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US Sanctions against Russia: The Forecast for 2018

Ivan Timofeev

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It must be clear that the letter and spirit of PL 115-44 define Russia in legislative terms as an adversary to the United States, which should be actively opposed and subjected to a comprehensive pressure. In fact, PL 115-44 sets the framework for US policies with regard to the Russian Federation, which to a great extent obviates opportunities for partnership and constructive cooperation. Russia should have no illusions about a reversal of course in the near future. We must also avoid underestimating the efficiency of the tools to pressure us. These trends need to be thoroughly analyzed and monitored.

So, the executive authorities will submit at least seven reports to Congress in 2018, which can be divided into three groups.

The first group includes reports drawn up mostly by the US Department of the Treasury. The U.S. Treasury is the key, if not the only, sanctions policy tool. Congress instructs the U.S. Treasury to work closely with the CIA, the Department of State and other agencies whose data may significantly expand capabilities of financial intelligence. The most expected document in this group is a report on Russian oligarchs and parastatal entities to be prepared by February 2018 and which contains a list of senior Russian political figures as well as oligarchs and entrepreneurs close to the “Russian regime.” Congress wants the submission of an assessment of the relationship between the said individuals and President Vladimir Putin or other members of the Russian ruling elite and an identification of any indices of corruption with respect to those individuals. The report should also include the estimated net worth and known sources of income of those individuals and their family members, including assets, investments, other business interests, and relevant beneficial ownership information and an identification of the non-Russian business affiliation of those individuals.

But being included in the report does not automatically mean that individuals or entities will face sanctions. Nevertheless, the Act unambiguously indicates that the report is a mechanism for their expansion. At least it is required to assess the potential impacts of imposing secondary sanctions with respect to Russian oligarchs, Russian state-owned enterprises, and Russian parastatal entities, including impacts on the entities themselves and on the economy of the Russian Federation, as well as on the economies of the United States and allies of the United States.

In theory, the report may include an unlimited number of Russian individuals and entities. But the algorithm and methodology of its compilation within so brief a timeframe is still a big question. It requires processing a huge amount of information, since, in fact, the case in point is Russia’s entire public sector. This significantly increases the risk of erroneous assessments, which may later affect the United States itself. In theory, the Americans may also choose to present a compact report that will include what they think are the most anti-Western figures. But one nicety involved is that the Act’s current wording does not imply that the report should be constantly updated and therefore the anti-Russia lobby can do what it will to expand the lists as much as possible.

The next report is to appear in February as well. It concerns opportunities for expanding sanctions against individuals or entities blacklisted by the Department of the Treasury under Presidential Executive Order No. 13662, which made it possible to impose sanctions to counteract Russian policies in Ukraine. The fine point is that the executive order imposed sanctions against Russia’s financial and energy sectors, while PL 115-44 added railways to the list, as well as the iron-and-steel and manufacturing industries. For the time being, the report is not to be expanded.

Unlike the previous two, the next report will require a longer preparatory period – until August 2018 – and is to be updated annually until 2021 (but there is nothing to prevent the timeframe from being extended). The report will concern any illicit financial transactions related to the Russian Federation or Russian nationals. It will contain data on specific violations, results of investigative actions, and outreach to the private sector to prevent these kinds of activities. Inclusion in the report involves criminal prosecution.

Importantly, it should disclose the outcome of US agencies’ cooperation with their counterparts in the EU and other countries. In other words, it internationalizes US practices. The report is also a mechanism for finding loopholes in law enforcement with regard to anti-Russia sanctions and has to include trouble-shooting proposals.

The next group is covered by the subtitle, Countering Russian Influence in Europe and Eurasia. The Act makes it incumbent on the US government to act as a protector of the sovereignty and security of all Eurasian countries that are or may become “victims” of Russian influence. The Department of State is the key agency responsible for this group. Policies in this area imply the broad use of soft power based on NGOs in the US and Eurasian countries (the Act lists some of these). The appropriations for these purposes in 2018 will add up to $250,000,000, a considerable sum given that it will be largely used for ideological and educational work rather than for infrastructure. At first glance, the money is spread across a wide spectrum of objectives and countries, such as protection of electoral infrastructure, the fight against corruption, legislative improvements, aid to NGOs and the media, and opposition to “propaganda.” However, given the low cost of these measures and their focus on countering Russia, they will become a serious source of pressure. At least this sum is much greater than Russia’s own “soft power” expenses. What’s more, Russian institutions are addressing the entire international agenda, while the West (let alone opposition to it) is not the first, nor the only target of its efforts.

