Russia, U.S. Edge Toward Economic Warfare
Policy + Politics

Russia, U.S. Edge Toward Economic Warfare

REUTERS/Kevin Lamarque

Russia and the West appear to be moving ever closer to full economic warfare as U.S. and EU leaders prepare new and harsher sanctions on the Russian economy and Russian lawmakers discuss legislation that would give authorities in Moscow the ability to eject companies from Russia if they are headquartered in “aggressor nations” – defined as countries that have imposed sanctions on Russia. 

In the nearly two weeks since a Malaysia Airlines passenger jet was shot down over Ukraine by Russian-backed separatists, Moscow’s posture toward the neighboring country has become more, rather than less aggressive. U.S. intelligence reports that arms and materiel have continued to flow across the Russian border to separatist units, and that the Russian military has been firing artillery rounds over the border in support of separatist units. 

Related: Russian Oligarchs Are Tired of Funding Putin’s Land Grab 

On Tuesday, U.S. and EU officials are expected to finalize a harsh new set of sanctions on Russia. The Financial Times, which obtained a draft version of the sanctions, reported that “the EU measures would bar any European from investing in or advising on a new debt or stock offering by any Russian bank that is more than 50 per cent owned by the state. Such a restriction would cover most of Russia’s largest financial institutions. The measures also include energy sanctions that bar export of 32 highly sophisticated technologies needed in deep-sea drilling, Arctic exploration and shale oil projects, and an arms embargo.” 

Rumors of the extent of the new sanctions started to emerge on Monday, just as the Permanent Court of Arbitration in The Hague ruled that the Russian government must pay $50 billion in damages to the former shareholders of defunct Russian oil company Yukos. The panel agreed that the company had been driven into bankruptcy by a series of political attacks aimed primarily at its owner, Mikhail Khodorkovsky, a key political rival to Russian President Vladimir Putin.

The largest such ruling in history, it would allow former Yukos shareholder to make claims on Russian state property overseas if, as expected, the government refuses to pay.

Also on Monday, the Obama administration unexpectedly accused Russia of violating a nuclear weapons treaty signed in 1987. The administration claims that, as long ago as 2008, Russia tested intermediate range missiles capable of delivering nuclear warheads, a practice banned by the treaty. The tests have long been a poorly kept secret, but the public accusation on Monday only upped the tension between Russia and the US.

Related: Obama’s Road to Unintended Consequences in Ukraine

In response to increased Western pressure, Russian lawmakers are reportedly working on legislation that would allow Moscow to define countries that enact sanctions against Russia as “aggressor nations.” The government the authority to expel any foreign companies headquartered in countries so designated.

According to the Kremlin-friendly English language news outlet Russia Today, “Once some country is included in this list, all its citizens, permanent residents and companies registered on its territory automatically lose the right to deliver legal services, business consultancy and financial audits on Russian territory.” 

RT noted that the bill will not be considered by the full Duma until the fall, but said lawmakers believe some of the restrictions being considered could be introduced sooner. 

Related: EU Agrees to Russia Sanctions; U.S. Could Arm Ukraine 

The impending announcement of harsher sanctions on Russia prompted some large international companies to issue warnings to their shareholders about a potential negative impact on profits. British oil company BP, which owns about 20 percent of Russian energy conglomerate Rosneft, said in a statement, “Any future erosion of our relationship with Rosneft, or the impact of further economic sanctions, could adversely impact our business and strategic objectives in Russia, the level of our income, production and reserves, our investment in Rosneft and our reputation.”

French carmaker Renault, which has a large interest in Russian automaker Avtovaz, has already reported a decline in sales, and warned that further impact from sanctions was a strong possibility. 

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