How the New US Sanctions Could Rebound

23.08.2017

Donald Trump might have been elected on the Republican ticket and Republicans might control both houses of Congress, but this does not mean that the US President is finding it easy to get his way. After seven months in office, his promised repeal of Obamacare remains blocked, while a bill he expressly opposed - on new sanctions against Russia - positively sailed through the legislative process.  

Not only was the ‘Countering America’s Adversaries Through Sanctions Act’ passed in almost record time, but the size of the votes -only three objections in the House, only two in the Senate - made it pointless for Trump to use his veto. On 2 August Trump signed the bill into law, with a statement of disapproval and no cameras.

As its title indicates, the new law does not apply exclusively to Russia. It provides also for sanctions on Iran, North Korea and undefined sponsors of terrorism. But the bulk of its provisions target Russia, and the hostility of the current Congress towards Russia - and not just to Russia, but to Trump - is what largely propelled it into law.

Although none of the investigations has yet reported, legislators believe, along with the majority of the Washington establishment, that Russia interfered in the US election and that Trump was the knowing beneficiary. A key section of the new law reflects their fear that, despite everything, Donald Trump might still try to improve relations with Russia and to that end might use his presidential power to lift sanctions.

What it says is that the President must consult Congress and secure its approval before doing any such thing. It also sets out conditions - most of which relate to Ukraine and observance of the Minsk-2 agreement - that would have to be met before the sanctions regime can be changed.

This could well be the part of the law, rather than the actual sanctions, that inflicts most damage on US-Russia relations. In effect, it restricts the ability of the President to conduct a major aspect of foreign policy. Trump has complained bitterly that Congress has impinged on his constitutional power, and he is absolutely right. To an extent, his whole Russia policy is held hostage by Congress.  

Everything else in the law might be regarded as secondary to this, whether it is sanctions against new named individuals; the inclusion of the energy sector in commercial sanctions, or the potential extension of sanctions to non-US companies that do business with Russia in these sectors.

It is true that these sanctions could, if fully implemented, constitute "a fully-fledged trade war”, as the Russian Prime Minister, Dmitry Medvedev, lamented. At the time of writing, however, the extent to which they will be implemented is in doubt.

This is because the final version of the law introduced an element of presidential discretion - including consideration of the US national interest - before some of the most contentious elements come into force. If Congress’s main aim was to restrict Trump’s room for manoeuvre on Russia policy, then these sections could simply be left on the books without having any particular effect - at least not on the US and Russia.  

The problem is that the very fact of such provisions being on the statute book at all, is already causing anxiety in places far removed from the current US-Russia quarrel - and specifically in Brussels and some other European capitals. The concern here is that the extension of US sanctions to energy sector investment and to third-country companies doing business with Russia could directly damage European commercial and other interests. As the European Commission President Jean-Claude Juncker objected, “America first cannot mean that Europe's interests come last’.

Central among European worries is the potential effect on Nordstream II - the cross-Baltic gas pipeline in which Germany and France are both heavily invested. The US stands accused not only of interfering in EU energy policy (which would be bad enough), but of reopening an internal EU dispute over Nordstream II, which Poland and the Baltic States had fiercely opposed.

EU countries also claim an element of US self-interest, in that American companies could bid to replace supplies and investment lost to them through US sanctions on Russia. They also point out that the sanctions specifically exclude an area - space - where US interests would be directly harmed because at present the US has no way of reaching the International Space Station without using Russian rockets.

In the end, with Germany among its strongest supporters, Nordstream II is unlikely to be derailed by US sanctions. But this does not mean there will be no damage to EU-US relations. As Juncker’s words show, some damage has already been done, and more could follow.

By appearing to interfere in internal EU affairs and reopening the dispute about Nordstream II, the US could reopen dissent within the EU about Russia sanctions generally. Each time EU sanctions are renewed, the voices against renewal grow louder from those whose economies have been harmed or who believe the time has come to change tack.  

This could in turn weaken not only the - now limited - effect of EU sanctions, but the US-EU united front on sanctions that has held remarkably solid since 2014. With enthusiasm for these sanctions fraying, not least among southern European countries that have lost agricultural export revenue, it is possible that new US sanctions that effectively penalise European countries could deal this aspect of transatlantic solidarity a final blow.

And not just solidarity on anti-Russia sanctions. Europe’s misgivings about additional US sanctions feed into a wider European distrust of the US, stemming from the Trump administration’s mixed signals on Nato and transatlantic defence. The EU is now actively looking for ways to make itself more self-reliant, a process made simpler by the decision of the EU’s most Atlanticist member, the UK, to leave.

The US may also have miscalculated if it has designs on the European energy markets. Since the 2005 interruption in supplies of Russian gas via Ukraine, the EU has quite successfully reduced the dependence of its members and neighbours on Russian gas. At best, it has made energy relations with Russia into a purely commercial, rather than a political, proposition. American companies could find it harder to penetrate the market than they believe.

In the end, the effect of the US sanctions law could be rather different from what the US Congress intended. Any damage to the Russian economy is likely to be limited. The greater harm could be first to EU unity over sanctions, and then to transatlantic solidarity - not just on Russia, but much else. True, Donald Trump will be prevented from offering to lift sanctions as an opener to better US-Russia relations, but that hope of better relations is looking anyway remote.


Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.

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