PL 115-04 makes it incumbent on the State Department to report to Congress annually, including its performance, spending efficiency, and results. A separate report will cover cooperation with foreign entities and their contribution. In other words, the Americans expect that their spending should be reinforced by that of their allies in the EU and other countries. The report is due to be submitted on April 1.

The next two reports also need to be submitted annually by the US President.

The first is on the media organizations controlled and funded by the government of the Russian Federation. It is also a black list of sorts involving at least reputation effects and due to stigmatize both Russian media proper and those supported by Russia in some or other form.

The other concerns Russian Federation influence on elections in Europe and Eurasia. This is important as a tool for internationalizing the American approach to supposed Russian “electoral interference.” Unlike the United States, people in Europe and elsewhere are more or less skeptical of the US position. The annual report will make it possible to perpetuate the focus on this subject by aggregating events of any importance and prodding the related Western discourse towards the US stance.

Finally, yet another report is linked to a law on Ukrainian and other countries’ energy security interpreted as reduced reliance on Russian distribution or any ties with Russia. It is speaking about facilitation of Ukrainian energy sector reforms, the sector’s liberalization, enhanced efficiency, etc. But in the same breath it mentions counteraction to Russian energy projects (Nord Stream, etc.) and what it calls “Russian aggression.” It also says directly that the US policy should be aimed at promoting US energy exports to Europe, among other things, to create jobs in the United States. (This means that the Americans are using this political tool in market rivalry.) The Secretary of State is to report on the implementation of the Ukraine Freedom Support Act and on achievements in this area in February, with subsequent updates to be submitted every six months.

The bottom line is that PL 115-04 prescribes a specific bureaucratic procedure and narrative that will largely define US policy with regard to Russia in 2018 and thereafter. There will be at least seven reports submitted next year, each of which will most likely provide a pretext for the further alienation of Russia and the United States from each other. Russia needs a well-considered policy of clever actions that will make it possible to control confrontation, minimize damage, and retain foreign policy initiative.

First published in Valdai Discussion Club

RIAC Director of Programs, RIAC Member, Head of "Contemporary State" program at Valdai Discussion Club, RIAC member.

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Is Israel Taking Advantage of a Longtime Strategic Partner for Russia?

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In February, Israeli Prime Minister, Benjamin Netanyahu met with his Russian counterpart, President Vladimir Putin. In what can only be described as a bravado attempt to flaunt the strength of the ties between the two countries, Netanyahu pointed out that, “tourism is at an all-time high, with 400,000 Russians visiting Israel every year and about 200,000 Israelis visiting Moscow every year,” adding that, “(he has) the honor to contribute somewhat to this statistic.” The first part of that statement is accurate; yet, the latter part is far from the truth. Russo-Israeli relations had been improving for decades before Netanyahu entered the Israeli political scene.

Primakov’s Mission: Laying the Foundations for Russo-Israeli Relations

The “founder” of improving Russo-Israeli relations, Yevgeny Primakov, made a point (almost a mission) of maintaining some type of relationship between the two countries. Since the 1967 Arab-Israeli War all the way up to the latter years of Secretary General Mikhail Gorbachev’s leadership, Moscow officially considered Israel a “pariah state.” However, in the 1970s, during the “Brezhnev Years,” Primakov, a Jewish-born Soviet, was a key member of Soviet delegations that held several rounds of secret talks with the Israelis (usually in hotel rooms from Vienna to Tel Aviv) despite Moscow breaking off diplomatic relations with Israel.

Following Brezhnev’s death, Primakov continued his “mission” by maintaining correspondence with his Israeli counterparts while serving in various capacities within the Soviet establishment in order to preserve communications between the two countries. When Gorbachev began his perestroika and glasnost policy, relations between the Soviet Union and Israel slowly began to improve. Gorbachev’s policies allowed Soviet Jewish “refuseniks” to immigrate to Israel, which eventually led to the resumption of diplomatic relations with Israel in October of 1991—two months before the breakup of the Soviet Union. In December of that same year, Gorbachev announced the breakup of the Soviet Union but relations between the newly formed Russian Federation and Israel continued.

