Friday, May 18, 2018

Russia Slaps US, Europe with Counter-Sanctions

I'm reposting this article by Paul Goncharoff, an American businessman who has lived and worked in Russia for decades, first published by

The good book tells us “let he who is without sin cast the first stone”. Then it follows that Washington and its co-sanctioning colleagues among EU and NATO countries must surely be purer than freshly fallen virgin snow, and free to pelt Russia with all the stones they wish, including the first one.

One of Russia's Latest Electric Locomotives
In the beginning, the west’s trade punishments took the form of travel bans and asset freezes, then they were  strengthened to restrict borrowing and access to U.S. technology (for Russian government-controlled companies) and made it very difficult if not impossible for some of Russia’s businesses to trade with the United States. Given the current western political climate some Russian companies fully expect to be hit with still more rounds of sanctions. In the words of one Moscow CEO who commented on Washington’s position, “When poorly thought through ideas becomes standardized, the inertia of bad policies persists and keeps growing with a mind of its own”.

This past January saw the U.S. Treasury Department naming several Russian businesspersons in a so-called “oligarchs’ list”. It would seem that any Russian who makes it onto the Forbes list is an “Oligarch”, deeply steeped in the miasma of imputed corruption, and not just a successful businessperson with achievements in a challenging environment.

Since then Washington has called for additional sanctions, probably just to keep in practice with this fashionable “diplomatic tool” that is all the rage these past several political seasons.

Back then President Putin had some comments; “It is, of course, an unfriendly act. It will complicate the difficult situation Russian-American relations are already in, and of course harm international relations as a whole.”
He went on to say it was “stupid” to lump Russia together with North Korea and Iran, while at the same time asking Moscow to help broker a peace deal on the Korean peninsula, or help destroy ISIS. Nonetheless, he said he wanted to improve ties with the United States and would refrain from any immediate retaliation.

He concluded by saying; “I will not hide it, we are ready to take retaliatory steps, serious ones, which would have reduced our relations to zero, but for now, we will refrain from these steps. But we will carefully watch how the situation develops.”

The situation and pressures have only ratcheted up with increased tempo since this winter. May 17th the Russian Parliament (State Duma) adopted in its second reading a draft law on counter-sanctions to those imposed by the US and other foreign states “that commit unfriendly acts against the Russian Federation”.

The third reading of the draft law on counter-sanctions will take place next week and its subsequent final adoption is expected on May 22.

In the current proposed bill, six points have been selected which have allowed influence by the United States and other foreign states in the internal affairs of the Russian Federation. Measures are being considered on how best to address these areas of activity:
  1. Stop or suspend international cooperation with unfriendly foreign states, as well as organizations directly or indirectly under the jurisdiction or influence of unfriendly countries.
  2. Impose a ban or restrict the import of products or raw materials by organizations that are under the direct or indirect jurisdiction of unfriendly foreign states.
  3. Impose a ban or restrict the export of products or raw materials by organizations that are under the direct or indirect jurisdiction of unfriendly foreign states.
  4. Prohibit or restrict organizations under the direct or indirect jurisdiction of unfriendly foreign states to participate in state public procurements.
  5. Prohibit or restrict organizations under the direct or indirect jurisdiction of unfriendly foreign states to participate in privatization.
  6. The president of the Russian Federation has the right to take “other measures” as he sees fit.

One of the sticking points was if an entity’s “foreign participation” were directly or indirectly more than 25% controlled by American or other unfriendly foreign interests then they would be banned from international cooperation, participation in privatization and public procurement. By the time this second reading took place this point was eased back to read simply “directly or indirectly controlled” by unfriendly countries.

So here we are, descending from “good business partners” to “unfriendly countries”, what is the endgame, who wins? And what? The only immediate beneficiaries of this tit for tat sanctioning and then counter-sanctioning are the international law firms in the relevant capital cities billing clients to unravel this escalating hairball.

These new counter-sanctions ideas are mild when compared to those already arrayed against Russia. It looks like diplomatic and political “restraint” accurately describe Russia’s position even now after the many successive sanctioning regimes imposed against them. The question remains, for how long will forbearance, responsible diplomacy and restraint last? With Russia patience is not an endless quality.

It might be worth everyone’s time and effort to dial back a bit, take a breath, and reassess calmly outside of the newsy political noise. Have sanctions produced positive effects for Europe? For Washington? Perhaps Washington, London and Brussels should try presenting Russia a “Reset” button again instead of throwing stones. This time the reset button should be correctly labelled, and not spell “overload” yet again in Russian…. the line between tragedy and farce is often a thin one.

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