Translated by Ollie Richardson & Angelina Siard

23:17:28
25/07/2017

cont.ws

A vote on the draft bill for the introduction of unprecedented anti-Russian sanctions is scheduled in the United States in the near future [update: it appears it was already adopted – ed]. However, long before this event the liberal Russian press was systematically swept by a whole “tsunami” of defeatism, while the pro-American media, by contrast, literally cried out loud reports of the imminent capitulation of Moscow.

How dangerous are the US sanctions, really? Can the bill of the United States stop the construction of Russian pipelines? What are the non-publicized details of the controversial document, and will Moscow be able to adequately respond to such a Russophobic step?

Background

Initially, the current document on the strengthening of anti-Russian sanctions was considered by the Senate under the index “S. 722” in June 2017. Then the amendment was called “sanctions against Iran”, but it already carried a whole list of comprehensive measures to restrict Russia. A month later, the bill passed all “negotiations” between both Houses of Congress and then it become a “Law on countering Iran’s destabilizing actions” in the world and the region. Moreover, astonishingly, and despite the ambiguity of its name, of the 38 pages of the law “against Iran”, 30 are devoted to the anti-Russian chapter “countering Moscow’s influence in Europe and Eurasia”.

Now, in the event of its adoption, the bill will go for re-approval in the Senate, and then it will be on the table for the final signing by the American President. The vetoing of the anti-Russian document by Donald Trump essentially will not change the situation, because congressmen from both parties, both Republican and Democratic, came to a collective decision to approve the draft anyway, and therefore Congress anyway will overcome the presidential veto with a majority vote.

The domestic political challenges of this unprecedented bill

International decisions of this magnitude have a huge populist value, and that’s why news about them as a rule does not affect the essence of the introduced innovations. Meanwhile, through adopting this bill the transnational elite of America, which lost the presidential election, in fact, stages a quiet administrative revolution and successfully moves the levers of foreign policy decisions from the White House and the hands of the acting President to those institutions in which they are still the undisputed masters – Congress, Senate, and the House of Representatives.

The essence of the “revolution” lies in the fact that most of the higher political functionaries of the United States live and build their careers on a recurring cycle of electoral cadences. They spend one term in the position of Congressman, Senator, or state representative, later they take a forced break of six or two years, depending on the position, and then, after the “timeout” in the environment of University elites, or private international corporations, begin a new round of election “battles”. New elections require new investments and because with each repetition the American establishment is increasingly bogged down in continuous dependence on the private organizations that finance it. High competition in the political field forces individual figures to be as useful as possible for their sponsor, and in a short time leads to the fact that some politicians not only adhere to one of the established political clans, but also all of these clans as a whole become deeply engaged in these or those representatives of the corporate elite. Congressmen, Senators, and many other American officials profess such an approach a priori, and therefore a priori depend on financial injections from the outside, and since the traditional pensionary future for any US politician is the “sale” of their own links of this or that company as a full-time lobbyist, Western corporations have enough control over the political system of America.

Understanding this, it is not difficult to realize that the main challenge for transnational elites, after their defeat in the race for the White House, became not only blocking the opportunities of Donald Trump, but also the transfer of the maximum of his powers to those lower level functionaries that are controlled by them as reliably as possible – Congressmen, representatives of states, and Senators. This is precisely what the sanctions document that is currently being adopted does – depriving the national elite behind Donald Trump, and he himself – the lion’s share of foreign sovereignty. Now Trump, who planned to establish bilateral relations with Moscow, will not be able to do this at least because the old sanctions regime, which based on five decrees of Barack Obama, and which, if necessary, Trump could cancel by the same decrees, ceases to act at least until new elections in Congress. In the framework of the new law, any action to weaken the sanctions measures must be justified by the American leader in a special report to the relevant committees of both chambers. I.e., the US President isn’t just deprived of the possibility of making a whole layer of independent foreign policy decisions, but also is obligated to “persuade” Congress to support his presidential position, while the latter, after the 30-day consideration period will either approve or reject his offer of a joint resolution. And taking into account the influence on acting congressmen from the side of the transnational elites that oppose Trump, this resolution is guaranteed to be negative.

Relations with Russia

The new American sanctions draft bill transfers into the framework of the law absolutely all existing restrictive anti-Russian packages – “Crimean”, “Donbass”, “hacker”, “Syrian”, “human rights”, and also “energy”. In addition, it binds “Donbass” sanctions to the implementation by Moscow of the Minsk Agreements of 2015 and 2014, even despite the fact that Russia is not legally an executive part of them. The recent absurd innovation is being done in order to ensure that “the exchange of Syria for Donbass”, which twinkled with hints featured in the American press, or other geopolitical concessions in the direction of our country were not legislatively feasible for Trump. With exactly the same purpose, “acts in support of the sovereignty, integrity, democracy, and economic stability of Ukraine”, which were previously “activated” at the discretion of the President, after the adoption of this bill also become obligatory for him.

