US Needs Additional, Stronger Sanctions on Russia, Experts Tell Financial Services Subcommittee

During a House Financial Services subcommittee hearing on U.S. sanctions, several panelists painted a grave picture of the state of U.S.-imposed sanctions on Russia, calling for additional, stronger measures and criticizing the Trump administration's removal of sanctions from several Russian companies in January. “You’ve asked whether the current sanctions policy is effective, especially as it relates to Russia,” Daleep Singh, a senior fellow for the Center for a New American Security, told the Subcommittee on National Security, International Development and Monetary Policy on May 15. “Forgive me for being blunt, but my answer right now is 'no.'”

Each of the five panelists agreed that U.S. sanctions on Russia were largely ineffective, and while they differed slightly on how severe new sanctions should be, they all told the subcommittee that Russian President Vladimir Putin is not feeling U.S. pressure. Singh said the Russian economy is growing and its gross domestic product increased in 2018 “by the fastest amount in six years.” Singh also said Russian inflation last year fell “to an all-time low” and the country’s budget and trade balance “are both well into surplus.”

When asked why, several panelists were critical of the Trump administration's stance against Russia, saying it was a mistake for the Treasury Department in January to remove three Russian companies -- EN+, Rusal, and JSC EuroSibEnergo -- from under U.S. sanctions. Rusal is the world's second-largest aluminum producer. Elizabeth Rosenberg, another senior fellow at the Center for a New American Security, said investors “feel confident” investing in Russian markets because they don’t believe U.S. will impose new sanctions. “They look at the Rusal de-listing in particular as an example that the the U.S. administration blinked, it lost its spine, it won't be imposing tough penalties for the array of Russian malign activity,” Rosenberg said. That decision also “undermined” existing U.S. sanctions on Russia, said David Mortlock, a senior fellow with the Atlantic Council’s Global Energy Center. “The sanctions are unlikely to compel a change in Russian behavior when that behavior is minimized and dismissed by the president,” Mortlock said.

Singh said the U.S. should ban purchases of “new Russian sovereign debt and any currency,” adding that there’s “no good reason why U.S. pension funds and 401(k)s should be funding Putin.” Michael Carpenter, the senior director at the Penn Biden Center for Diplomacy and Global Engagement at the University of Pennsylvania, said the U.S. should impose “full blocking sanctions” and “complete restrictions” on select Russian banks. “To be impactful, they really need to target the Russian economy as a whole,” Carpenter said. “We kid ourselves when we think we can have an impact on the Kremlin’s decision-making when surgically targeting [specific] oligarchs or government officials.” Carpenter said the sanctions may not need to be coordinated with European allies because “most Russian banks have extensive exposure to U.S. financial markets.”

But Rosenberg disagreed, saying that without multilateral support, sanctions “can be leaky, ineffective and very dangerous.” While Rosenberg said “the time is now for new, strong measures” on Russia, she advocated for collaboration with other countries and a clear policy objective, something she said has been lacking with previous sanctions. “The U.S. will lose credibility and allies in the campaign to push back on Russia if U.S. sanctions policy appears episodic, arbitrary or lacking in strategy,” she said. While Carpenter said collaboration with European countries would be ideal, he also said “it’s remarkable” that some countries have “stood with us for as long as they have,” specifically mentioning Hungary, Italy and Austria, who have “complained vocally” about U.S. sanctions. “We’re right now almost at the end of our rope as far as European cohesion goes,” Carpenter said.