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New Russia Sanctions Are Well-Intentioned -- But Poorly Targeted

 

September 2, 2020



By Andrew Langer

Vladimir Putin is arguably the free world's most dangerous foe. In the past few years alone, he has invaded Ukraine, propped up murderous dictators in Syria and Iran, and even meddled in America's elections.

Now, Senators Lindsey Graham (R-SC), Marco Rubio (R-FL), and Bob Menendez (D-NJ) have a plan to stop him. The three recently shepherded a bipartisan sanctions package through the Senate Foreign Relations Committee.

The senators' hearts are in the right place. But unfortunately, their package is so poorly targeted, it'd hurt America's economy more than Russia's. Americans can only hope these senators rework their bill to hammer Putin and his cronies rather than U.S. businesses.

The Defending American Security from Kremlin Aggression Act, or DASKA, would sanction any transaction between U.S. companies and "parastatal" entities owned or affiliated with the Russian government. That sounds sensible enough -- naturally, we don't want American companies making deals that enrich the Russian government.

But the bill doesn't even allow for reasonable exemptions, such as the mandatory business registration and inspection fees that American firms must pay in Russia.

For instance, imagine an American shipping company needs to pick up cargo in St. Petersburg. Does it really make sense to penalize that company for purchasing the necessary permits from the government?

DASKA would also prohibit American oil and gas companies from partnering with Russian-owned firms on energy extraction and transport projects anywhere in the world.

It makes sense that senators would target Russia's energy sector -- one of the nation's principal sources of wealth. But the total ban on partnerships is too extreme. It could actually empower Putin's kleptocrats to box out American firms from new, lucrative projects.

Here's how. Russian companies could take a stake, even a small stake, in a particular energy project, such as a liquified natural gas terminal in Nigeria. That'd force American companies to abandon the project, even if they'd already invested tens of millions of dollars. If DASKA becomes law, U.S. firms will have to withdraw from at least 100 ongoing oil and gas projects.

DASKA would also compromise our alliance with the European Union. Since 2014, the United States has worked side-by-side with our European allies to sanction Russia. But the European Union doesn't want to impose additional sanctions on Russia, particularly not the broad penalties outlined in DASKA. If the United States unilaterally enforces these sanctions, it could strain our relationship -- something Russia would undoubtedly exploit.

Senators Graham, Rubio, and Menendez rightly want to kneecap Putin. But DASKA isn't the solution. It'd cause too much collateral damage to American companies -- and even give the Kremlin an opportunity to thwart America's rise as an energy superpower. It's time to go back to the drawing board.

Andrew Langer is President of the Institute for Liberty. He holds a degree in Soviet Studies and is a lecturer at the College of William & Mary where he serves as the faculty lead on a State Department-funded student research project.

 

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