Washington’s war on Russia has potential to backfire

Maria Dubovikova

August 13, 2018 17:18

The US last week announced new sanctions against Russia as a result of Moscow’s alleged plot to assassinate Sergei Skripal using a chemical weapon in the UK. The new sanctions included the banning of exports of some high-tech equipment to Russia.

The decision to impose new economic sanctions on Russia, which Washington was obliged to do under a 1991 law, was an important development beyond merely the bilateral relationship between the two countries, potentially affecting the EU on one hand and the relationship between the White House and the American legislative institutions on the other.

Further sanctions can be imposed in 90 days if Russia does not assure that it no longer uses chemical weapons and will refrain from doing so in the future. The US Congress, meanwhile, will soon debate a draft bill that could impose far more draconian sanctions on Moscow, potentially pulling the rug from under President Donald Trump.

The seriousness of the proposed sanctions is that this time they come in strict legal form, unlike previous sanctions, which were seen in the context of what might be called “soft power,” as a tool of political pressure in economic clothing. The sanctions proposed in the Defending American Security from Kremlin Aggression Act of 2018 have, in essence, clear economic objectives. They include tightening restrictions on American financing of Russian energy projects and a prohibition on US citizens working on oil production in the country.

These wide-ranging US sanctions would have a negative effect on Russia’s economic growth, which has seen a recovery in recent months, as they would push Moscow to freeze its structural reforms as a result of poor liquidity. The Russian currency has already dropped in value following last week’s sanctions announcement.

The seriousness of the proposed US sanctions on Russia is that this time they come in strict legal form, unlike previous sanctions, which were seen in the context of what might be called “soft power.”

Maria Dubovikova

For Russians, the US is trying to export its economic and political crisis by initiating new crises, such as the trade war with Moscow, China, the EU and other countries.

When the US imposed sanctions on Russia last July, Prime Minister Dmitry Medvedev issued a sharp statement that the sanctions were tantamount to declaring a “full-scale trade war” and the Kremlin expelled 755 US diplomats. But because Moscow does not want its relationship with Washington to blow up again, it still hopes the White House will persuade Congress to abort or at least severely water down this bill

Some Russian experts underestimate the impact of US sanctions for several reasons, the most important of which is that Western investments in general, and the US in particular, are weak in Russia, so there will be little impact on the movement of funds. Moreover, Russia has many cards that it can play against the US, including its relations with China, North Korea, Iran, Turkey, and India.

For Europe, US sanctions on Russia could potentially signal the end of the era of economic harmony and understanding between the two Atlantic shores, as companies that operate in Russia or do business with Moscow’s state enterprises may soon be targeted. This shift is due to clear American selfishness, which began with its withdrawal from the Paris Agreement on climate change. Moreover, European countries do not want to seek an alternative to Russian gas as it is cheaper than American gas. However, it is as yet unclear how the EU would respond if the US was to impose far stricter sanctions on Russia. 

The global trade and fiscal war launched by the US has already pushed companies and countries to look for other currencies to replace the dollar for their financial operations. This can be illustrated by Iraq looking to continue trading with Iran by escaping US dollar fiscal operations, while Egypt has reportedly proposed establishing a new African currency that should facilitate trade on the continent, and the EU might avoid using the dollar in its affairs with Iran, replacing it with the euro to avoid US sanctions on Tehran. If this trend continues, the US will be the main loser as a result of its own policies, giving up the leverage it holds on the world stage — its currency. 

There appears to be no end to the sanctions war in the foreseeable future, as Russia will continue to respond reciprocally, as it has done before, and such escalations will continue to raise the stakes. 

• Maria Dubovikova is a prominent political commentator, researcher and expert on Middle East affairs. She is president of the Moscow-based International Middle Eastern Studies Club (IMESClub). Twitter: @politblogme