Congress must face reality in exposing Russian aggression

The shakeup of members of the new Congress provides an opportunity for changing United States foreign policy. After two years of criticizing much of what the Trump administration has done, Congress has tools at its disposal to push back or alter course. On Russia, House Democrats are likely to pursue a much tougher course, writing new sanctions legislation to target foreign adventurism and interference. To be effective, however, they will need to keep in mind three broad issues of oligarchs, sovereign debt, and operational resources needed to underwrite their efforts.

To start, Democrats need to maintain perspective on what sanctions on Russian oligarchs can and cannot accomplish. The Trump administration already delivered a serious blow to Russian elites and their business interest when it sanctioned Oleg Deripaska and his corporations. The Treasury Department identified an extremely wealthy individual engaged in illicit and threatening conduct, believed to be close to Vladimir Putin, and imposed the toughest financial tools at its disposal. Thus, Deripaska has entered a tortured process to wind down control of those enterprises. He and his money have become toxic assets for other global companies, a status that other wealthy and influential Russians would like to avoid.

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However, the treatment of Deripaska has not changed the calculus for Putin or his aggressive approach to the United States and his neighbors. The Minsk agreements are no closer to fulfillment and Russia has only increased aggression against Ukraine. Moscow still supports allies such as Bashar Assad. The lesson here is that while oligarch sanctions can inconvenience members of the Russian elite, their complaints about their treatment at the hands of the United States fall on deaf ears in the Kremlin. In their interests, Russians who did what they were told in order to operate lucrative businesses have neither the inclination nor the leverage to push back on the policies and priorities of the Kremlin.

Next, there are strong indications that on sanctions, Congress will include bans on transactions around the issuance of new Russian debt, further restricting the ability of Moscow to raise money. House Democrats should be aware, however, that the impacts of such a move will be muted. Russia has faced economic coercion from the United States for the past four years, and over that time Moscow has worked to insulate itself from such measures. Foreign borrowing and government spending are winding down along with the deficit. Russia does not need to raise as much money abroad and is therefore less vulnerable to limits on this activity.

Additionally, thanks in significant part to the Trump administration launching a maximum pressure campaign against Iran, oil prices are relatively strong relative to the lows experienced in 2014 when sanctions were first imposed on Russia. That made for a double hit to Russia. Now however, stronger oil prices mean that Russia has an important revenue source, an insulation against sanctions from the United States. House Democrats need to manage expectations about how much the Russian economy will actually stumble because of a move against sovereign debt.

Finally, efforts to inflict sanctions pain on Russia in the short term should not ignore the importance of pursuing fixes to serious finance related national security vulnerabilities in the long term. Congress has debated, but has so far failed to pass, regulations improving financial transparency, especially to stamp out an epidemic of anonymous corporations. These filing loopholes have been, and will continue to be, exploited by our adversaries, including Russian individuals and entities that have parked money, some of it ill gotten and criminally invested, in this country.

The new Congress could breathe new life into requirements around the collection and dissemination to law enforcement of beneficial ownership information for all corporate entities formed in the United States. Such a database would allow law enforcement to better track dirty money flowing through domestic banks. Such a law would make it harder for a wide variety of criminal actors to hide illicit proceeds in the United States.

House Democrats can also lead in conducting oversight to help preserve the effectiveness of the various executive agencies charged with fighting illicit finance. The Treasury Department, notably the Office of Foreign Assets Controls and the Financial Crimes Enforcement Network, are the premier bodies for the exercise of economic coercion and fighting illicit finance. However, these federal agencies are overstretched by growing obligations around implementation and enforcement of sanctions. Our members of Congress should appropriate more resources to staff these critical agencies to ensure operational readiness and capacity to support some of the most important operations of United States foreign policy.

The next Congress will have an important role to play in exposing and targeting Russian aggression. But members must balance their desire to push back on the full range of Russian malign activities with a sense of realism about what can be accomplished and the necessary resources.

Elizabeth Rosenberg is a senior fellow and director of the Energy, Economics, and Security Program at the Center for a New American Security. Neil Bhatiya as a research associate in the Energy, Economics, and Security Program at the Center for a New American Security.