The 1990s were a tough decade for the newly formed Russia. The breakup of the Soviet Union saw the end of a social, cultural, economic, and political lineage that lasted for roughly seventy years dissolve overnight, thereby sending the citizens into dearth and poverty at unimaginable levels. As a result, Russia was a very weak state and did not have much leverage in the international arena. It did not help that the Yeltsin government implemented an American-backed “shock therapy” economic policy that de-modernized the country several decades and left the vast majority of the state in calamitous conditions.

Under the Yeltsin presidency, Russia was destabilized to a high degree (some would argue that it was worse than the years of the Great Depression in the 1930s), crushing their economy. Russians often term the “Yeltsin years” or the decade following the breakup of the Soviet Union as smutnoe vremya (time of troubles), or smutnoe for short, in reference to political crises caused by tumultuous transition periods. The term was most notably used following the demise of the Rurik dynasty, which eventually saw the establishment of the Romanov dynasty. It was also used, to a lesser extent, during the years of the Russian Revolution—the transition from the Russian Empire to Soviet Russia.

Similar to the “Brezhnev years” of stagnation in the 1970s, Israel proved to be a sanctuary for many Russian Jews during this chaotic period. Russian Jews (and other Jewish citizens from former Soviet satellite states) were no exception to this smutnoe of the 1990s, and as a result, Soviet and Russian Jews chose to immigrate to Israel in large numbers.

Despite the tough economic times in Russia, the Russian political elite, which included the then-Russian Foreign Minister (and eventual Prime Minister) Yevgeny Primakov, did its best to preserve its relations with Israel, while maintaining its longstanding foreign policy principle of a two-state solution regarding the Israeli-Palestinian conflict. This was consistent with its overall foreign policy of stability in the region. In the 1990s, Russia (similar to the Gorbachev era of the Soviet Union) maintained a balanced approach when it came to the Middle East, ensuring its national interests were preserved.

The Putin Era: Advancing Interactions, Strategic Engagement, and Navigating the Palestinian Question

Relations between Israel and Russia significantly improved under Russia’s current leader, Vladimir Putin. Throughout his nineteen years in office, since being elected in 2000, President (and Prime Minister) Putin has often received many Israeli Prime Ministers along with other Israeli officials. Putin and others have also visited Israel on many occasions. Both Israeli and Russian officials often cite the size of the Jewish community in Russia and the Russian diaspora in Israel as proof of warming relations. In fact, today the Russian Jewry often claim that the community has it better under the current leader than at any other point in Russian history. And, there is a reason for that. The extent of anti-Semitism in Russia is minimal in comparison to the past. This increased acceptance is reinforced by President Putin. The Kremlin often speaks kindly of the Jewish community in Russia, and Putin has even taken it a step further by stating that Israel and Russia have common histories – namely that the two despise fascism and Nazism of any kind. In addition, the Russian Jewry now has the freedom to practice its religion with no fear of retribution today and can travel to Israel freely—a right greatly curtailed in the Soviet Union.

Despite being political rivals, President Putin, like others, sought Primakov’s advice when it came to the Middle East. Being an Arabist and an expert on the Middle East, Primakov felt (and wrote extensively) that Russia’s main challenge in the 21st century was to fight international terrorism—something that the new President agreed with (and still agrees with to this day). The President has long sought better relations with the Zionist entity as a result of his belief that one of Russia’s main national interests in the region is reducing international terrorism. President Putin believes, for better or worse, that Israel can be a strategic partner in fighting international terrorism. However, President Putin and the entire policy class also believe in a two-state solution along the 1967 borders (in reference to the land Israel captured in the 1967 Arab-Israeli War) to allow for a future Palestinian state to exist alongside Israel. Furthermore, the Russian policy class believes that state sovereignty must be respected. On the former, Israel has made little to no effort and, on the latter, Israel has consistently overstepped its bounds with regards to state sovereignty, often pushing hard enough to destabilize the region.

A policy reversal by the Israelis on the Palestinian question – that is to disengage from the West Bank and East Jerusalem, as well as fully withdrawing from Gaza – seems highly unlikely. Moreover, it also seems unlikely that Israel will cease its illegal excursions in other countries, such as what it is doing in the Syrian arena. This begs some fundamental questions: is Israel’s belligerence putting its citizens in harm’s way and, more importantly, is it risking losing Russia as a national security partner, with its fifty years of unofficial relations and twenty-plus years of official relations? If this is the case, then Israel will be putting itself in a very dangerous conundrum.

The United States, Russia, & Israel: Is it a Triangle?

