U.S., Russia: New Sanctions Against Moscow Impede Efforts to Improve Relations

4 MINS READAug 9, 2018 | 21:30 GMT

What Happened

Despite efforts by U.S. President Donald Trump to improve relations with Russia, Washington's economic pressure on Moscow is only increasing. The U.S. State Department announced on Aug. 8 that the United States would be expanding sanctions against Russia after the poisoning of former Russian agent Sergei Skripal and his adult daughter, Yulia, in the United Kingdom during March. The new sanctions stem from a 1991 law known as the Chemical and Biological Weapons Control and Warfare Elimination Act, which "requires the President to make a determination with respect to whether a country has used chemical or biological weapons in violation of international law or has used lethal chemical or biological weapons against its own nationals." Though the initial deadline to enact sanctions under the law had passed, Secretary of State Mike Pompeo declared on Aug. 8 that Russia had violated the act, triggering the sanctions.

The Big Picture

In its 2018 Annual Forecast, Stratfor wrote that the United States would ramp up its pressure on Russia through a variety of means, including a heavier sanctions regime. The expansion of U.S. sanctions against Russia over the Skripal case confirms this forecast and will complicate the negotiations underway between Washington and Moscow.

What Happens Next?

The sanctions will come in two installments. The first, beginning Aug. 22, will cover U.S. exports to Russia of sensitive national-security-related goods such as calibration equipment and gas turbine engines. The second installment, which will arrive in 90 days if Russia does not provide "reliable assurances" that it will stop using chemical weapons and allow on-site United Nations inspections, includes a menu of options allowing the Trump administration to increase pressure on Russia. The options include the suspension of Aeroflot flights to the United States, the restriction of U.S. bank loans and the downgrading of diplomatic relations.

What's the Impact on Russia?

The economic impact of the sanctions on Russia will be limited, at least in the first phase. Restrictions on national-security-related imports from the United States are unlikely to have a major effect, given that previous sanctions cover most of these items. Overall trade between Russia and the United States is relatively small. In 2017, Russia imported about $12 billion in U.S. goods (mostly machinery, aircraft and autos), representing only around 5 percent of its total imports. Nevertheless, the announcement of the new sanctions caused the ruble to fall more than 4 percent in value, to more than 66 to the dollar — its lowest level since August 2016.

The second installment could have a greater impact on Russia economically, depending on how the penalties are enforced. The Trump administration has taken a softer line on sanctions implementation against Russia than Congress has required, though in April the U.S. Treasury Department did issue — albeit beyond a deadline established by Congress — the toughest sanctions against Russia to date as part of the Countering America's Adversaries Through Sanctions Act. They included restrictions on Russian officials, oligarchs and major companies, such as aluminum giant Rusal. Another key bill recently introduced in the Senate, the Defending American Security From Kremlin Aggression Act of 2018, calls for sanctions on Russian sovereign debt and energy projects. If it becomes law, it will lead to another tug of war over sanctions implementation between Congress and the Trump administration.

Further Outcomes for Russia and the U.S.

The Russian government has maintained that it had nothing to do with the poisoning of the Skripals, and Kremlin spokesman Dmitry Peskov said it was too early to "talk about any countermeasures." However, the extent of sanctions implementation will undoubtedly be a factor in the path of broader U.S.-Russian negotiations. After last month's summit between Trump and Russian President Vladimir Putin in Helsinki, the two leaders highlighted several contentious issues — including arms control and the conflict in Syria — in which progress can be made. But Trump remains highly constrained by Congress, which seeks to ramp up pressure on Russia over Moscow's meddling in U.S. elections and Russian activities abroad. This is likely to trigger a more assertive stance out of Russia in response, making any significant breakthrough in negotiations unlikely for now.

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