January 2017

By Norman Rozenberg

At no time in the last two years has the future of sanctions policy towards Russia over Ukraine been more uncertain. The transatlantic economic sanctions regime that has dominated American and European relations with Russia since 2014 is under scrutiny as a new president enters the White House and unanimous support among Europeans is waning. Political change in both the United States and the European Union is driving a new time of uncertainty.

Recent accounts of the Russian government’s alleged involvement in the Democratic National Committee (DNC) hacks and document leaks have added additional complications to this evolving situation. According to the U.S. intelligence community, the level and scope of the alleged DNC hack and document leaks to websites such as WikiLeaks could only be attributed to the Russian government. In response, Members of Congress are currently deliberating a new round of sanctions beyond those signed by President Obama, including the ejection of 35 Russian diplomats from the country. If Congress were to pass a new sanctions bill against Russia, many of the previous executive orders by the Obama administration would be made permanent.

Economic and travel sanctions were first instituted in 2014 by the Obama administration and the E.U. after Russia annexed the Crimea peninsula of Ukraine on the Black Sea and publicly supported separatists in Eastern Ukraine. These sanctions included both visa bans against top Russian officials and restrictive measures against the country’s top banks. The most damaging of these measures severely restricted access to dollar funding for Russian banks and gas companies. Major gas producers such as Novatek have had to postpone infrastructure projects due to difficulties securing funding from foreign investors dissuaded by the sanctions. Sanctions have had an impact.

In the U.S. to date, there has been bipartisan consensus among lawmakers in Congress that sanctions were a necessary tool to pressure Russia into de-escalating the situation in Ukraine and by respecting the Minsk Protocol that called for a ceasefire in Eastern Ukraine. Indeed, the House of Representatives passed a strongly-worded resolution in 2015 in support of President Obama’s sanctions policy, while Republican Senators such as John McCain and Bob Corker called for even tougher measures, including arming Ukraine with lethal weapons.  

In Europe, policy makers have instituted tactics such as asset freezes and visa bans designed to impact Russian business interests in London and other key global financial centers. For their part, while the Europeans have viewed sanctions as a means to pressure Russia to come to the negotiating table, Russian countersanctions and deteriorating relations have cast doubt on the potential for such an outcome. Concurrently, European politicians have expressed strong support for a unified Trans-Atlantic partnership for working with Russia to find a solution to the crisis. But with the failure of a ceasefire that was promised in both iterations of the Minsk Protocols and no progress on a solution for Crimea, the chorus of arguments against sanctions policy has since grown louder for some lawmakers and pundits, particularly in Europe. 

In this context, the shaky ground that the current sanctions regime stands on is fast coming under increased pressure. With no clear solution, decision-makers on both sides of the Atlantic are increasingly calling for new approaches. U.S. President-elect Donald Trump, as well as his newly appointed national security advisor Michael Flynn, have expressed a desire to work with counterparts in the Kremlin to address Ukraine and have called for closer ties between the U.S. and Russia.

Furthermore, while respected area experts such as Andrew Wood and David Kramer have argued in favor of a strong sanctions regime, others have been far more skeptical that such punitive measures are alone capable of either de-escalating the conflict or bringing Russia to the negotiating table. As sanctions seem to have had little effect on Russia’s interest in working with the West, dissenting opinions have grown and strengthened. Those such as Eugene Rumer has criticized the Obama administration for not engaging with Russian President Putin or his inner circle. Instead of tougher sanctions, they call for deeper engagement with Russia and a continuing dialogue aimed at addressing Ukraine.

Elements of realpolitik have also entered the equation. A number of E.U. member states rely heavily on trade with Russia, such as France, Italy, Hungary, and Slovakia. Western sanctions and Russian counter-sanctions have negatively impacted trade relations with these countries where some have lost an important export market for their manufactured goods and agricultural products. While Russians can go without brie, French farmers rely heavily on these exports to survive.

In the U.S., despite seemingly strong bipartisan Congressional support, sanctions policy is in danger of unraveling in favor of potential alternative approaches, however limited those options may appear to exist. American sanctions are authorized by an executive order signed by President Obama, which the new U.S. president could undo with the stroke of a pen. If Mr. Trump cannot be convinced by members of the Republican Party or his own cabinet to maintain the sanctions regime, similar European measures may also become vulnerable. The E.U. votes on whether or not to extend their sanctions policies every six months. If it is looking to the U.S. for leadership in this area, the E.U. may find itself wanting and not be able to obtain the unanimous votes needed, leaving the sanctions to expire.

This situation has led politicians on both sides of the Atlantic to question just how effective sanctions policy has been. The problem, however, is that politicians seem to be left with only two options: maintaining sanctions on Russia; or looking for an alternative option that may result in the removal of the measures. While Mr. Trump has expressed interest in the latter, the Republican-dominated Congress has held steadfast on sanctions. Most recently, Mr. Trump’s nominee for Secretary of State Rex Tillerson told the Senate Foreign Relations Committee that he believed sanctions on Russia would continue until the new administration decided its position on the subject. Further, with Senator McCain’s recent visit to Ukraine, some see a political battle brewing between the president and Congressional leadership.

The coming weeks will be crucial for sanctions policy as a new U.S. administration enters the White House and signals to the world what its next steps will be in addressing the Ukraine crisis and sanctions levied against Russia.