waters.

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DASKAA 2.0 also expands on its predecessor’s attempt to sanction new Russian sovereign debt. Although Russia’s public debt currently is equivalent to only around 15% of GDP, restricting its ability to borrow on global markets makes sense, because it would force Russia to tighten its belt and invest less, which would also reduce economic growth. And having started with new public debt, US sanctions can be extended to cover secondary public debt and borrowing by state-owned companies. This is both a serious and convenient measure, involving no risks or costs to the West. DASKAA 2.0 also threatens sanctions against Russian financial institutions.

Sanctioning Russia’s exports of oil and gas – which accounted for two-thirds of Russian exports when world prices were peaking between 2011 and 2013 – to impede Russian military aggression would merely boost world prices, to the Kremlin’s benefit. Wisely, the US and the European Union have so far limited their sanctions to certain oil technologies.

Previously proposed sanctions against joint Russian-US oil and gas ventures would have hurt American companies and have therefore been reined in with DASKAA 2.0, which would affect only major new investments outside of Russia. A much stronger US idea was to sanction Nord Stream 2, the Russian pipeline from St. Petersburg to Germany. But this turned out to be technically difficult, and the Europeans have persistently opposed sanctions on Russia’s gas exports through pipelines. Instead, DASKAA 2.0 proposes sanctions against Russian liquefied natural gas, which will elicit fewer objections from Western allies.

The 2017 CAATSA law pioneered the pursuit of Russian oligarchs close to Putin, and of Putin’s personal wealth. DASKAA 2.0 goes further in this regard. A US demand for full transparency of all assets would be the hardest blow against Putin’s kleptocracy.

Yet the toughest provisions of DASKAA 2.0 are contained in the last new section, which could designate the Russian Federation as a state sponsor of terrorism, which is a very serious suggestion. The bill also offers ideas for tackling Russian misuse of Interpol’s Red Notices in pursuit of its political enemies overseas. Perhaps the most striking novelty is the call for a report on the assassination of Russian opposition leader Boris Nemtsov in 2015. This will be very interesting, especially given that the eminent Hoover Institution historian John Dunlop has just published a book blaming Putin in no uncertain terms for the killing.

The Russian stock market initially fell by 3% in response to news of the new congressional bill. Clearly, DASKAA 2.0 is focusing minds in Moscow. The main question now is how Trump will react to this attack on his most important foreign supporter.

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