Russia | Trump lifting Russia sanctions?

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Russia | Trump lifting Russia sanctions?

Rumours have spread almost overnight in both Washington and Moscow that Donald Trump has a draft executive order on his desk lifting or seriously softening economic sanctions against Russia.

The order could apparently be signed after telephone conversations with Vladimir Putin and Angela Merkel, both scheduled for Saturday (Putin’s spokesman Dmitry Peskov has already confirmed Saturday as a ‘possible’ date for the call).

Other recent news which would definitely be welcomed by Moscow is the announcement of the resignation of Victoria Nuland, the Assistant Secretary of State for European and Eurasian Affairs at the US Department of State. Nuland is seen by Russia as the US official bearing the greatest degree of responsibility for the Ukraine crisis in late 2013-early 2014 and as one of the main advocates of sanctions introduced by both the US and the EU. It has been reported that Nuland, along with several other senior State Department officials, has been asked to leave her post by Trump .

Moreover, according to Yuri Romanenko, usually a well informed Ukrainian commentator, Trump gave [Ukrainian president Petro] Poroshenko two to three months to produce workable proposals for solving the crisis in Ukrainian-Russian relations. If no such proposals are forthcoming, Trump will seek a bilateral solution with Putin, without Ukraine’s participation.

Why Trump needs Russia

Donald Trump has identified three strategic priorities in international politics and national security where he and his advisors believe that cooperation with Russia is required.

The most immediate is a quick and complete victory over the Islamic State: "These terrorists and their regional and worldwide networks must be eradicated from the face of the earth, a mission we will carry out with all freedom-loving partners", he said. Trump’s recent call for Syrian safe zones echoes what some of his advisors have been saying since 2015: the US, Russia, Turkey and, possibly, Europe should divide Syria into zones of influence where these powers will safeguard security.

Trump intends to increase the US military budget and invest in military technology. At the same time, a new arms race with Russia, which has been modernising its armed forces for nine years since the South Ossetia war, is best avoided. “When we play this sort of bully game against each other, between the United States and Russia……that’s going to achieve nothing,” – Michael Flynn, Trump’s national security advisor, once said to the Russian state-owned English-language TV channel, RT. “[W]e have to try to figure out: How do we combine the United States’ national security strategy along with Russia’s national security strategy, despite all the challenges that we face?”

Trump’s team sees China as the main potential challenger to American leadership. The way Russia fits into the picture is that it would be important for the US to prevent it from forming a close alliance with China and reorienting its export routes for its resources from West to East (Russia insists that it is diversifying exports of its oil and gas rather than redirecting them).

In addition, Trump has offered unprecedented support to Israel which sees Iran as the main strategic threat, because of the Islamic republic’s nuclear programme. Russia’s relations with Iran could help to keep Iran under control.

Will the Senate stop Trump?

Trump’s hands could be tied by the US Senate where a bipartisan group of senators introduced, on 10 January, “The Countering Russian Hostilities Act of 2017”. The bill codifies existing sanctions by the Obama administration which currently exist as presidential executive orders.  It would also prohibit all investments in Russian pipelines and Russia's civil nuclear sector as well as investments of $20 million or more in the development of Russia's petroleum and natural gas resources. Additionally, the bill would prohibit US and third party participation in any privatisation of Russian assets and issuance of sovereign debt.

The bill still gives the president discretion on which sanctions to apply and allow him to waive certain sanctions if he certifies that "progress is being made." However, Republican Senator John McCain, one of the bill’s co-sponsors, warned that Congress will amend the bill to make the sanctions mandatory if the Trump administration grants too many waivers. Another Republican co-sponsor, Lindsay Graham, claimed that the bill enjoys the support of 75 senators, which is above the 66 votes required for it to be passed. It is still unclear whether the bill will be given a vote, what position the Senate majority leader Mitch McConnell will take on it, or whether Trump will veto it. It is obvious, however, that Trump risks a conflict with a number of his own party’s members in Congress, unless he is able to quickly show progress with Putin, including in Saturday’s telephone call.

Russia's reaction 

Officially, the Kremlin denies that sanctions have had a critical impact on the Russian economy or that prospects for their removal are an important incentive to seek compromise on its security interests. It says, however, that it would certainly welcome the removal as a gesture of goodwill. Our view is, nevertheless, that it will be celebrated in the Kremlin which will remove the Russian food embargo in return. Some lobbyists for the agricultural sector in the State Duma are already brainstorming what the legislature could do help local farmers if they are again forced to compete against imports.

We believe that the Kremlin realises that it has gone too far in its confrontation with the West and its self-isolation. This was reflected in how active Russia was, until recently, in negotiations with Japan over the peace agreement and the South Kuril Islands: very important concessions have had been allegedly under close consideration. The negotiations were frozen after Trump’s surprise victory.

As the Russian economy seems to have begun its recovery from the recession of the past two and a half years and the government is working on measures to improve the investment climate, the lifting of sanctions will definitely boost foreign investment in Russia. This is long awaited by Russian companies, including the state-owned ones, and by American and European businesses active in the country.

What if?

What if Trump’s hands are indeed tied by the Senate, or he decides not to risk confrontation with the legislators, or he is not inspired by Saturday’s call with Putin, or simply that the rumours are wrong? We still believe that Trump will seek reconciliation with Russia, even if at a more evolutionary pace. Rex Tillerson, if confirmed as Secretary of State, will probably not turn into a Russia hawk from his former businessman persona in which he signed large deals with Rosneft. If, as expected, John Heffern, a former ambassador to Armenia (2011 to 2014) is appointed to Moscow, the daily routine between the Department of State and the Russian Ministry of Foreign Affairs will likely become more pragmatic. Most importantly, the US will stop pressuring the EU, where support for Russian sanctions is quickly deteriorating, to keep them.

If, as predicted, presidential elections in France and early parliamentary elections in Italy (which have not yet been scheduled) result in victories for candidates and parties critical of the sanctions and calling for normalisation of Europe’s relations with Russia (such as François Fillon), unilateral support for sanctions renewal will erode. The economic sanctions then could be revoked in December 2017, if not in July (the second round of French elections, if required, will take place on 7 May).

How long the US economic sanctions remain in place then, will depend on the dynamics in US-Russian relations, but it is hard to imagine US companies not putting significant pressure on both the White House and Congress, if the US government does not follow suit soon.. By: Oleg Babinov, Director, Head of Business Intelligence & Investigations, Russia, Eastern Europe & Eurasia

Image: President Donald Trump signs executive order, January 24 2017, Shawn Thew, DPA, Press Association Images 

Oleg Babinov
Author: Oleg Babinov
27th January 2017
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