The next wave

The West is preparing a new round of sanctions against Russia, but who really pays, and what’s the point, in the end?

On February 8, 2021, at the initiative of the Permanent Representation of Poland to the European Union, two of Alexey Navalny’s associates — Leonid Volkov and Vladimir Ashurkov — held a meeting with Western diplomats. According to Polish state radio network Polskie Radio 24, which published a report from the meeting, the ambassadors of Great Britain, the U.S., Canada, and Ukraine were also present, along with representatives of the EU’s diplomatic corps. According to Reuters, Volkov and Ashurkov spoke about the West’s policy towards Russia, including possible sanctions against individuals in Putin’s inner circle.

They were most likely referring to the “priority shortlist,” which Ashurkov, the executive director of the Anti-Corruption Foundation (FBK), published shortly after Navalny’s return to Russia from Germany and subsequent arrest. The list includes the names of eight individuals — the same eight names that come first in a longer list of 35 people that Ashurkov attached to his recent letter to U.S. President Joe Biden.

What sanctions are we talking about?

In addition to those named on the “shortlist,” the expanded list includes 12 people who, according to Ashurkov, are directly responsible for Navalny’s political persecution — from Investigative Committee head Alexander Bastrykin and Russian National Guard director Viktor Zolotov to Russia Today editor-in-chief Margarita Simonyan, as well as Khimki Municipal Court judge Elena Morozova and local police chief Igor Yanchuka (apparently for his role in detaining Navalny at Sheremetyevo airport and the subsequent trial held right in the police station). It also includes the leaders from state corporations, law enforcement agencies, local governments, and the presidential administration.

Both the U.S. and Europe have already responded to Navalny’s supporters’ requests. On January 21, an overwhelming majority of European Parliament members voted for a resolution calling for EU member countries to stop the construction of the Nord Stream 2 gas pipeline and impose sanctions against members of Putin’s inner circle.

In the U.S., a bipartisan group of senators led by Republican senator Marco Rubio introduced a bill of sanctions against individuals involved in the poisoning of Alexey Navalny and other human rights violations in Russia. In an interview with MSNBC, U.S. Secretary of State Anthony Blinken condemned the use of chemical weapons against Navalny and announced that the U.S. government was considering possible responses. He didn’t specify what responses were being considered.

While seven of the people named on the list are already under a range of international sanctions, the Russian authorities have not dismissed either the new Western sanction initiatives or the communications between Navalny’s team and Western politicians. On the Russian news program “60 Minutes,” Foreign Ministry spokeswoman Maria Zakharova stated that “our Western so-called partners […] are continuing their absolutely illegal, illegitimate, and aggressive attack on us.” On Facebook, she accused Navalny’s supporters of being NATO agents. Meanwhile, during a press briefing on February 9, Putin’s press secretary Dmitry Peskov disagreed with the idea that the letters to the U.S. and the EU can be considered treason, but also brought up the bill that would recognize such actions as criminal offenses.

What’s this legislation?

On May 14, 2018, exactly a week after Vladimir Putin’s presidential inauguration, Russian lawmakers introduced a bill to hold Russian citizens criminally liable for “deliberate actions contributing to the imposition of foreign sanctions.” In the most extreme cases, violators could face three years in prison and a fine of 200,000 rubles ($2,700) or a year’s salary. Another section in the bill penalized compliance with foreign sanctions; violators of this rule could go to prison for four years and pay the same fine.

Dmitry Medvedev’s government endorsed the legislation, and lawmakers approved its first reading a day later on May 15. On May 17, however, the deputies decided to postpone further consideration “due to insufficient legal elaboration.” The Duma hasn’t returned to it since, but Duma speaker Vyacheslav Volodin recently proposed reviving it and adding amendments to criminalize calling for foreign countries to impose sanctions on Russia.

What kind of sanctions are they proposing?

To see what could await the individuals named in Marco Rubio’s bill, “Holding Russia Responsible for Malign Activities,” take a look at the bill itself.

Within 30 days of the bill’s passing, the U.S. president would have to present to Congress a list of people representing the Russian government or its interests who may be involved in the poisoning of Alexey Navalny or its concealment. Those individuals would then either be subject to the same sanctions listed in the Magnitsky Act, or the following sanctions:

• The freezing of all assets located in the U.S. or in the possession of American citizens or organizations, and
• A ban on entering the U.S., including the revocation of existing visas and a refusal to issue new ones

Are there loopholes?

Marco Rubio’s bill does have one important exception. It concerns the U.S.’s obligations to the UN headquarters in New York under a 1947 agreement. According to Sections 11-13 of Article 4 of the agreement, the U.S. is required to provide access to the block in eastern Manhattan where the UN headquarters is located to a wide range of people, from the country’s official UN representatives to anyone invited by any of the NGOs accredited by the EU as consultant organizations (which includes over 5,000 organizations). That means that, theoretically, anyone hit by sanctions for Navalny’s poisoning could be invited to the UN building as a guest — by the Russian Peace Foundation, for example — and the U.S. government would be forced to issue them a visa.

