“Putin Is Corrupt” and Other Uncertainties Related to U.S. Policy toward Russia

During a BBC interview aired on January 25, a surprising and seemingly “out of the blue” comment from Adam Szubin, U.S. acting under secretary of the treasury for terrorism and financial intelligence, had many people scratching their heads. Szubin in essence said President Vladimir Putin of Russia is corrupt.

Mr. Szubin, who previously served as director of the U.S. Treasury Office of Foreign Assets Control between 2006 and 2015— the office in charge of implementing U.S. financial sanctions—described President Putin’s personal situation as one that paints a “picture of corruption” about which the U.S. government has been aware for “many, many years.” “We have seen him enriching his friends, his close allies, and marginalizing those who he doesn’t view as friends using state assets. Whether that’s Russia’s energy wealth, whether it’s other state contracts, he directs those to whom he believes will serve him and excludes those who don’t” he added, mentioning Putin’s “long time training and practices in terms of how to mask his actual wealth.”

Was this statement a warning to President Putin that more “personalized” sanctions would be placed against him and his inner circle? Did new information recently come to light about Putin’s personal wealth? Was the United States initiating a new strategy vis-à-vis the Kremlin?

Three days following the release of the BBC interview, White House press secretary Josh Earnest was asked about Szubin’s characterization of President Putin. Earnest reaffirmed that Szubin’s comments “best reflects the administration view.” Asked why the Obama administration had refrained in the past from describing President Putin in such stark terms, Earnest seemed to draw a connection to possible sanctions, saying that the United States doesn’t “make a habit of announcing sanctions in advance…To do so would only give those who could potentially be the target of these sanctions the opportunity to take actions to evade those sanctions.”

This statement clearly had some in the Kremlin wondering what it meant and a bitter exchange of official statements between Washington and Moscow ensued. On January 29, Dmitri Peskov, Mr. Earnest’s counterpart in the Kremlin, described the U.S. allegations as “pure fiction” accusing Washington of meddling in Russian politics. Russia’s foreign affairs minister, Sergei Lavrov, delivered a similar message in a phone call with Secretary of State John Kerry and expressed “outrage at the contrived and unforgivable allegations against the Russian leadership” and emphasizing “that the blame for the deliberate whipping up of tension in bilateral affairs falls squarely on Washington.” Strangely, only days earlier Secretary Kerry had remarked that sanctions against Russia might be lifted should the cease-fire agreement in Ukraine be implemented.

This exchange sheds light both on the ongoing evolution of tensions between the countries and the growing uncertainty about the United States’ current strategy and policy toward Russia.

To be fair, Mr. Szubin’s interview was recorded in July 2015 but only publicly released in January 2016. It is difficult to see how the seemingly random timing of the BBC interview was designed to deliver a specific message from the U.S. government to Moscow. However, Mr. Ernest’s statement complicates the story by suggesting that a Treasury Department official’s comments could be linked to future U.S. action, making it sound as if a specific policy was being set into motion.

If a specific U.S. message was being sent, who was the intended audience? There are several possible recipients.

Conceivably, the message might have been targeted for an American audience as an attempt by the Obama administration to remind the U.S. public that Putin, who has recently formed a mutual admiration society with Republican presidential candidate Donald Trump, is a corrupt man (in addition to his aggressive military behavior in Ukraine and Syria). Alternatively, the British government may have been the recipient, as the United States was less than overwhelmed by the tepid response of the Cameron government to the results of the formal UK public inquiry into the murder of former Russian Federal Security Service (FSB) agent Alexander Litvinenko, which concluded that there was a “strong possibility” that the murder had been committed on behalf of the FSB and that the “operation was probably approved by President Putin.”

The U.S. message may have been aimed at the European Union, as there are increasing concerns Russia is exacerbating Europe’s migration crisis in its military operations in Syria as well as using its influence to weaken unity among Europeans on the future of sanctions against Russia. While EU sanctions have been renewed twice in the past year without too many difficulties, Washington remains wary that the Europeans may not extend them beyond July 31. Europeans could read the U.S. statement as an attempt to raise EU awareness about the true nature of Russia’s leader and perhaps to suggest the possibility that additional sanctions might become necessary against him personally. This approach would pose a challenge to Europe as its sanction regime is based on Russia’s annexation of Crimea and military involvement in eastern Ukraine and not because of Putin’s personal corruption or human rights abuses (as is the U.S. Magnitsky Act).

