Turn of the Screw

VLADIMIR PUTIN SAYS HIS COUN­TRY IS IM­PER­VI­OUS TO THREATS FROM THE WEST. New U.S. Sanc­tions BUT AIM TO UP­END THAT CLAIM. WASH­ING­TON’S NEW MOOD: ‘PUN­ISH RUS­SIA AS HARD AS POS­SI­BLE’

Newsweek - - Con­tents - BY OWEN MATTHEWS

Un­prece­dented U.S. sanc­tions re­flect Wash­ing­ton’s (and Trump’s) new mood: ‘Pun­ish Rus­sia as much as pos­si­ble.’

There used to be a bar in down­town Moscow called Sanc­tions, fea­tur­ing car­i­ca­tures of Western politi­cians and serv­ing only Rus­sian booze—a one-stop sum­ma­tion of Pres­i­dent Vladimir Putin’s at­ti­tude to­ward the ef­forts of the U.S. and Europe to eco­nom­i­cally kneecap his coun­try. Putin and his Krem­lin-con­trolled pro­pa­ganda ma­chine have a his­tory of shrug­ging off sanc­tions, de­spite a 55 per­cent crash in the value of the ru­ble, a col­lapse in for­eign in­vest­ment and ris­ing in­fla­tion. Rus­sia, Putin boasts, will al­ways sur­vive the West’s ef­forts to de­stroy it.

That nar­ra­tive will be ag­gres­sively tested in the com­ing months should the U.S. gov­ern­ment make good on the harsh­est eco­nomic sanc­tions ever im­posed on Rus­sia.

There are three sep­a­rate ef­forts to in­flict eco­nomic pain. On Septem­ber 12, Pres­i­dent Don­ald Trump signed an ex­ec­u­tive or­der that de­clared elec­tion in­ter­fer­ence a “na­tional emer­gency” and au­tho­rized sanc­tions on for­eign com­pa­nies, in­sti­tu­tions or in­di­vid­ual med­dling. The Of­fice of Na­tional In­tel­li­gence would take charge of as­sess­ing any po­ten­tial in­ter­fer­ence. Al­though the ex­ec­u­tive

or­der isn’t di­rected solely at Rus­sia—the ad­min­is­tra­tion said it was also con­cerned about China, Iran and North Ko­rea—it was in­sti­gated by Rus­sian hack­ing dur­ing the 2016 elec­tion, cur­rently be­ing in­ves­ti­gated by spe­cial coun­sel Robert Mueller.

Trump’s or­der was an at­tempt to fore­stall Congress, which, on the same day, voted through the first stage of leg­is­la­tion aimed at more se­vere and pointed pu­n­ish­ment of Rus­sian elec­tion in­ter­fer­ence. Trump’s cor­dial­ity to­ward Putin has been star­tling—as in Helsinki this past July, when he ap­peared to credit Putin’s de­nials of elec­tion in­ter­fer­ence over the unan­i­mous con­clu­sions of his own in­tel­li­gence ser­vices. He was also slow to im­ple­ment an ear­lier sanc­tions bill passed by Congress last year.

But with wide­spread sup­port for a tougher line on Rus­sia in Congress and within Trump’s ad­min­is­tra­tion, the U.S. pres­i­dent has been forced to bow to pre­vail­ing sen­ti­ment. “We felt it was im­por­tant to demon­strate that the pres­i­dent was tak­ing com­mand of this is­sue,” na­tional se­cu­rity ad­viser John Bolton said of Trump’s ex­ec­u­tive or­der.

The mea­sures un­der con­sid­er­a­tion in Congress— known as the De­fend­ing Amer­i­can Se­cu­rity From

Krem­lin Ag­gres­sion Act—seek to de­ter fur­ther Rus­sian in­ter­fer­ence in elec­tions by ef­fec­tively cut­ting off the coun­try from the world econ­omy. The pro­pos­als in­clude ban­ning ma­jor Rus­sian banks from cap­i­tal mar­kets and freez­ing over­seas ac­qui­si­tions by Rus­sian gas and oil com­pa­nies, as well as shut­ting down Rus­sian bot­nets and the com­pa­nies that host them. In ad­di­tion, there would be an in­ves­ti­ga­tion into the per­sonal wealth of Putin and mem­bers of the Rus­sian elite.

The bill is set to do more dam­age to Rus­sia than a “tac­ti­cal nu­clear weapon,” Se­nate For­eign Re­la­tions Chair­man Bob Corker of Ten­nessee, one of the bill’s many Repub­li­can sup­port­ers, told re­porters on Au­gust 20. Other Repub­li­can sup­port­ers in­clude for­mer House Speaker Newt Gin­grich, who called Trump’s friend­li­ness to Putin in Helsinki “the most se­ri­ous mis­take of his pres­i­dency.”

