Saudi Arabia aims for a more Republican Washington

The diplomatic maneuvers of Russia and Ukraine on the question of a peace agreement, or at least a ceasefire, naturally raise the question of a possible lifting of Western sanctions against Russia. US officials have already made clear that Washington will lift previously imposed sanctions if the current military operation ceases.

The United States is trying to use the sanctions as an incentive to push Moscow into negotiations. The logic here is simple: the continuation of the conflict means the escalation of the sanctions, while the end of the conflict would lead to the abolition or the easing of the restrictive measures. However, this simple and logical model does not work in practice. Moscow probably doesn’t think the sanctions will be lifted or suspects they could be reimposed alongside a new set of political demands. Recent historical experience confirms these fears. Is it possible in this case to put sanctions on the agenda of the negotiations? Yes it’s possible. But such a framing of the question necessitates a discussion of the specific parameters of sanctions de-escalation, rather than abstract promises or demanding positions. In turn, the specifics involve the segmentation of the introduced restrictions into distinct components. Their cancellation can be done sequentially or simultaneously.

The key segments of the restrictive measures against Russia are:

First. Sanctions against the Central Bank, the Ministry of Finance and the National Provident Fund. Among other things, we are talking about the freezing of Russian reserves in the EU. It is possible that these funds will be transferred to Ukraine for the restoration of the armed forces and infrastructure. It should also be noted here that the freezing and the risk of confiscation affects Russian state property, as well as the assets of blocked Russian individuals and organizations, from bank and real estate accounts to yachts and football clubs. In fact, we are talking about forced seizure. Given Russia’s heavy involvement in the global economy, such a process could turn into an unprecedented expropriation of public and private property from Russia and its citizens abroad.

Second. Financial sanctions against Russian banks, infrastructure, energy and other companies. Blocking sanctions (i.e. prohibition of transactions and freezing of assets) of a number of banks and companies, bans on making dollar settlements (restriction on the use correspondent accounts in US banks) and lending restrictions stand out here. The financial sanctions include a ban on the transmission of financial messages in the interests of a number of Russian financial institutions.

Third. Block sanctions against big Russian businessmen (in Western terminology, “oligarchs”). Similar sanctions against political figures – high-ranking politicians and their family members.

Fourth. Closure of airspace, as well as refusal of lease and maintenance contracts for civil aircraft. Here, a number of countries have closed their seaports to Russian ships.

Fifth. Bans on imports of Russian fossil fuels, steel products, seafood and other products already introduced or only planned.

Sixth. Bans on investments in the Russian energy sector and other sectors of the economy.

Seventh. Restrictions on the export to Russia of a wide range of goods, including oil refining equipment, lasers, navigation equipment, certain categories of cars, computers, marine engines and many other categories of industrial and consumer goods. Separately, it is worth highlighting the export control of dual-use items, although they existed before.

Eighth. A ban on importing cash dollars and euros into Russia, as well as restrictions on opening deposits above certain amounts in some initiating countries.

Ninth. Exit from normal trade relations with Russia.

Tenth. Tightening of visa restrictions.

These measures differ in detail from country to country. For example, a ban on Russian fuel supply has already been introduced in the US, but is still under discussion in the EU. At the same time, they can be seen as general sanctions policy standards for all major initiating countries.

From an institutional point of view, the lifting of new sanctions still seems to be an achievable task. In the United States, they are enshrined in the form of executive orders and directives of the relevant departments. Despite the abundance of Russian sanctions bills in the US Congress, none of them have become law. However, two bills have already passed the House of Representatives. HR 6968 suggests the legislative suspension of Russian fossil fuel supplies to the United States, and HR 7108 suggests freezing normal trade relations. If these standards are enshrined in US law, their repeal will become virtually impossible. At best, these standards could then be suspended by presidential decree. As far as the EU is concerned, the lifting or easing of sanctions will require a unanimous decision by the Council of the EU. Differences may arise here, but they are easier to overcome than in the US Congress. In the UK, the executive has considerable leeway to change the sanctions regime. Therefore, technically, their significant reduction is quite possible. Ultimately, the lifting of sanctions is largely doable without unnecessary delay.

