A maximum pressure campaign against the Kremlin

A maximum pressure campaign against the Kremlin
© Getty Images

Kremlin decisions worldwide continue to vex members of Congress. Release of the Mueller report confirms Russian “active measures” directed at the 2016 U.S. election. Draconian sanctions targeting Russia’s energy, manufacturing and financial sectors have been sponsored by Democrats and Republicans — notably the Defending American Security from Kremlin Aggression Act (DASKAA) and the Defending Elections from Threats by Establishing Redlines Act (DETER) — to dictate U.S. tactics in what the Trump administration’s National Security Strategy has identified as the return of great power conflict.

Judging from the actual record since 2014, these legislative proposals, if enacted, would harm U.S. companies, further alienate EU allies, and fail to change Kremlin decision-making.

ADVERTISEMENT

The hard truth is the simultaneous existence of a global economy and great power rivalry entail a fundamental contradiction. Global commerce and global supply chains co-exist with strategic competition among sovereign nation-states. While tensions grow between the U.S. and EU. vis a vis Russia, respective commercial ties provide great value to legitimate commerce among them.

Since 2014, Russia under Putin’s Kremlin has annexed Crimea, managed hybrid warfare elsewhere in Ukraine, and attempted electoral subversion in the U.S. and EU nations. The U.S. — and to a much greater degree EU companies — continue to conduct enterprise in Russia in multiple sectors. NASA-Russia space station cooperation continues. 

The Obama administration implemented “targeted, scalable, and reversible” economic sanctions in concert with the EU, as coercive diplomatic pressure to change Kremlin decision-making to no avail. 

In response to President TrumpDonald John TrumpJulián Castro: It's time for House Democrats to 'do something' about Trump Warren: Congress is 'complicit' with Trump 'by failing to act' Sanders to join teachers, auto workers striking in Midwest MORE’s posture towards Putin, Congress — by veto-proof majorities in the House and Senate — codified, extended, and claimed authority over the conduct of Russia sanctions in 2017 passing Countering America’s Adversaries through Sanctions Act outside of regular order.

There has been no alteration in Russian conduct globally.

The Russia-related findings, in the Mueller report, have increased the political warrant for more sanctions. The draconian, unilateral and extraterritorial sanctions mandated in DASKAA and DETER — the Iran model — are modeled on the accumulation of sanctions now being re-applied to Iran to exert “maximum pressure.”  

Russia is not Iran. Russia is a member of the World Trade Organization — its hydrocarbon, financial, and manufacturing sectors are globally integrated. There is no evidence to indicate that more unilateral sectoral sanctions applied extraterritorially will change Kremlin calculations.  

In fact, abjuring the multilateral Russia sanctions coordination achieved between the U.S. and the EU in 2014, coincident with U.S. “maximum pressure” on Iran may well buttress Russia’s cash flow from oil exports and exacerbate U.S.-EU divisions.

Regarding coercive tactics, Congress has another way forward. The Magnitsky Act, which was signed into law in 2012 as part of normalizing trade relations with Russia for WTO accession and made global in 2016. This law authorizes Treasury to sanction foreign government individuals for human rights abuses by seizing their assets in the U.S. and denying them use of the U.S. banking system and travel visas. Congress, however, has yet to address the elephant in this space: the formation of anonymous shell companies in the U.S. 

The multilateral Financial Action Task Force (FATF) has criticized the U.S. for failing to require appropriate transparency regarding beneficial ownership. Pursuant to the Bank Secrecy Act, Treasury’s Financial Crimes Enforcement Network (FinCEN) requires U.S. financial institutions to ascertain corporate ownership. But Congress has yet to legislate that ownership information be disclosed at the time of corporate formation or ownership transfer.

Rather than restraining trade to the collateral damage of U.S. companies and their employees, Congress should enable Treasury to follow the money. In 2015, Treasury estimated that $300 billion a year is laundered in the U.S. Since most EU countries already require disclosure of beneficial ownership, veto-proof passage of beneficial ownership legislation, coupled with Global Magnitsky and close coordination with the EU and other allies, would yield real “maximum pressure” tailored to the deciders in the Kremlin. 

Richard Sawaya is vice president of the National Foreign Trade Council.