“We are go­ing into a dif­fer­ent phase now,” says one se­nior Obama-era of­fi­cial who was di­rectly in­volved in draft­ing sanc­tions against Moscow be­tween 2014 and 2016, and who is not au­tho­rized to speak on the record. “The orig­i­nal in­tent was to show [Putin] how closely in­ter­linked the Rus­sian econ­omy was to the global econ­omy, not to shut down the Rus­sian econ­omy. The idea was to stop fur­ther Rus­sian ag­gres­sion” in Ukraine. But now, four years on, the po­lit­i­cal cli­mate in Wash­ing­ton has changed. “Af­ter the [2016 elec­toral] hack­ing the mood has be­come ‘Pun­ish Rus­sia as hard as pos­si­ble. Turn the screws all the way.’”

The con­gres­sional ef­fort runs par­al­lel to a third set of sanc­tions, im­posed by the Trea­sury and State Depart­ment on Au­gust 22 in re­sponse to the at­tempted nerve-agent poi­son­ing of ex-spy Sergei Skri­pal and three oth­ers in Sal­is­bury, Eng­land, in March. These are based on a vi­o­la­tion of a 1991 U.S. law that re­quires the pres­i­dent to act against any coun­try that has “used chem­i­cal or bi­o­log­i­cal weapons in vi­o­la­tion of in­ter­na­tional law.” The mea­sures re­quire Rus­sia to al­low in­ter­na­tional in­spec­tors into its se­cret chem­i­cal weapons fa­cil­i­ties within 90 days or face even more strin­gent pu­n­ish­ment. Ef­fec­tively, the U.S. is on course to brand Rus­sia a state spon­sor of chem­i­cal weapons ter­ror­ism along­side North Ko­rea and Iran.

As a re­sult, Rus­sia can no longer re­ceive high-tech U.S. goods, such as su­per­fast com­put­ers, state-of-theart oil ex­plo­ration ma­chin­ery and lasers. The mea­sure is in­tended to hit the econ­omy where it hurts the most: in the oil ex­trac­tion and arms in­dus­tries.

Rus­sia has al­ready dis­missed the idea of al­low­ing in­spec­tors. So come Novem­ber, the Trea­sury is ex­pected to turn those screws even tighter, and that could in­clude Iran-style re­stric­tions on Rus­sian banks and com­pa­nies doing busi­ness in the West.

And there’s more: Ad­di­tional mea­sures un­der

THE BILL IS SET TO DO MORE DAM­AGE THAN “a tac­ti­cal nu­clear weapon,”said FOR­EIGN RE­LA­TIONS CHAIR­MAN BOB CORKER, ONE OF ITS MANY REPUB­LI­CAN SUP­PORT­ERS.

con­sid­er­a­tion, by both Congress and the Trea­sury Depart­ment, are the sanc­tion­ing of Rus­sian lo­cal and in­ter­na­tional sovereign bonds—a third of which are held by for­eign in­vestors—and a fullscale in­ves­ti­ga­tion into Rus­sian of­fi­cials’ money abroad. This would be fol­lowed by a much wider ver­sion of the as­set freezes and visa bans al­ready im­posed on a hand­ful of Putin cronies by ear­lier rounds of sanc­tions.

It might be time to re­open that bar.

‘A Global Plot to De­stroy Rus­sia’

the pres­sure to pun­ish rus­sia put trump in a po­lit­i­cal and diplo­matic bind. He seemed to at­tempt to re­po­si­tion him­self as a hard-liner on Rus­sia in a July tweet, adding a cu­ri­ous pre­dic­tion: that the Krem­lin would again in­ter­fere in Novem­ber’s midterm elec­tions—on the side of Democrats. “I’m very con­cerned that Rus­sia will be fight­ing very hard to have an im­pact on the up­com­ing Elec­tion. Based on the fact that no Pres­i­dent has been tougher on Rus­sia than me, they will be push­ing very hard for the Democrats,” the pres­i­dent tweeted. “They def­i­nitely don’t want Trump!”

Still, the pres­i­dent con­tin­ues to re­sist crit­i­ciz­ing Putin di­rectly. The warmth he dis­played to­ward the Rus­sian leader in Helsinki was likely in­sti­gated by his an­tipa­thy to­ward spe­cial coun­sel Robert Mueller and the on­go­ing in­ves­ti­ga­tion into col­lu­sion be­tween Trump’s cam­paign and Rus­sia. For much of the first 200 days of the Trump ad­min­is­tra­tion, there were ef­fec­tively “two sep­a­rate Rus­sia poli­cies in Amer­ica—trump’s and Congress’s,” says Vladimir Vasiliyev of the Rus­sian Academy of Sciences’ In­sti­tute for U.S. and Cana­dian Stud­ies, a think tank. “It is clear that one is con­cil­ia­tory and con­struc­tive, the other hos­tile.”

Trump’s sign­ing of the ex­ec­u­tive or­der on Septem­ber 12, there­fore, marked a de­ci­sive vic­tory for Rus­sia hawks over the pres­i­dent. In­stead of the re­set of re­la­tions Trump promised in Helsinki, the U.S. is head­ing for all-out eco­nomic war­fare with Moscow.

