The US sanctions bill is a timebomb for Donald Trump and Vladimir Putin
In Russia, propaganda-generated hope springs eternal, and no more so than at the news agency Tass. Europe is wising up to the fact that its sanctions policy against Russia is “senseless and futile”, was the quote on Monday from Sergei Zheleznyak, a member of the state Duma’s international affairs committee. You have to hand it to Russia: it pursues some goals relentlessly.
For the truth is that Russia would very much like to get rid of the international sanctions introduced after its 2014 military intervention and annexation of territory in Ukraine. They aren’t much discussed in Britain, but they matter. Those sanctions stand at the heart of the investigation into the Trump-Putin relationship, and whether there was collusion: Trump’s potential “Russiagate”. Seeking sanctions relief was part of the infamous June 2016 meeting between Russian emissaries and Trump campaign officials, among them Donald Trump Jr. Hillary Clinton was secretary of state when sanctions were imposed. That was one of several important reasons why the Putin system and its army of hackers, bots and trolls worked so hard to undermine her, if not to aid Trump’s ascent.
US sanctions matter greatly because of America’s global financial clout. But Vladimir Putin wants European sanctions relaxed just as badly as he wants those imposed by the US out of the way. US and European sanctions have generally been decided in a coordinated manner. Russian money is all over Europe. In a recent book, Russia and the Western Far Right, the researcher Anton Shekhovtsov draws a connection between the Kremlin’s support for populist movements across Europe and their leaders’ systematic denunciation of sanctions on Russia.
The issue is simmering now but it could well boil over by February, when a piece of US legislation including new, wide-ranging sanctions is likely to be passed. Donald Trump reluctantly signed the bill in August after it was nearly unanimously voted through by Congress – who wanted to prevent Trump from being able to unwind sanctions single-handedly, in the aftermath of US intelligence reports on Russian meddling in the election. The bill is emphatically called The Countering America’s Adversaries Through Sanctions bill. Deep inside it, section 241 is the closest thing to a bombshell for Putin’s pyramidal power structure. Indeed, it stipulates that by February 2018, the US administration must submit a detailed report to Congress containing “the identification of the most significant oligarchs” in Russia, their relationship to Putin, evidence of any corruption, estimated net worth and sources of income. Anyone fitting the criteria could be subjected to personal sanctions, such as asset freezes and travel bans.
Not only would Russia’s wealthiest come under unprecedented American scrutiny but the same would happen to their family members, and anyone doing business with them in the west. As such, the scope of the bill goes much further than anything undertaken to date against members of Putin’s entourage. As sanctions go, and depending on the bill’s implementation, this has the potential to destabilise the regime, not just create unpleasantness for a few Putin insiders.
As a result, there’s been a whiff of panic among Russian oligarchs. Dan Fried, a former Obama administration sanctions coordinator now working at the Atlantic Council thinktank, recently told me he’s never seen anything like it. Russian oligarchs have been flooding Washington with lobbyists and lawyers to try to fathom what may be coming at them. “They want to know whether a blacklist of names will be drawn up,” says Fried, who’s been contacted by some of these emissaries and smells “desperation”. Reporting from Russia, the Moscow Times adds that Russia’s wealthiest are at a loss as to how to circumvent the coming blow. Some law firms have reportedly advised oligarchs to divorce their wives and register all their assets in the names of their former spouses as a way of keeping them safe.
Targeted, personal sanctions aimed at oligarchs create a genuine problem for Putin’s hold on power. Russia is an authoritarian kleptocracy. The elite’s loyalty to the president hinges greatly on the protection he can guarantee them. Putin is readying himself for reelection next March, aged 65, but he wants to be sure the ruling system he’s built remains iron-clad. Oligarchs dislike sanctions, especially those that make it harder for them to enjoy the wealth they’ve amassed and placed abroad, whether in luxury properties in London, New York and the Riviera, or in a wide network of offshore accounts, as the Panama Papers revealed.
The Russian establishment may sing the tune of nationalism, but it mostly prefers to live outside of Russia, knowing full well property rights are best guaranteed in places where there is the rule of law.
Anyone doubting the shock this bill might represent should consider how the regime has reacted to the 2012 Magnitsky Act, which partly served as a template for the wider sanctions adopted in 2014, as well as those voted on this year. In his July testimony to the Senate judiciary committee, Bill Browder, a British-American businessman who led the campaign for the act, made clear how important it was for Putin to “guarantee impunity” for his cronies, and ensure that “the system of illegal wealth accumulation worked smoothly”. Moscow, in turn, has accused Browder of three murders in an attempt to frame an influential foreign critic.
Putin may be popular, but oligarchs certainly aren’t. Trump, meanwhile, says he has nothing to hide, and that he believes Putin’s denials about meddling – but the sanctions are always in the background. During his trip to Asia, Trump complained that “Russia has been very, very heavily sanctioned … They were sanctioned at a very high level and that took place very recently. It’s now time to get back to healing.”
The Trump administration has yet to fully implement the new sanctions. Indeed, there are many signs it is stalling, and reluctant to do so, but the clock counting down to that February deadline, just ahead of the Russian election, is ticking. Trump and Putin sit 5,000 miles apart, but they can hear it loud and clear.
• Natalie Nougayrède is a Guardian columnist
Law firms have reportedly told oligarchs to divorce their wives and register their assets in their former spouses' names