January 22, 2019

U.S. Policy Toward Russia and a Deepening Transatlantic Divide

By Elizabeth Rosenberg:

The new U.S. Congress is considering whether to impose fresh sanctions on Russia for its intrusions into U.S. democratic processes, its attacks on sovereignty, and its destabilization in Ukraine, Syria, and beyond. New measures could meaningfully confront and constrain Russia and also bring U.S. policy toward Russia even further out of step with Europe’s policy posture, even as transatlantic partners share many concerns about Russia’s threats.

It’s likely that potential new Russia sanctions measures from the U.S. legislature will reprise versions of ideas for tough economic pressure introduced in the last Congress. Two measures in particular, the Defending Elections against Trolls from Enemy Regimes (DETER) and Defending American Security from Kremlin Aggression (DASKA) acts, sought to deter Russian interference in U.S. elections and to impose sharp penalties for malign Russian activity.

Particularly following a steady string of revelations from U.S. intelligence officials and social media executives documenting Russia’s misinformation and manipulation campaigns around the 2016 and 2018 U.S. elections, U.S. lawmakers are reaching for an aggressive response. Russia’s brazen chemical attacks in the U.K., continued support for Syrian atrocities, and alarming maritime acts in the Sea of Azov only increase the ire among U.S. foreign policy leaders. They are right to be outraged by Russia’s disturbing threats to U.S. national interests and should work carefully and diligently to respond.

If fresh U.S. economic pressure efforts have the effect of squeezing European firms, Europe may well embrace retaliatory measures, deepening the divide in the relationship between these traditional security allies.

The question is how, and at what cost. Along with the now-infamous April 2018 U.S. sanctions designations of Oleg Deripaska and his companies Rusal, EN+, and EuroSibEnergo, the sanctions proposed by U.S. lawmakers last year spooked the business community and political observers. When it was introduced in August, DASKA even moved the market, a powerful feat for a piece of legislation. Foreign observers are worried about what the U.S. government will do next to punish Russia and that might also create consequences for other governments, including allies and the business community.

But they aren’t just worried. Some countries are actively contemplating push back.

The European Union, for example, appears to have come to the conclusion that the United States is not a reliable security partner and has no real willingness to work collaboratively against the threat from Russia. Germany, dismayed and angry, anticipates that U.S. policymakers will actively target the under-construction Nordstream II pipeline that will move more Russian natural gas directly to Germany, bypassing Eastern European connector pipelines and countries. Companies involved in the new pipeline project are plowing ahead.

In Germany and elsewhere in Europe, small- and medium-sized manufacturers with sizeable and longstanding business with Russia are also wary about getting caught in the crosshairs and targeted by U.S. sanctions. It’s possible that they might decide to choose Russia over the United States if U.S. sanctions force them to pick sides. EU member state governments might even tell their companies what their loyalties must be if they are exposed to U.S. sanctions on Russia.

U.S. sanctions on Iran may be an instructive example. German courts recently ordered local banks to reinstate services to Iranian customers that they had cut ties with last November in deference to painful new U.S. sanctions on Iran. The EU has sharply criticized U.S. policy on Iran, including these sanctions, and Germany appears to be ordering European companies to essentially join in this rebuke and distance themselves from the United States.

This may be a dry run for what Germany, and indeed others in the EU, will do if the United States targets German companies for their ties to Russia. Russia is a vastly more significant business partner for Germany than is Iran. Also, Germany’s business ties to Russia are about two and a half times as large as U.S.-Russian business dealings. The United States may not fear the economic consequences of targeting Russian firms, and their European business counterparts, with new sanctions. But if the United States adopts this sanctions policy course it must prepare for the reality that some European firms may side with Russian, not U.S., business counterparts. That stark choice will hurt transatlantic relations and will dull the effect of sanctions.

The U.S. administration seems relatively unconcerned with the prospect of spurning Europe, or the economic and political consequences that doing so can incur. The White House has disdained European security partnerships, threatened tariffs and sanctions on Europe, and downgraded the diplomatic status of the EU mission to the United States. Foreign policy leaders in the U.S. Congress have been careful to call for transatlantic coordination in Russia sanctions. However, legislators engineered an enormous policy divergence from Europe by passing the powerful CAATSA Russia sanctions package in 2017. They have signaled that they won’t hesitate to repeat the move.

One of the major casualties of the last few years of policy toward Russia is transatlantic coordination on sanctions and indeed the transatlantic relationship. As the U.S. Congress prepares for possible new sanctions on Russia in the months ahead the U.S.-European relationship looks likely to sustain another hit. If fresh U.S. economic pressure efforts have the effect of squeezing European firms, Europe may well embrace retaliatory measures, deepening the divide in the relationship between these traditional security allies. Both sides have already accepted economic and political costs, and loss of strategic alliance, when it comes to Russia policy. Those costs appear likely to increase.

Elizabeth Rosenberg is a Senior Fellow and Director of the Energy, Economics, and Security Program at the Center for a New American Security. In this capacity, she publishes and speaks on the national security and foreign policy implications of the use of sanctions and economic statecraft as well as energy market shifts. Current geographic areas of focus include Iran, Russia, China, North Korea, and Venezuela. She has testified before Congress on an array of banking and trade issues, and on energy geopolitics and markets topics. She is widely quoted by leading media outlets in the United States and abroad.

Read the full CNAS "U.S. Strategies to Counter Russia" commentary series below:

Embedding Sanctions in U.S. Russia Strategy

Prospects for Transatlantic Cooperation on Russia Policy

Russian Domestic Politics and Greater Russia-China Cooperation

Russia’s Macroeconomic Vulnerabilities

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