Less clear, of course, is how Putin and Rus­sian cit­i­zens will re­spond. Ev­ery time Rus­sia has vi­o­lated in­ter­na­tional law—by an­nex­ing the Ukrainian ter­ri­tory of Crimea in 2014, for in­stance, or in­ter­fer­ing in the 2016 U.S. pres­i­den­tial elec­tions—the U.S. and Euro­pean Union have an­nounced pack­ages of eco­nomic sanc­tions on the Krem­lin. None has put

a dent in Putin’s pop­u­lar­ity rat­ings, or changed Rus­sia’s ag­gres­sive be­hav­ior in Syria, Ukraine or to­ward the regime’s op­po­nents at home.

Un­til now, Putin has coun­tered sanc­tions by blam­ing a slump­ing econ­omy on for­eign en­e­mies, a nar­ra­tive pushed at home by the Krem­lin’s near-to­tal con­trol of the Rus­sian me­dia land­scape. Franz Klint­se­vich, a mem­ber of the De­fense Com­mit­tee of Rus­sia’s up­per house of par­lia­ment, re­cently told state tele­vi­sion that the sanc­tions were part of a “mul­ti­fac­eted global plot to de­stroy Rus­sia.” The Krem­lin-con­trolled me­dia have dis­missed eco­nomic penal­ties as in­ef­fec­tive and more dam­ag­ing to the West than to Rus­sia.

Putin de­nounced Congress’s pro­posed De­fend­ing Amer­i­can Se­cu­rity bill as “boor­ish,” “be­yond all rea­son­able bounds” and “ab­so­lutely un­law­ful from the point of view of in­ter­na­tional law.” He promised that Rus­sia would re­tal­i­ate. “When will our re­sponse fol­low? What will it be? That will

de­pend on the fi­nal ver­sion of the draft law, which is now be­ing de­bated in the U.S. Se­nate.”

The re­ac­tion to the Septem­ber 12 sanc­tions in­cluded top Rus­sian of­fi­cials de­nounc­ing U.S. “hys­te­ria,” declar­ing Rus­sia to be mighty enough to go it alone. “Our elec­tron­ics are far more ad­vanced than Amer­ica’s,” Sergei Zheleznyak, deputy chair­man of the Rus­sian Duma, or lower house of par­lia­ment, told Rus­sian tele­vi­sion.

In fact, Rus­sia pro­duces no in­ter­na­tional brands of tele­phones or com­put­ers, and the only air­plane it makes, the Sukhoi Su­per­jet, de­pends on French avion­ics and en­gines. Rus­sia’s one ma­jor ex­port, ac­count­ing for nearly 52 per­cent of fed­eral in­come and 70 per­cent of to­tal ex­ports, is oil and gas, with arms, steel and alu­minum mak­ing up most of the rest.

Rus­sia’s Fed­er­a­tion Coun­cil, par­lia­ment’s up­per house, has be­gun draft­ing a raft of coun­ter­sanc­tions that could in­clude ban­ning the ex­port of Rus­sian-made rocket boost­ers to the U.S. (cur­rently used by NASA to sup­ply to the In­ter­na­tional Space Sta­tion). And Deputy For­eign Min­is­ter Sergei Ryabkov threat­ened on Rus­sian state TV to re­tal­i­ate against the U.S. by us­ing what he called the “info-com­po­nent” of Rus­sia’s power, a seem­ing sig­nal for a new round of in­ter­fer­ence in U.S. pol­i­tics by Rus­sian hack­ers. When pressed to elab­o­rate by the talk show’s host, Ryabkov added cryp­ti­cally, “Our meth­ods will work. They’ll be ef­fec­tive—i’m cer­tain of that.”

De­spite the Krem­lin’s down­play­ing of the im­pact of sanc­tions, Wash­ing­ton “un­doubt­edly has the power to stran­gle Rus­sia’s econ­omy if it so wishes,” says the Obama-era of­fi­cial. “The ques­tion is whether con­se­quences of that are in [Amer­ica’s] real in­ter­ests.”

“A SANC­TIONS WAR IS LIKE A LONGʝDISTANCE RACE. IT WILL BE WON BY WHO­EVER stronger IS OB­JEC­TIVELY and more pa­tient.

AND THAT, HOW­EVER YOU LOOK AT IT, IS THE U.S.”

FAKE NEWS IN CHIEF Top: Trump with Putin at their joint press con­fer­ence in Helsinki in July, when the U.S. pres­i­dent cred­ited the Rus­sian leader’s de­nials over elec­tion in­ter­fer­ence. Right: Pump jacks in Siberia. Oil and gas ac­count for 70 per­cent of to­tal ex­ports.

VI­O­LA­TION NA­TION Clock­wise from top: A foren­sic tent where Sergei Skir­pal was found in Sal­is­bury, Eng­land; Putin vis­its Crimea af­ter Rus­sia an­nexed the Ukraine ter­ri­tory in 2014; Rus­sian forces in Syria, be­fore posters of al­lies Putin and Pres­i­dent Bashar al-as­sad; a U.S. polling sta­tion on Novem­ber 8, 2016.

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