Just as Ukraine attacks Russia on the military battlefield, the United States must reinvigorate its assistance efforts on the economic battlefield. The National Defense Authorization Act passed by the House of Representatives includes Amendment No. 743, which allows temporary government to use sanctioned assets related to President Putin (seized in criminal proceedings) to help rebuild Ukraine. It gives power to the president. Likewise, the European Union can move forward towards this kind of lawful seizure of assets. In July, European Commission Judiciary Commissioner Didier Lainders told the press he expected a political agreement to facilitate the seizure of assets to be completed in the fall.US, EU, UK and allies must maintain momentum in its efforts to counter Russia, including closing gaps in the sanctions regime.
The need arises because, in the short term, there have been some areas of resilience in the Russian economy. Putin has so far responded to economic stimulus with “dramatic fiscal and monetary interventions to mitigate these structural economic weaknesses.” So the sanctions that once pushed the Russian ruble down to 139 per US dollar for him look less effective in the short term than many would have liked. In June, the Russian ruble reached about $52 per he dollar. The EU’s historic package of sanctions against Russian oil has not significantly cut Kremlin revenues. It is included. In addition, the unprecedented surge in oil prices and the willingness of India and China to “buy Russian oil at discounted prices” has allowed Russia to run a large foreign exchange account surplus.
Longer term, the impact of sanctions, export controls designed to freeze Russian technology, and the exclusion of Russia by many countries could be devastating if the United States and its allies remain committed to exerting pressure. will make an impact.
The latest edition of the Brookings Sanctions Tracker shows that much more can be done to leverage and strengthen existing and future frameworks for stimulating the economy. This tracker shows that the United States and its allies have imposed targeted financial sanctions against over 3,000 individuals and entities in response to Russia’s aggression since 2014. But not all are equally effective.
Trackers show large gaps between jurisdictions. For example, the United States has not subject 37 senior Belarusian officials and 82 members of the Russian House of Representatives to asset freezes and travel bans, as many of its allies have done. Closing such gaps is an important step towards closing the back door to sanctions evasion and conducting lawful seizures of state assets.
To give another example, individuals and companies at risk of sanctions often hide behind false names or transfer assets to spouses, children, subsidiaries, etc. Unless jurisdictions coordinate on a technical level, including sanctioning subsidiaries and listing all known aliases, the illicit interests of individuals and companies could remain liquid. You can see that we make a reasonable effort to publish information that covers our known subsidiaries, but that is not the case in many other jurisdictions.
Moreover, multilateral sanctions can increase pressure on targets for related geopolitical and business interests. For example, states, private entities, and individuals may be particularly reluctant to engage with sanctioned subjects when sanctions are imposed by their closest allies. Regulatory factors also come into play, as seen with multinationals that have voluntarily chosen to distance themselves from Russia-related deals.
In late June, the United States took a step toward closing a significant gap by imposing an asset freeze on Rostec, whose assets in the United Kingdom, Australia, Canada and New Zealand had already been frozen.[1] Rostec is “the cornerstone of Russia’s defense, industrial, technological and manufacturing sectors”. The proximity of Rostec’s subsidiaries, which are involved in a variety of industries, including ratioed electronics, optical and laser systems, and asset management, is a testament to Russia’s ability to “develop and deploy weapons and technology” used in the war in Ukraine. weaken the The U.S. government has taken longer to target Rostec than other jurisdictions, but has licensed more subsidiaries. Other jurisdictions should follow suit and impose sanctions on all possible subsidiaries.
Economic stimulus takes time, especially when targeting a large economy like Russia. Putin has made it clear that he is committed to the long term and shows no signs of slowing down or shifting resources. To counter Putin, the United States and his allies must do the same. But they are already showing signs of fatigue. Votes approving aid packages in the United States are becoming increasingly partisan. House Republicans had only 10 of them vote against the new Lend-Lease Act in April, but in May he had 57 votes against the aid bill. Moreover, a poll taken that month showed that a majority of Americans no longer support “sanctioning Russia as effectively as possible, even if it hurts the American economy.” not
It is imperative that the United States and its allies continue to send military and financial aid to Ukraine and continue to provide military training. Political ties that are strong today may weaken tomorrow. So it’s important to leverage what we have and do it quickly. The Brookings Sanctions Tracker provides the ability to analyze gaps in the global sanctions regime and greater opportunities for adjustments to fill them.
footnote
- The EU has imposed sanctions against Rostec under Annex XIX. This prohibits directly or indirectly engaging in transactions with the listed entities or individuals. The EU has not yet imposed an asset freeze on Rostec. (back to top)