It is true that Israel, for decades, has relied on the United States for military aid and moral support in the international community in times of war. However, since the fallout of Hurricane Katrina in 2005, the United States has been slowly (but surely) leaving the scene. American citizens do not want their country to be extensively engaged in the Middle East or elsewhere. They would rather the exorbitant amount of money spent on these commitments abroad be invested in improving lives of American citizens through domestic programs, like healthcare, education, and increased job security. The direct lineage between the elections of candidates Barack Obama and Donald Trump (not John McCain, Mitt Romney, or Hillary Clinton) proves this to be the case. We are seeing further evidence of this as politicians vie for control of the Democratic Party. Voices within the party are justifiably asking questions out loud that have been asked behind closed doors for years. Questions like: why is it that a foreign country receives so much financial support from the United States when many of its own citizens still struggle to survive? As a result, support for Israel in the American political scene is waning, despite the Israeli lobby’s claim. Today, only a certain portion of the Republican Party blindly supports Israel wholeheartedly. At some point, those voices will grow quieter and quieter or, at the very least, become less influential.

When America leaves the scene and becomes less influential on the international stage, Israel will be left alone. Yet, Israel can move eastward in pursuit of securing its national interests, creating a new alliance with Russia, a country that is more invested in the region today. This can be beneficial to Israel’s national security but, for that to happen, Israel will need to change its course on both the Palestinian question and its excursions in the region. The decision is a “no-brainer” given that the current course is creating an outcome where Israeli citizens are endangered from rockets as well as stabbings, shootings, and car-ramming attacks.

Russia, who seems to be invested in the region for the long haul, has been a willing partner thus far. Most recently this was evident when Russia –– in coordination with its military and the Syrians –– cooperated with Israel to help return the body of the fallen Israeli soldier, Zachary Baumel, who was killed in the 1982 “Lebanon War.” However, the Israeli establishment cannot take its Russian counterparts for granted forever. While the vast majority of the Russian policy class and President Putin still seem to want better relations with Israel and are willing to give it the benefit of the doubt, this is not guaranteed going forward. The policy class is not homogenous and some within it can override the Russian President when they deem Russia’s national interests are being jeopardized, as we saw when Russia finally decided to deliver its S300 surface-to-air missile systems to Syria. Thus, if Israel continues its confrontational activity in the region and prolongs its actions towards the Palestinians, Russia has cards at its disposal that will be unfavorable to Israel—leaving Israel isolated and weaker.

The ball is in Israel’s court. It must decide if it wants better relations with Russia or not. For the moment, the Russian policy class desires this; there is no doubt. However, at some point, Russian patience might run out. With the United States slowly leaving the scene, Israel would be wise to move closer to Russia. However, for that to happen, it needs to seriously consider changing its policy towards the Palestinians and cease its military excursions in the region. Israel should not test Russia’s resolve like it has done in the past, because the consequences for the Zionist entity could prove to be existentially dire.

First published in our partner RIAC

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Russian- Arab Cooperation Forum

Kester Kenn Klomegah

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On April 16, Moscow hosted the 5th Russian-Arab Cooperation Forum to review comprehensively its strategic goals and achievements, challenges and layout plans for the future. The Fifth Ministerial Session of the Russian-Arab Cooperation Forum, for the first time, attracted 14 ministers from the League of Arab States (LAS), and representatives from north Africa (Maghreb) and from the Arab world. It was also attended by the three foreign office representatives of the Council of the Arab League (Iraq, Sudan and Somalia), as well as Tunisia (as current Arab League Summit chair) and the Arab League Secretary General.

Foreign Minister Sergey Lavrov agreed, in an opening remarks at a news conference, to continue joint work in the interest of a Libyan settlement, supported the UN Secretary-General Special Representative in Libya Ghassan Salame’s efforts to implement the road map he developed to normalise the situation in Libya.

“We have a common goal which is to help the Libyans overcome their current differences and reach a stable agreement on national reconciliation. To this end, Russia is working with all the political forces of Libya, without exception,” he said.

“We discussed various situations in the Middle East and North Africa, including Sudan, Somalia, Yemen and Iraq. We supported the decisions adopted at the recent Arab League summit in Tunisia, the documents that capture the commitment to increase the role of the League in the region’s affairs. We strongly welcome such decisions,” the Minister added.

Lavrov further referred to the 12th session of the Russian-Arab Business Council and the 4th Arabia-Expo International Exhibition as significant events that enormously contributed to creating additional opportunities in the interest of promoting business cooperation between Russian and Arab organisations.