As for Russians themselves, they didn’t hear the message; although reminding the Russian people that, in the words of Russian opposition figure Alexei Navalny, the Russian government is composed of “liars and thieves.” could send a message to Russia’s beleaguered opposition to keep the faith prior to the September Duma elections. In that sense, Russian officials may not be wrong to think that Washington is trying to influence Russian domestic politics. Even if this is not the ultimate goal, it is worth noting that U.S. statements of that sort can only fuel the Russian narrative and paranoia that the ultimate goal of the United States is regime change in Moscow. But it is hard to see how these public accusations can influence the Russian domestic political debate, because Russian media is very heavily controlled and Russians have been repeatedly told to never believe statements from U.S. officials.

One strong message from Mr. Szubin’s statement is that the United States seems to possess precise information about the Russian president’s personal corruption. By claiming to have knowledge of such corruption, the U.S. Treasury Department implies potential further U.S. action (if only to share more details publicly). It is difficult to speculate whether or when the United States would seek to exploit this vulnerability if it ever wanted to. But the U.S. message can only appear as a warning to Putin that the United States could go down this path. Yet there are risks. We do not know what sort of Russian reaction such an act could produce other than fueling uncertainty.

Beyond message guessing, what does this episode say about U.S. strategy toward Russia?

In the first instance, many officials and analysts do not know what stated U.S. policy toward Russia is today. After an exhaustive 15-month review of its policy toward Russia, the Obama administration has done very little publicly to discuss its policy toward Russia, which falls along four lines of effort: (1) counter and deter Russian malign influence, coercion, and aggression; (2) strengthen, build resilience, and reduce the vulnerability of allies and partners; (3) communicate and cooperate with Russia on key global challenges; and (4) preserve the potential for Russia's integration as a responsible global player.

Russia’s repeated use of military aggression certainly justifies strengthening NATO’s deterrence and defense posture, both conventional and nuclear. Continued economic support for Ukraine and Georgia, as well as engagement with NATO, strengthens key partners. Washington’s engagement with Moscow during the Iran nuclear agreement, as well as seeking to resolve the conflict over Syria, support the continuation of communicating and cooperating with Russia on global issues.

But, where does Putin’s corruption fit into this policy equation? Is it part of the effort to counter Russian influence? Pursuing Putin’s personal corruption could signal a more confrontational U.S. approach by framing relations with Russia as a direct challenge to the nature of the Russian regime, its leaders, and the regime’s pervasive use of corruption and malign economic influence. But if maintaining transatlantic unity is a U.S. goal in and unto itself, confronting Russian leaders about their corruption would likely leave the United States isolated, as Europe would likely not support this approach. European leaders are concerned that imposing specific sanctions related to Putin or his inner circle’s personal corruption could be viewed by Moscow as escalatory with unknowable consequences. At the end of the day, it is unlikely that this theory will be tested, as the Obama administration has so far seemed more interested in containing the damage created by Russian aggression in Ukraine to preserve open avenues for cooperation with Russia and maintain transatlantic unity.

 Many questions are raised because there are so many uncertainties about evolving U.S. policy toward Russia. Is the United States seeking an accommodation with Russia, or is it gearing up for further punishment? Who is ultimately response for this policy, and how is the White House coordinating the work of the different agencies implementing it—the Treasury Department for sanctions, the State Department for diplomatic outreach on Ukraine or the Syria peace efforts, the Department of Defense for NATO defense issues and the counter-ISIS campaign? Does the United States seek to contain the damage created by Russian interventions in Ukraine and Syria, create conditions for their eventual rollback or simply to deter further Russian actions? What is the U.S. vision for post-Soviet Europe, specifically Moldova, Ukraine, and Georgia? Can a rules-based transatlantic-Russian dialogue be organized?

We would have fewer questions about what Mr. Szubin and the White House meant if we had a greater understanding of U.S. policy toward Russia and its long-term policy objectives.

Simond de Galbert is a visiting fellow with the Europe Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Heather Conley is senior vice president for Europe, Eurasia, and the Arctic and director of the Europe Program at CSIS.

Commentary isproduced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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Heather A. Conley

Simond de Galbert