The United States must redouble its support efforts on the economic front while Ukraine pushes back against Russia on the military front. The National Defense Authorization Act, approved by the House, contains amendment #743, which would grant the President a single authority to use assets (forfeited through criminal proceedings) of sanctioned targets linked to Putin to aid in the reconstruction of Ukraine. The European Union can also move closer to legal asset seizure. Didier Reynders, the EU’s commissioner for justice, predicted in July that a political deal to simplify asset seizures would be completed in the fall. In their efforts to oppose Russia, the US, EU, UK, and allies must keep up the pace, which includes filling in any gaps in the sanctions framework.
Some regions of Russian economic resilience bring on the necessity in the near term. Putin has so far used “dramatic fiscal and monetary intervention to smooth over these structural economic deficiencies” as a response to economic remedies. As a result, the sanctions that once drove the Russian rouble down to about 139 to the USD seem to have a less immediate impact than many had thought. Although it has somewhat dropped to about 60 to the dollar, the Russian rouble in June reached “its best level since May 2015” at about 52 to the dollar. The unprecedented sanctions imposed by the EU on Russian oil have not yet significantly reduced the Kremlin’s earnings. The “wind down time” of the package and significant carve-outs for oil delivered via pipelines are among the causes. In addition, Russia’s foreign exchange account has substantial surpluses due to the historically high oil prices and India and China’s willingness to “grab up Russian petroleum at discounts.”
If the US and its allies continue to be devoted to exerting pressure, sanctions, export bans intended to freeze Russian technology, and the isolation of Russia by many states will all have terrible long-term implications.
The most recent Brookings Sanctions Tracker edition demonstrates how additional steps might be taken to strengthen the current and upcoming framework for economic responses. The tracker indicates that, since 2014, over 3,000 people and businesses have been subjected to targeted financial penalties by the US and its partners in response to Russian aggression. But not all of them work equally well.
The tracker shows significant discrepancies between different jurisdictions. For instance, numerous partners have imposed asset freezes and travel restrictions on 82 Russian Duma Members and 37 high-ranking Russian defence officials, but the United States has not. These gaps must be closed to carry out legal national asset seizures and close sanction evasion backdoors.
Another illustration would be that people and businesses who run the risk of sanctions frequently utilise aliases or transfer their assets to subsidiaries like their wives, kids, or daughter firms. Individuals and corporations’ illicit earnings may continue to be mobile unless jurisdictions coordinate at the technical level, which includes penalising subsidiaries and disclosing all known aliases. When you look at the tracker, you can see that, in contrast to many other countries, the United States has made a significant effort to target and publish information on known subsidiaries.
Additionally, due to pertinent geopolitical and commercial interests, international sanctions may enhance pressure on targets. When sanctions are imposed by their closest allies, for instance, nations, businesses, and individuals may be highly reluctant to cooperate with the marks. As we’ve seen with global firms that have voluntarily cut ties to trade with Russia, regulatory factors also come into play.
By putting an asset freeze on Rostec in late June, the US made progress towards narrowing a significant gap; the UK, Australia, Canada, and New Zealand had already done the same. [1] Rostec anchors Russia’s defence, industrial, technological, and manufacturing industries. By focusing on Rostec’s affiliates, which work in various fields like asset management, optical and laser systems, and ratio electronics, Russia will be less able to “create and deploy weaponry and technology” for the conflict in Ukraine. Despite targeting Rostec later than other countries, the US government sanctioned more subsidiaries than any other country. All conceivable subsidiaries must be approved, and other jurisdictions must follow likewise.
Countermeasures against an economy as massive as Russia’s take time, mainly. Putin has made it evident that he intends to be in this for the long haul, and he doesn’t appear to be slowing down or refocusing his efforts. The United States and its allies must act similarly to confront Putin. Nevertheless, they are already displaying indications of tiredness. In the US, votes to approve aid packages have become more politicised. Only 10 House Republicans voted against the new Lend-Lease Act in April, whereas 57 did so in May. The majority of Americans no longer support “sanctioning Russia as effectively as possible, even if it harms the US economy,” according to a poll conducted that month.
The US and its allies must keep supplying Ukraine with financial and military aid and training. Strong political unity today could become weaker tomorrow. Therefore, we must utilise what we have as soon as possible. The Brookings Sanctions Tracker makes it possible to identify weaknesses in the international sanctions system and potential areas for improved coordination to address them.
Analysis by: Advocacy Unified Network
