Counter-Sanctions: How Can Russia Hurt the US?

The recent "oligarch sanctions" are quite serious actually. Time to think how Russia could hit back

On April 6, the US Treasury Department extended sanctions against a number of Russian billionaires, including:

  • Heads of state owned energy giants Sechin (Rosneft) and Miller (Gazprom)

  • Putin’s circle of silovarch chums and friendly billionaires, e.g. Kirill Shalamov (Putin’s former son-in-law), Fursenko, Patrushev, Zolotov, Dyumin (a long rumored successor)

  • The “oligarchs” (which they are not) Deripaska (Rusal/EN+), Vekselberg, and Kerimov

Positive side is that this helps Putin’s stated goal of “nationalizing” Russia’s infamously comprador elites and repatriate their money back to Russia.

Negative side is that these sanctions really are quite serious, constituting a major upgrade over the meaningless Russian Forbes list from January 2017.

The individuals and companies in question have been added to the Specifically Designated Nationals (SDN), which forbids US nationals from doing business with them, freezes their US assets, requires US persons to sell any company stock they have within 30 days, and crucially, opens the possibility of secondary sanctions against non-US companies that continue to do business with them.

Companies in this category include some of the commanding heights of the Russian economy:

  • EN+/Rusal – World’s largest aluminium producer

  • Rosoboronexport – Russia’s weapons expert monopolist

  • Russian Machines – Major industrial conglomerate

These come in addition to previously enacted sectoral sanctions on the Russian oil industry, which makes it difficult for Russia to get access to the equipment and software needed to drill for unconventional oil (its own capabilities in this sphere are limited thanks to Putin’s relative disinterest in developing domestic R&D).

The new sanctions will further up the pressure on the long-term viability of the Russian economy:

1. The US market is an order of magnitude larger than Russia’s, so it is not only US corporations that will defer to Uncle Sam. This will also hold true for European corporations (most of Russia’s trade is still with Europe), for Chinese corporations (unless the CPC expressly orders them to flout US restrictions), and even for other Russian corporations (e.g. Russian state banking giant Sberbank still doesn’t have any branches in Crimea in what is probably a futile effort to avoid US sanctions).

2. The fact that the US continues to introduce even more severe sanctions against Russian companies – and we haven’t even gotten to the fallout over the Douma alleged chemical weapons attack – will make foreigners even warier of doing business in Russia than they already are, and raise the cost of business across the board.

It is now well past time to admit that the US is engaged in a long-term project to cut off and strangle the Russian economy, and to react vigorously to this threat.

The dominant view in the US is that Russia is a gas station masquerading as a country, with an economy smaller than that of Italy/Texas, and is consequently too much of a small fry to hurt the US itself. The longer Russia sits still, the more certain the Americans will become in that conviction, and the more untied the Americans’ hands will become in enacting further anti-Russian sanctions and seizures. It is well past time to move beyond symbolic measures if Russia wants to survive and thrive as a sovereign state.

Some ideas for Russian sanctions against the US:*

1. Although kicking out select American corporations will be viscerally satisfying – I have seen McDonald’s suggested – in reality this would be very counterproductive, making foreigners even more loth to invest in Russia.

2. Get Roskomnadzor to do something useful for once and block Google, Facebook, and Twitter (as opposed to harassing Russian patriots and threatening to shut down Russian services such as Telegram). These companies all have an anti-Russian agenda and are deep in bed with USG and its global surveillance program. They should not be allowed free access to the Russian market, not least because Russia has viable alternatives to all of them ready to go (e.g. Yandex, Vkontakte, Odnoklassniki).

Those few Russians who really, really need Google/Facebook will be free to use VPN to get round them.

Russia needs its own sovereign information ecosystem like China has instead of feeding its adversary’s.

3. Since the US is now targeting Putin’s “oligarchs”, while leaving pro-Western Russian billionaires alone (e.g. Friedman’s Alpha Bank, which has acknowledged the Donbass and Crimea as occupied territories), this creates perverse incentives for Russian oligarchs to kowtow to Uncle Sam.

There are two ways to rebalance incentives:

(a) Compensate the material losses of Russian billionaires affected by Western sanctions. But this is going to be very unpopular with ordinary Russians, and Navalny and liberals are at the ready to make political hay from this.

(b) Pressure pro-Western billionaires. Associating with the US and its most supplicant satraps (e.g. the UK) should become as toxic for a Russian businessman, as it is now for American businessmen to associate with Russia. A couple of demonstrative trials should instill the message.

4. Since Trump wants protectionism so much, he can have it.

There have been several campaigns to shift from Microsoft products to Linux, but the former remains ubiquitous on Russian government systems. This is a totally bizarre state of affairs, not least considering that the US banned Kaspersky on government systems last December. There need to be real punishments and demotions for heads of bureaucratic departments who continue (for all intents and purposes) to feed yet another US surveillance apparatus within Russia.

Another company that comes to mind is Boeing. Russian airlines should be mandated to buy non-US planes, and preferably Russian ones. Russia has the SSJ-100 regional plane, the Irkut MC-21 will enter mass production from 2019, and there is a large wide-body jet jointly developed by Russia and China that may be coming to market by the late 2020s.

This is just the beginning. I’m sure one can think of many other good targets.

Fortunately, Trump/deep state/whomever have been dumb enough to engage in a trade war with China and Europe at the same time as they further the squeeze on Russia, so there’ll be plenty of opportunities for cooperation on this.

5. The US in 2017 made a special exemption to allow NASA and other American companies to continue buying Russian rocket engines.

Russia should just ban it anyway.

SpaceX is still a couple of years off from developing the heavy reusable rockets that would annul the need for Russian rocket engines.

6. I have long been arguing that Russia should adopt the Chinese method of keeping a secret blacklist of very hostile Western journalists (so that would be most of them) and denying them visas.

First, this works. Western coverage of China is far nicer and fairer than of Russia.

Second, frankly, these people deserve it, having played a major role into getting us all into this mess.

7. I believe that sooner or later RT is going to get ejected from a swathe of Western countries.

When that happens, Russia should be prepared to shut down the relevant country’s news bureaus in Moscow (making exceptions for any pro-Russian outlets, if they exist).

Source: The Unz Review

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