At the same time, even if a compromise is found between Russia and Ukraine, the sanctions may remain partially or in full for political reasons. Two key factors would lead to their eventual retention. The first is the political capital of the national leaders of the initiating countries. Imposing sanctions tends to increase political capital, while lifting them often draws criticism from the opposition. In other words, the application of sanctions unites the elites, but not their lifting. Russophobia is so pervasive today that any step back means the loss of political points. The second and most important factor is a possible attempt to extract the maximum concessions from Russia. For example, a ceasefire may be subject to additional conditions for compensation of Ukraine for damages, failure to comply with which will be grounds for maintaining sanctions. The agreements themselves may imply a certain transition period during which the parties will be required to fulfill their obligations. The experience of the Minsk agreements has shown that these obligations may simply not be fulfilled, freezing the sanctions for a long time.

Skepticism about the lifting of sanctions is also linked to existing historical experience. For example, the United States easily violated the Joint Comprehensive Plan of Action (JCPOA) concluded in 2015. It involved the lifting of sanctions against Iran in exchange for the abandonment of the military nuclear program. The “nuclear agreement” was confirmed by a resolution of the UN Security Council, that is to say, from the point of view of international law, it received the highest degree of legitimacy. At the same time, in 2018, Donald Trump decided to withdraw from the agreement and resumed sanctions. A new cancellation condition, the so-called “13 points”, was put forward, involving significant concessions on many other issues unrelated to the nuclear program. Given the risk of secondary sanctions and coercive measures from US authorities, many other companies have been forced out of Iran. There is no guarantee that after the lifting or easing of sanctions against Moscow, a new “13 points” will not appear. Historical experience has crushed the overall level of trust between Russia and the West, which can now be considered almost nil.

At the same time, the West may well be flexible in easing sanctions, depending on its own economic interests. Some measures have caused significant damage to the initiators themselves. Most likely, the measures to squeeze Russia out of commodity markets, as well as its technological isolation, will not change. However, mitigating the economic costs of such transit, especially in the short term, is quite likely to lead to progress.

In the event of a cessation of hostilities agreement, it is reasonable to expect changes in the import of Russian steel into the EU, the relaxation or lifting of restrictions on civil aviation services , the partial or total opening of airspace, the partial removal of export controls on “luxury goods”, and the easing of visa restrictions for businesses to reflect the status quo in the February 24, while maintaining those for civil servants, certain relaxations on non-dual-use industrial goods, the lifting of restrictions for banks on (SWIFT), the lifting of sectoral sanctions and blocking of certain banks and companies (but not all of them), the abolition of blocking sanctions against certain businessmen, and a reduction in barriers to investment. In the United States, these waivers may take the form of blanket licenses (i.e. exemptions from the sanctions regime) rather than delisting as such. Depending on relations with Iran and Venezuela, whose oil could enter the world market due to the easing of sanctions against these countries, a partial return to purchases of Russian oil from the United States and the United Kingdom may be permitted (although this practice is likely to be temporary).

Much more uncertain is the prospect of unlocking Russia’s financial reserves, as well as the many assets of Russian citizens arrested, frozen or already confiscated abroad. It is likely that they will be used to fund military and civilian aid to Ukraine from the West. Blocking sanctions against a significant number of government officials are unlikely to be lifted. The same should be expected with regard to export controls on dual-use goods and high-tech products. The partial or even complete abolition of restrictions on the purchase of Russian raw materials will not cancel the long-term course towards their replacement.

The main problem is the stability of the decisions made. The resumption of sanctions regimes is possible at any time. Whereas a military response to such decisions will require much more serious political will and resources. The inclusion of sanctions in the compromise formula on Ukraine is quite possible. Total pessimism is hardly desirable here, if only because the initiators themselves bear significant costs and may be willing to reduce them. However, the complete lifting of the new sanctions and a return to the status quo on February 21, 2022 also appear as an unlikely, if not impossible, alternative.

From our partner RIAC

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