Earlier, Russian President Vladimir Putin sent a message of greetings to the participants and guests of the 12th session of the Russian-Arab Business Council and the 4th Arabia-EXPO International Exhibition, held from April 8 to 10.

The message reads, in part:“Over the years of its work, the Russian-Arab Business Council has fully proved its relevance and effectiveness and contributed to promoting direct dialogue and practical interaction between the business communities of Russia and the countries of the Middle East and North Africa.

The council’s energetic efforts serve to expand and diversify trade, to increase mutual investment and implement promising joint projects in the manufacturing industry and agriculture, energy and high technologies, transport and infrastructure.

Large-scale Arabia-EXPO exhibitions are an essential area of the council’s activities. They introduce the latest economic, scientific and technological achievements of the Arab states to the Russian people and offer an opportunity for entrepreneurs to exchange business proposals and innovative ideas.

I hope the current session of the council will be substantive and will make it possible to outline new forms and mechanisms for equitable cooperation, as well as to strengthen friendship and mutual understanding between our nations.”

The Russian-Arab Cooperation Forum was officially launched in 2009 with the signing of a memorandum between the Russian Federation and the Arab League. Since then it has proved its importance as a mechanism of a regular exchange of opinion and coordination of positions on major regional and international issues. 

An in-depth exchange of views were held during the meeting on the situation in the Middle East and North Africa, particular attention was paid to coordinating practical steps to further enhance the whole range of relations between Russia and Arab countries, primarily trade and economic relations, investment, culture, education and people-to-people ties. At the end of the Forum, a joint declaration adopted as well as an action plan to implement the principles, objectives and tasks of Russian-Arab cooperation for 2019-2021.

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The Results of the Azerbaijan- Russia Industrial Cooperation Forum

Asim Suleymanov

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On April 4, the Azerbaijan-Russia Industrial Cooperation Forum was held in Baku with the participation of representatives of relevant government agencies and entrepreneurs. Speaking at the forum, Azerbaijan’s Minister of Economy Shahin Mustafayev noted that the political will and joint efforts of the presidents of Azerbaijan and Russia laid a solid foundation for expanding economic cooperation between two countries. The relations between Azerbaijan and Russia, which are developing in all areas, are at a strategic level.

Within the framework of the forum, three Russian companies – Rostselmash, Transmashholding and Service Invest – signed the cooperation agreements with Azerbaijani partners. State Duma Deputy Dmitry Savelyev, commenting on the results of the event, noted that Russia and Azerbaijan had obviously moved from the initial steps in building economic partnership to a normal working process.
The result is visible to the naked eye: last year’s trade turnover amounted to $ 2.5 billion, exceeding the figure for 2017 by 19%. It shows the great interest of companies in joint projects.

According to the parliamentarian the countries have long-term successful experience in opening joint ventures in the industrial sector, and not only in the oil and gas sector. Industrial cooperation is developing at full speed.
The real examples of mutual investment were the SOCAR Polymer project, the construction of a pharmaceutical enterprise in the Pirallahi industrial park, and the cooperation of the Ganja car plant with the Russian enterprises KamAZ and Ural. A service center that would make maintenance and repair of Mi helicopters in Azerbaijan is supposed to be opened.

Moreover, at this stage of cooperation we can talk about readiness for cooperation in the international arena. The Ministry of Industry and Trade of Russia and the Russian Export Center (REC) are launching the Unified Export Support System. Regional hubs will be formed in 19 countries (including China, Turkey, Germany, Vietnam, Uzbekistan and Singapore).

Moreover, the creation of joint assembly plants considers promising point of economic growth. Such a joint project will expand the market for engineering represented by Middle East and Southeast Asia countries. An important role in this regard should be played by agreements at the level of state corporations.

“This year, President Ilham Aliyev signed a decree establishing the Azercelli company. This company will be engaged in the development of the non-oil sector, the production of defense and import-substituting industrial products. In cooperation with Rostec that is among the ten largest industrial corporations in the world in terms of revenues Azercelli can begin its expansion into the huge markets in Africa and the Middle East.”

The long-term friendly relations of two states, based on good-neighborliness and taking into account the national interests of a partner, the Russian parliamentarian considers the main trump card in the joint entry into international markets. “If there is a conflict of interests in some areas of activity, then in order to pass events like the Russian-Azerbaijani forum of industrial cooperation, where both parties can always sit at the negotiating table and find mutually acceptable solutions, as was done throughout the history of the relations.

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