Congress should ‘phone a friend’ when sanctioning Russia

Discussion of additional U.S. sanctions on Russia for its interference in the 2016 presidential election and general bad behavior is heating up in Congress, but lawmakers should coordinate with our allies before acting.

The Senate Committee on Banking, Housing and Urban Affairs held hearings in March and April to assess options for further penalties — “to impose real costs” on the Kremlin as Chairman Mike Crapo (R-Idaho) put it — for Moscow’s aggression in Ukraine and Syria, in addition to meddling in elections in Europe and the U.S. Russian sanctions were again a prominent theme during a May 16 committee hearing for Treasury Department nominees.

{mosads} The Countering Russian Hostilities Act of 2017 is the most likely vehicle for congressional action to increase economic pressure on Moscow. Modeled on the Iran Sanctions Act, the Countering Russian Hostilities Act would impose economic sanctions on firms and banks doing certain business with Moscow, in particular investment in Russian oil and gas (including export pipelines), nuclear power plants, purchases of Russian sovereign debt and participation in the privatization of Russian state-owned assets.

The legislation also calls for tougher action against Russian corruption and establishment of a high-level task force for “tracing, mapping and prosecuting illicit financial flows linked to the Russian Federation.” Waivers for most of the sanctions on national security grounds require the president to certify that Moscow is taking steps to implement the Minsk agreements to bring peace to Ukraine and “to substantially decrease its military activities in Syria.” 

There is a growing view on the Hill that U.S. and EU sanctions on Russia have not had a meaningful impact in curbing Russian President Vladimir Putin’s aggression. In the recent hearings, senators expressed a desire to hold the Kremlin accountable for its belligerent behavior by targeting more directly key economic sectors and individuals close to Putin.   

The sanctions that the U.S., EU and others began imposing on Russia three years ago reflected a compromise, given Europe’s significant dependence on economic ties with Russia, especially for energy.  Since Russia supplies about one-third of the EU’s natural gas and a significant portion of its oil, there was strong resistance in European capitals to restricting trade or investment on energy beyond measures to limit Russian access to technology for future production from frontier areas, like the Arctic or from shale. 

U.S. sanctions are most effective when undertaken in conjunction with our allies. That means the agreed sanctions may be less encompassing than we would like, but broader participation means less likelihood the sanctions will be undercut. The political message of alliance solidarity is important. 

While senators pay homage to a united U.S./EU approach to Moscow (Japan, Australia, Canada and others have also imposed restrictions on Russia), they also speak of showing U.S. leadership in taking additional actions to deny resources to Putin. Their expectation seems to be that the Europeans will follow the U.S. lead and toughen sanctions on Moscow, as they did when the U.S. guided the international community in tightening restrictions on Iran over its nuclear program.

There are no indications, however, that the U.S. would be able to convince EU members to impose more sanctions on the Kremlin, barring a significant increase in Russian aggression in Ukraine. Indeed, the challenge remains to keep the current restrictions from being loosened. There is an order of magnitude of difference between Europe’s dependence on trade and investment with Russia, compared to Iran.  

Enacting new sanctions on Russia without European and other allied support could set us up for a major conflict with our allies that would only benefit Putin. That said, congressional action pushing the envelope a bit could be useful, as long as it includes waivers that allow the Trump administration to work most cooperatively with our allies. Financial sanctions have a more immediate impact than most energy sanctions, so Congress should focus there. One example would be creating additional restrictions on participation in issuance of Russian sovereign debt. 

On the energy side, some EU members would applaud targeting new Russian export infrastructure, such as the Nord Stream 2 natural gas pipeline running from Russia to Germany via the Baltic Sea, although it would upset the Germans. There is strong bipartisan opposition on the Hill to Nord Stream 2, as it would increase the vulnerability of central and eastern European countries while hurting EU energy diversification.

There is plenty of capacity available to move Russian gas to Europe through existing infrastructure, so failure to build Nord Stream 2 would have no practical effect — Putin wants the pipeline simply to avoid transit through Ukraine. An added bonus is that this pipeline is very important symbolically to Putin.    

Douglas Hengel (@DougHengel54) is a senior fellow at the German Marshall Fund of the United States, a professorial lecturer at Johns Hopkins School of Advanced International Studies, and a former deputy assistant secretary of state for energy and sanctions in the Bush and Obama administrations.

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