Oleg Deripaska has already used this loophole. After his American visa was revoked in 2007 (for his alleged links to organized crime groups in Russia), Deripaska spent a lot of time trying to restore it; even Russian Foreign Minister Sergey Lavrov tried to help him by recruiting American lobbyists and was ultimately required to register as a foreign principal in the Foreign Agents Registry (FARA). Since then, according to a 2018 article in Bloomberg about the sanctions, Deripaska has managed to travel to the U.S. at least 10 times on a diplomatic passport (without a visa). He’s used the same passport to represent Russia at the G8 and G20 summits, as well as other international events, as a member of APEC.

In a 2019 interview with FT, Russian billionaire Viktor Vekselberg spoke about similar sanctions the U.S. had taken against him, calling them a “complete crisis in his life.” He complained about not being able to see his children or grandchildren: “All my life, I’ve tried to be a man of the world […]. I moved my whole family to the U.S. I never imagined I’d be in this situation.” More recently, he mentioned in an interview with Forbes that he has more than half a billion dollars in Western banks, and that the U.S. Treasury Department won’t even let him spend it on charity.

Even people just named as potential targets are affected. Meduza spoke to one businessman named on the “Kremlin List,” which isn’t itself a sanctions list but falls under the American sanctions law CAATSA. So far, he said, he’s been able to keep his business in the West, but running it remotely has become a challenge. “If a new account was opened in a Western bank we hadn’t used before, we would be subjected to a very thorough check, even if we had a good history in other banks we were using,” he said. “The checks became stricter — they’d try to find out whether we were doing business with the original targets of the sanctions, and whether we had connections to politicians and bureaucrats. So if you were getting aluminum from [Russian oligarch Oleg] Deripaska, you’d have to explain that you didn’t have a choice.” But personal sanctions, he explained, are even more impactful:

“You can’t export to the West; they cut off transport technology you could have used; all of your Western partners leave you. Western regulators look at several things: friendship with [Putin’s] family, government contracts, and Crimea. If you’re even close to doing those things, you’ve got no chance of doing business in Europe or the U.S.”

It’s not only the people named on the sanctions lists who are affected — their business partners feel it as well. The head manager of an enterprise hit by sanctions targeting Vekselberg told Meduza that the sanctions against Vekselberg temporarily paralyzed his company’s business with American and European banks. “We removed Vekselberg from our shareholders’ list,” he said, “but even after his participation fell below 50 percent, which is what the sanctions required, I couldn’t access my money; I couldn’t even pay my lawyers.” Having connections to a sanctioned person significantly complicates any financial procedures, said Meduza’s source. “For several long, painful months, I was forced to withdraw money from my own accounts and open new accounts in new banks that didn’t fall into the sanctioned jurisdiction. This cost money. It was like a terrible hemorrhoid. Every time, I had to do my due diligence again.” Even now, he said, he seems to have a permanent “Vekselberg stain” that discourages people from doing business with him.

Another painful effect (literally) of personal sanctions is an inability to seek medical treatment abroad. In 2017, Reuterswrote about the “Kremlin hospital” — a separate building on the Central Clinical Hospital territory intended to serve Russia’s top officials. Reuters’s sources claimed that Putin’s inner circle’s need for high-quality medical care became especially acute after the wave of personal sanctions that followed Russia’s annexation of Crimea; Putin himself said in 2014 that Gennady Timchenko’s wife was unable to pay for her surgery due to the sanctions. Joseph Kobzon, the target of EU sanctions, tried several times to get a Shengen visa in order to visit Italy. He was ultimately able to get an Italian visa on humanitarian grounds.

Are sanctions actually effective?

Because of the relatively short lifespans of most of the sanctions imposed on Russia (as opposed to Iran and Cuba, for example, who have been under sanctions for decades), their long-term effects are still poorly understood. Nigel Gould-Davies, the former British ambassador to Belarus, wrote an analysis of several rounds of international sanctions since 2014 against the Russian authorities, businessmen, and companies, including the sanctions that followed the annexation of Crimea and interference in Ukraine, interference in U.S. elections, and the poisoning of the Skripals. He came to the conclusion that these sanctions have been fairly ineffective if you evaluate them based on their stated goals (preventing future hostile actions).

Thanks to the size of its territory and economy, Russia has managed to mitigate the effects of many sanctions using strategies like import substitution. And sanctions work as a deterrent only in the most extreme cases — for example, it was only the threat of being disconnected from the global payment system SWIFT that prevented pro-Russian separatists from taking over Mariupol in 2014. At the same time, according to Gould-Davies, sanctions can have a cumulative, rather than instantaneous, effect on Russia’s policy changes by gradually accelerating the country’s economic crisis.

Text by Alexey Kovalev, Svetlana Reiter, and Denis Dmitriev, edited by Tatiana Lysova

Translation by Sam Breazeale