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For Trump and Putin, Sanctions Are a Setback Both Sought to Avoid

Throughout 2016, both Donald J. Trump and President Vladimir V. Putin complained that American-led sanctions against Russia were the biggest irritant in the plummeting relations between the two superpowers. And the current investigations, which have cast a shadow over Mr. Trump's first six months in office, have focused on whether a series of contacts between Mr. Trump's inner circle and Russians were partly about constructing deals to get those penalties lifted.

Now it is clear that those sanctions not only are staying in place, but are about to be modestly expanded – exactly the outcome the two presidents sought to avoid.

How that happened is a story of two global leaders overplaying their hands.

Mr. Putin is beginning to pay a price for what John O. Brennan, the former C.I.A. director, described last week as the Russian president's fateful decision last summer to try to use stolen computer data to support Mr. Trump's candidacy. For his part, Mr. Trump ignited the movement in Congress by repeatedly casting doubt on that intelligence finding, then fueled it by confirming revelation after revelation about previously denied contacts between his inner circle and a parade of Russians.

If approved by Congress this week, Mr. Trump has little choice, his aides acknowledge, but to sign the toughened sanctions legislation that he desperately wanted to see defeated.

Just days ago, Secretary of State Rex W. Tillerson and other top officials were lobbying fiercely to preserve Mr. Trump's right to waive Russia sanctions with a stroke of the pen – just as President Barack Obama was able to do when, in negotiations with Iran, he dangled the relaxation of sanctions to coax Tehran to agree to sharp, decade-long limits on its nuclear activity.

As one of Mr. Trump's aides pointed out last week, there is a long history of granting presidents that negotiating leverage when dealing with foreign adversaries.

But by constantly casting doubt on intelligence that the Kremlin was behind an effort to manipulate last year's presidential election, Mr. Trump so unnerved members of his own party that even they saw a need to curb his ability to lift those sanctions unilaterally.

On Sunday, Mr. Trump's new communications director, Anthony Scaramucci, repeated the White House position that Mr. Trump remains unconvinced by the evidence Russia was the culprit behind the election hacking. He said that when the subject comes up, Mr. Trump cannot separate the intelligence findings from his emotional sense that the issue is being used to cast doubt on his legitimacy as president.

"It actually in his mind, what are you guys suggesting?" Mr. Scaramucci said on CNN's "State of the Union." "You're going to delegitimize his victory?"

If so, Mr. Trump is the only one with access to the best intelligence on the issue who still harbors those doubts.

Last week at the Aspen Security Forum, four of his top intelligence and national security officials – including Mike Pompeo, the C.I.A. director – said they were absolutely convinced that the Russians were behind the effort to influence the election.

"There is no dissent," Dan Coats, the director of national intelligence, said on Friday at the Aspen conference. The Russians, he said, "caught us just a little bit asleep in terms of capabilities" the Kremlin could bring to bear to influence elections here, in France and Germany. The Russians' goal was clear, he said: "They are trying to undermine Western democracy."

The wording of the legislation agreed to by House and Senate conferees over the weekend indicates that many Republicans agree with the intelligence assessment: For the first time, it imposes penalties, though not very onerous ones, on anyone determined by the United States government to have participated in the election hacking.

But when Mr. Trump met Mr. Putin in Hamburg, Germany, two weeks ago, he did not utter similar suspicions, at least in public. In fact, he emerged to tell his aides that the Russian president had offered a compelling rejoinder: Moscow's cyberoperators are so good at covert computer-network operations that if they had dipped into the Democratic National Committee's systems, they would not have been caught.

And on Sunday, Mr. Trump made it clear again that regardless of statements by Mr. Pompeo and Mr. Coats, the entire issue is a political concoction.

"As the phony Russian Witch Hunt continues, two groups are laughing at this excuse for a lost election taking hold, Democrats and Russians!" he tweeted. A few minutes later, perhaps with the sanctions bill in mind, he added: "It's very sad that Republicans, even some that were carried over the line on my back, do very little to protect their President."

Mr. Putin's decision sometime early last summer appears to have been to turn a familiar Russian surveillance operation of the American political campaign into "active measures," releasing information that Russia hoped would harm the candidacy of Hillary Clinton. It succeeded in its immediate goal, disrupting the election and casting doubt on the integrity of the American voting process.

But with the new sanctions, it now also appears to have set back his long-term strategy: to get out from under a sanctions regime that, along with low oil prices, has stunted his country's economy.

Russia has stumbled along at barely 1 percent growth, and the new sanctions, while hardly draconian, will not ease its pain.

Chris Weafer, a senior partner at Macro-Advisory, which works with international investors on Russia, said the new American sanctions legislation was "much weaker" than originally proposed and raised no new serious hurdles for the Russian economy. But he added that it would further damage perceptions of Russia's prospects and curb badly needed Western investment by "reminding investors about Russia risk" and by prompting countersanctions by Moscow.

"If this legislation is passed, you can definitely expect a Russian reaction," he said.

Whether Russia can easily ride out a new round of sanctions is far from certain, especially at a time when companies and banks that racked up debts in the West before 2014 are now facing payment deadlines that will become increasingly difficult to meet because of credit restrictions on Russian entities under sanctions.

The proposed new measures could also expand the number of Russian companies that are affected by credit and other restrictions. They bar American entities from doing business with any company in which a Russian individual or company under a previous sanction owns more than a 33 percent stake. This could make Western banks far more wary of lending money to Russian companies in general as the exact ownership of many of these is often unclear.

And then there is the provision calling for Mr. Trump to ban American investments of more than $10 million in Russian privatization efforts. That could put a damper on an already stalled drive by Russia to raise money by selling off some of its assets.

Another Russian project that could suffer is Nord Stream 2, a new pipeline that would significantly increase the amount of Russian natural gas delivered to Germany and other parts of Europe. Russian state television dismissed any American moves against Nord Stream as a transparent attempt to boost the sale of American liquefied natural gas to Europe at the expense of Russian energy sales.

It will be a year or more before the effects of the new sanctions will be clear – and by then, there may well be new turns in the relationship with Moscow.

But this much is clear: The rapprochement that Mr. Trump talked about on the campaign trail is now further away than it was a year ago this month, when Mr. Trump first called on Russia, jokingly he insisted later, to hack into Mrs. Clinton's email account and publish whatever it found.

[Source: By David E. Sanger, The New York Times, Washington, 23Jul17]

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