Congress needs to be smarter on Russia sanctions

In the aftermath of the Helsinki summit, lawmakers are angry at the Trump administration and are turning to sanctions to hold the White House accountable for failing to fix America’s Russia problem. Congress must be careful, however, that its push for even more leverage does not create unintended consequences.

One year ago, President Trump reluctantly signed into law the Countering America’s Adversaries Through Sanctions Act (CAATSA). Motivated by the fear that President Trump might unilaterally lift sanctions on Moscow and let Vladimir Putin off-the-hook for his malign activities, the 2017 law gave Congress control over executive branch efforts to remove pressure on Russia. CAATSA codified existing Russia sanctions executive orders so the President could not simply rescind them. It created an onerous and unprecedented congressional oversight process that limited his ability to even weaken them; and it required the executive branch to impose even more sanctions on Moscow. Though it also contained other provisions, the overarching intent of the law was clear: the administration would have no choice but to ensure that Russia would face material costs for its international aggression and destabilization.

{mosads}In implementation, the results have been less than Congress hoped for. In January, per the law’s requirements, the Treasury Department published a list of Russian oligarchs. The document, however, was widely derided for being merely a laundry list of wealthy Russians and Kremlin cronies rather than a targeted list of Putin’s most critical relationships.

In the past few weeks, the Treasury Department has signaled it could back away from sanctions on the Russian aluminum firm Rusal. The Treasury Department is arguing that, since oligarch Oleg Deripaska, the ultimate sanctions target, is removing himself from active control of the company, Rusal should not be isolated from the international financial system. Though such a policy would be in keeping with the traditional U.S. approach to removing sanctions, many policymakers have criticized this potential delisting as another example of soft-pedaling.

Over the past several months, the administration has also delayed sanctions on third countries which purchase Russian arms in order to protect U.S. partners who rely on Russian equipment. President Trump had asked for broad authority in the National Defense Authorization Act to waive these sanctions without Congressional interference.  Despite the request, Congress only provided a partial relief from that CAATSA provision to allow key partners in countering China—India and Vietnam particularly—to purchase Russian arms.

These disappointing moves came to a head with the Helsinki summit. In Finland, Trump publicly rejected the intelligence community’s conclusions about Russia’s culpability in U.S. election meddling and seemed to once again let Putin off the hook for his interference in domestic U.S. politics.

That consternation is now accelerating domestic political strife. To distance itself from the president, Congress seems poised to pass more authorities to tie Trump’s hands on Russia policy and to find more Russian economic activity to target. The balance of power and the political dynamics are both favorable. More so than in any other foreign policy area, the Executive Branch and Congress are the closest to equals on sanctions policy, and there is no sign that, in the middle of a critical election year, either Democrats or Republicans will demur from reaching for those tools.

However, Congress risks major unintended consequences if it keeps climbing the sanctions escalation ladder. For one, targeting a broader scope of Russian economic activity may have macroeconomic and diplomatic consequences that Capitol Hill is ill-equipped to handle. Russian energy firms would be a natural target to punish Moscow, but such actions would risk spiking oil prices and disrupting supplies to the European Union. Well-intentioned legislative proposals, like the currently proposed DETER Act which would impose sanctions if the intelligence community determined Moscow had meddled in U.S. elections, risk causing major market upheaval. For example, they might wreak havoc in global debt markets if Russian sovereign bonds were no longer available to international buyers. While the gains of tough new sanctions may be politically attractive and send a strong message, they would not pass a more rigorous and long-term cost-benefit analysis.

There are, however, measures Capitol Hill policymakers can take to make new sanctions effective with minimal collateral damage. U.S. Russia sanctions policy during the Obama administration succeeded in imposing costs on Moscow in part because Washington closely coordinated its measures with the European Union, something the legislative branch is less able to do. Congress should use its oversight authority to push the administration to align its measures with what is feasible for the Europeans to pursue. The continued lack of clarity over the Nord Stream 2 makes Europeans who would otherwise support a tougher approach to Russia nervous that the United States is putting its energy export agenda ahead of wider European energy security. A transatlantic divergence, especially during recent rising trade tensions, would be an open invitation for Putin to try to further divide an already fracturing Atlantic alliance and run exactly counter to Congress’s Russia sanctions goals.

To create better policy that does not simply create economic havoc, Congress should also expand its countering Russia toolkit. Most importantly, it should increase U.S. financial transparency requirements. Strengthening these rules would show the global community that the United States is serious about fighting illicit finance. It would also be one of the most effective ways of targeting Kremlin-connected Russian oligarchs. Stronger disclosure requirements around beneficial ownership information would be an absolute game-changer in curtailing the ability of Russian operatives to operate with impunity in our financial system, information exchange, and property markets. The Mueller indictments thus far have shown how gaps in U.S. financial disclosure requirements facilitated the Russian interference in the election by allowing malicious actors to conceal there steps.

These improvements in the U.S. policy framework toward Russia could be even more momentous than last year’s. With CAATSA, Congress showed it can create “stronger” sanctions policy. Now, it must show it can craft “smarter” sanctions. After giving themselves great new powers, lawmakers should use their oversight to ensure strategic direction and strategic success for sanctions programs.

Neil Bhatiya and Edoardo Saravalle are researchers with the Energy, Economics, and Security Program at the Center for a New American Security.