Excessive demand

How Russian oligarchs upped the ante around the US Treasury report

On January 26, the US Treasury expanded sanctions against Russia over Ukraine. As explained in the message of the Office for Foreign Assets Control (OFAC) of the Ministry of Finance, the department took this step, protesting against the "occupation of Crimea by Russia." Thus, in the expanded list of individuals and organizations subject to US Treasury sanctions due to Russia's policy towards Ukraine, there are now 21 individuals and about 20 organizations, including Deputy Minister of Energy of the Russian Federation Andrey Cherezov, director of the Department of Operational Control and Energy of the same department Evgeny Grabchak, CEO of Technopromexport (a subsidiary of Rostec) Sergei Topor-Gilka, Power Machines of oligarch Alexei Mordashov...

All of them will add to the list of citizens of special categories (Special Designated Nationals, SDN), with which American businesses are now prohibited from entering into any business (financial) relations.

Sanctions on January 26 not only underlined the US intention not to retreat in political pressure on Russia, they added to the nervousness of the Russian elite, which is in anxious expectation: on January 29, the US administration, in compliance with the Countering America's Adversaries Through Sanctions Act (CAATSA), must submit to Congress so the so-called "Kremlin report" of the US Treasury with a detailed list of businessmen and officials who are part of Putin's "inner circle". All persons on this list may be subject to personal sanctions.

On the brink of panic

When on March 16, 2014, the United States imposed the very first personal sanctions in response to the annexation of Crimea (only 11 names were on the list), it became an occasion for the victims to exercise wit. For example, Vladislav Surkov, an aide to the President of Russia, proudly declared that he considers the distinction he received to be a “political Oscar.” “So it came to me - a real world recognition!” - Deputy Prime Minister Dmitry Rogozin jubilantly exulted. There were also fools: not finding themselves on the list, they demanded that Obama write them down as well. The sanctions list has become something like a VIP card in a trendy private club.

But now, four years later, the mood is completely different. Russian oligarchs are anxiously waiting for the "Kremlin report" where they expect all of them to be written down. Judging by numerous publications, the mood of potential defendants is close to panic. The Washington lobbyists they hired are digging their noses in the ground but can't find a way to ward off the threat from their clients.

Paradoxically, it was this fuss about the “Kremlin report” that raised the stakes greatly. When President Trump signed CAATSA into law in August 2017, no one in Washington paid any attention to the report's provision. How many reports are written at the request of Congress! “The list was expected to be shelved and forgotten about immediately after publication, as is often the case with such reports,” writes The New York Times. Lawyers insisted that there was no reason to be nervous: the list was not sanctioned, and it did not entail any automatic punishment.

But how can you not be nervous? After all, it is clear that the list is a preparation for a new round of sanctions. They get on the list for being close to Putin, and without being close to Putin, there is no big business in Russia. And it remains to be seen what nasty things they will write about you there and how to then ensure that you are excluded from the list: unlike the sanctions, from which the president has the right to delete any name or title, there is no procedure for deleting you from this list.

The peculiarity of the “Kremlin report” is that it creates uncertainty. Adam Smith, a Washington lawyer and former sanctions adviser to the US Treasury, says in an interview with The New York Times: “It's one thing to tell banks that so-and-so is under sanctions. And it’s quite another to put it like this: “This guy is on the list. Think for yourself what to do with it.”

"toxic" partners

The excitement of the Russian oligarchs gave weight and significance to the yet unpublished report.

About the workpiece - right. Many have not read up to the end of section 241 of the CAATSA law, which requires the administration to report on the oligarchs, their families, business activities and the size of their fortunes. At the very end of this article, it is said that the authors of the report should calculate the possible effect of the imposition of sanctions both on the persons on the list and on the Russian economy as a whole, as well as on the economy of the United States and its allies.

In addition, according to experts, a formal sanctions regime may not be required in some cases: investors will avoid "toxic" partners simply out of caution.

The peculiarity of the “Kremlin report” is that it creates uncertainty. Adam Smith, a Washington lawyer and former sanctions adviser to the US Treasury, says in an interview with The New York Times: “It's one thing to tell banks that so-and-so is under sanctions. And it’s quite another to put it like this: “This guy is on the list. Think for yourself what to do with it.

On January 17, exercising their right to propose nominations for the list, four Republican senators—Roger Vicker, Marco Rubio, Corey Gardner, and Lindsey Graham—sent identical letters to the list's officials: Secretary of State Rex Tillerson, Secretary of the Treasury Steve Mnuchin and Director of National Intelligence John Coates. In this message, the senators call for two names to be included in the list: Yuri Chaika and Alisher Usmanov. Each name is accompanied by a certificate compiled on the basis of materials from the Anti-Corruption Foundation (FBK) of Alexei Navalny and the International Consortium of Investigative Journalists (ICIJ).

With their proposal, lawmakers make it clear what they expect from the report and what level of person should be on the list.

Well, it's just a little bit of a wait...

* Vladimir Abarinov, Washington-based journalist, regular contributor to NT

The opinion of the author may not coincide with the opinion of the editors