Russian presidential elections

In the list of measures that are being adopted by the bill, a paragraph on the so-called “corrupt Russian officials, trying to avoid US sanctions” is present. This section is openly aimed at disrupting the upcoming 2018 Russian presidential elections. Essentially, it forms dense anti-presidential opposition from the representatives of political and economic representatives of the Russian elite who discredited themselves in the 90’s. In particular, the document provides the blocking of assets, accounts, a ban on entry into the United States for all individuals trying to circumvent sanctions through the re-registration of companies in the name of close relatives, and also requires the American President to provide Congress with annual reports on those Russian oligarchs who are “close to the political regime” of Russia. The question in this case of course is about Vladimir Putin and those businessmen, who had previously agreed to the terms of the Kremlin to come out of the shadows, currently carrying out large-scale investments in the Russian economy and its assets. In view of the aforementioned paragraph a section was added in the sanctions bill bringing restrictions on private investments over $10 million in such privatization transactions of Russian property committed in the interests of government officials, their partners, or their immediate family members.

Pressure on the country’s economy

The sanctions draft bill significantly expands and strengthens sectoral sanctions against Moscow, spreading them out except to the financial, oil, and defense sectors, to attract debt financing of enterprises of gas, metallurgical and mining production, and energy and rail infrastructure. The restriction on debt financing is proposed to be spread out also on sovereign Eurobonds of the Russian Federation, and also federal loan bonds, which, in principle, can have painful consequences for the Russian currency market. The private question about the return of Russian diplomatic property arrested by Obama can also be considered a no-go for the American side, and cooperation with sanctions by Russian companies because of the fear of American punitive measures is even more “toxic”.

Energy “wars”

In addition to the introduction of other restrictive measures, the draft bill of sanctions especially emphasizes the opposition to the pipeline “Nord stream – 2”, as well as the need to “prioritize the export of energy resources of America to create American jobs” in the country. For this, the package provides the reduction of terms of crediting of the Russian oil and gas industry from 90 to 60 days, and also a ban on participating in new projects of oil and gas production in deep water, Arctic offshore, and shale, where the share of State-owned companies is over 33%. The reason for the latter, thus, lies in the cost of the project “Nord stream – 2” – estimated at 9.5 billion euros, with a 100% shareholder of Nord Stream 2 AG is the Russian “Gazprom”. Earlier, under an agreement between Engie, OMV, Royal Dutch Shell Uniper, Wintershall, and a Russian company meant that European investors will provide 4.75 billion euros in the form of long-term loans, although now investment exceeded 1 billion, further financial transactions turn out to be under question. All of this is done by the US with the aim of creating a deficit in the gas market of Europe, and the task is to squeeze out Russian gas, raise prices to a competitive level profitable for US liquified natural gas, and to attack one of the key items of income of the Russian economy.

How will Russia respond?

Russia has two actual methods for a possible fully-fledged anti-American response. The first is symmetrical, for example to stop space cooperation with NASA, ceasing to share the resources of Roscosmos by importing Russian rocket engines and conducting consultations. However, such a step would undermine also the revenue base of Russian companies, and also will force Washington to pour out unprecedented financial flows to the private space corporation, thereby nurturing an industry competitor unnecessary for Russia. Also, we could symmetrically refuse US supplies of aluminium, titanium, and molybdenum used in the production of the company “Boeing”, but in this case Moscow is very interested in the procurement and maintenance of the existing fleet of American aircraft, and will need them at least until the serial implementation of their similar planes. Russia could abandon the contracts for the supply of “Rosoboronexport”, for example helicopter spare parts and digital equipment for the services of the helicopters sold to US for their needs of Afghanistan. But in this case, the growth of terrorism in Central Asia promises to the country a lot of unnecessary problems. In other words, the symmetrical response is not a full solution because in essence, Russia is not buying from America anything critical, and what Russia sells is beneficial for the development of its own economic system.

The second approach to counter is asymmetric, and in this perspective, it’s not for nothing that the United States awaits a blow from an “unexpected side”. In particular, Moscow is able to – without itself experiencing any pain, but for Washington on the contrary – begin cooperation in space exploration with China. Beijing is going to build its space station and already invited Russia to participate in the project, while the fruitful union and the result of this cooperation for the US is really critical. Also, the multinational companies of America have an eye on Russian lands and on joint development of energy resources, however, access to these desired objects can be blocked extremely quickly. There are also other asymmetrical steps, for example in rare-earth elements and the IT industry, which as a minimum is no less effective than the consequences of the extremely successful food embargo against the EU.

Europe, on the issue of the current sanctions, for a number of reasons also is a part of a successful asymmetric response for Russian diplomacy. Firstly, the US’ bill imposes sanctions not only against our country but also against those companies that are associated with Russia through the trade of raw materials, gas, metals, and many other products. Secondly, corporations falling under this list are European industry giants from Germany, Austria, Holland, and other EU countries. Thirdly, in Germany the next elections are near, and Merkel, as the nominee of the German industrial elite, like before is unable to close her eyes to the violation of the interests of her own sponsors. Finally, over the past three years since the imposition of sanctions, Germany alone lost around 300,000 jobs from the Russian retaliatory measures, and the EU as a whole – more than one hundred billion dollars. Just for the first five months of 2017, the trade turnover between Russia and the EU began to rapidly grow, reaching 30% and 97.5 billion dollars. Given the above, Europe despite geopolitical indecisiveness has something to lose, and that’s why Brussels along with the “locomotives” of the Eurozone actively searches for steps to prevent the US’ anti-Russian sanctions from being executed on the territory of the European Union.

Another asymmetric response may be a large-scale trial initiated by Russia in the framework of the WTO, because the unilateral action undertaken by the American side violates virtually all the rules of this authoritative international organization. Also, Trump, during the six weeks of debate with Congress, was able to soften the original version of the anti-Russian bill. Firstly, the Secretary of the Treasury is now deprived of the opportunity to impose restrictions not only on the railway and metallurgical sector of Russia, but also on shipping. Secondly, the timing of possible Western lending to Russian oil companies is reduced from 90 days to 60 instead, and not to 30 as was originally planned. And thirdly, a ban on the supply of US technology will apply only to new oil and gas projects of Russia, and not those that had already been commissioned and are operating successfully.

What is the impact of US sanctions on the internal situation in the country?

Oddly enough, but in the current conditions that are difficult for the Russian Federation, the new restrictive measures by the US may lead to extremely significant pros for the national mentality. At least without stronger external pressure, Russia is unlikely to ever be able to at least begin to review its traditional financial and hopeless economic policy of the liberal paradigm. After the introduction of new sanctions measures such motivation it will suddenly appear. In particular, one of the points in the text of the American bill provides “restrictions on operations between Russian financial institutions and treasury bonds of the United States”, and at the moment by making such a decision Washington demonstrates a complete lack of understanding of Russia by considering this step a serious blow to the economy of the country, while for us it opens up fantastic prospects. The treasury bonds of the Federal Reserve System are the most reliable debt instrument and they are indeed super-liquidity, but in our country, contrary to the expectations of Americans, billions of dollars in investment in the State’s income from a foreign economy, even taking into account the profits from this, for a long time and fixedly are the extremely unpopular solution. Now, thanks to the monetary logic of Washington, this item gives the Russian leadership a significant reason for the reduction, refusal, or full withdrawal of State investment from the US securities, and the economic bloc and the Ministry of Finance, which resist this with all their might, don’t have significant room for maneuver. Also, after the approval of the draft law the Russian elite won’t have any other choice than to either carry out their future investments in the national economy, or to close off the Russian market and, after dropping pro-Russian masks, to go into open opposition. For the liberal bloc the new sanctions also do not leave the usual excuses to eliminate any windfall from the sale of raw materials in favour of reserve funds. Now for the “left-wing” it is necessary to spend a part of their accumulated resources for the development of the economy of domestic consumption, as well as the replacement of external investment with their own, as it is actively being done in the US and China. In view of the technological section of the sanctions, the country is also left with no alternative but to raise their own industry experts and to rapidly revive aspects of basic education, ensuring high working conditions and remuneration, as well as the pace of import substitution. Plus, in the present circumstances, no other choice is left also in the sphere of control of every ruble from the budget, and each transaction of banks and state-owned companies, instead of the unaccountable raining of capital on poorly structured corrupt domains.

In general, the scale of threats from the new US bill against Russia was described the best by the expert on international trade who worked on the anti-Russian sanctions in the National Security Council of the United States David Mortlock, who publicly said ahead of the recent adoption of anti-Russian measures:

“In the case of such countries as Iran, any new sanctions measure indeed can quite significantly change the situation. But Iran — although a fairly large economy, is still not comparable with Russia. And although the current American administration tries to introduce sanctions against Moscow unilaterally, the reality is such that the Russian economy is too strong and large-scale in order for unilateral US restrictions to significantly hurt it alone.”

Thus, the sanctions of Washington, while being unprecedented, incredibly arrogant, and rather large, are not a radical threat to Russia. More important is how we will take advantage of this unique opportunity of their appearance, and how far we will be able to traverse the path of building a new, State–centered national economy.

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