Russia Sanctions Act Is Enacted

August 4, 2017

The Countering America’s Adversaries Through Sanctions Act (H.R. 3364) seems destined to become a new flashpoint in the transatlantic relationship. President Donald Trump grudgingly signed it into law in the face of overwhelming congressional support but complained that the bill contravenes his exclusive constitutional authority to determine the time, scope, and objectives of international negotiations. Though the law deals with Iran, North Korea, and Russia, the latter section has attracted the most international attention. Indeed, its implications could go far beyond punishing Russia to set the tone for the transatlantic relationship in general.

The law is a catch-all measure that pursues three main objectives. Its stated aim first is to respond to Russia’s interference in the U.S. elections, which explains why an entire section is dedicated to preventing and punishing cyber attacks. A second goal is to reduce the president’s room for manoeuver with Russia amid suspicions Trump wants to seek a grand bargain with Vladimir Putin even as a special counsel investigates connections between the Trump campaign and Russia. By codifying the already existing executive order sanctions, the Congress is effectively granting itself the right to veto the removal of sanctions on a case-by-case basis. Finally, the law gives these sanctions extraterritorial effects. Its potential scope therefore extends beyond the United States, potentially affecting any foreign actor in business with U.S. entities—including European companies—in certain key sectors.

The process has sparked outrage across Europe. Unsurprisingly, Germany and Austria, later followed by France, have denounced the bill as “illicit under international law.” The notion of extraterritorial reach has been consistently fought by the Europeans since the 1980s. European countries have challenged such laws before international bodies, even forbidding their national companies to comply with them in some cases. The president of the EU Commission, Jean-Claude Junker, claimed that “America first cannot mean Europe last” and even threatened the United States with “retaliation”—though this option was later postponed to await detail about how the United States will implement the law. Though the law in its final version has been softened and recommends that new measures be discussed in close coordination with allies, it is unlikely to curb criticisms as the outcome of such coordination is not prescribed.

The Europeans are infuriated by more than just the extraterritorial scope of the law. They argue that the act radically alters the compromise at the heart of transatlantic consensus on Russia since the 2014 annexation of Crimea, for three reasons:

1. They claim that the law harms transatlantic coordination on Russia and undermines their own policy agenda. They acknowledge the important role played by U.S. military power in deterring Russian aggressiveness and value it. Yet, they argue that Europe deserves respect and—at the very minimum—the right to be consulted after having paid a markedly steeper economic price than the United States to put effective pressure on Russia (in 2014, EU trade with Russia was 10 times as great as that of the United States). Incidentally, the adoption of the bill could run contrary to the current French-German effort to resume constructive dialogue with Russia on a political solution to the crisis in Ukraine.

2. The framework created by the United States and Europe after the Russian intervention in Ukraine was designed to be flexible and enable negotiations. Europeans had specifically insisted that sanctions should be relatively easily to lift in case significant progress was made with Moscow. Contrasting with executive orders that can be repealed by the president, making U.S. sanctions a matter of law creates important bureaucratic rigidity, allowing the Congress to delay or veto any lifting of sanctions. While the bill allows legislators to oversee presidential actions regarding Russia, it complicates future multilateral negotiations, as neither U.S. negotiators nor their partners will have a clear view of whether they can deliver on a lift of sanctions in exchange for progress. Europeans argue it could dissuade Moscow from softening its stance, since Congress, which traditionally holds a negative view of Russia, is unlikely to allow significant swings in policy. The bill has already generated renewed tensions with Russia, while time does not work in Kyiv’s favor on the ground.

3. Finally, Europeans contend the law violates an implicit agreement to avoid harming the other parties’ interests, especially in the gas sector. In fact, the European Union is unhappy with the sanctions’ effort to affect the EU-Russia Nord Stream 2 project aimed to carry Russian gas toward Europe. The U.S. Congress and the executive branch both worry that the project would further increase EU energy dependency toward Russia and isolate Ukraine by depriving it of transit revenues and potentially access to gas itself. Recently, voices in the United States have multiplied pushing for European energy diversification via U.S. exportation of liquefied nature gas (LNG), though this argument has always been an afterthought, since the price-competitiveness of U.S. LNG exports to Europe is uncertain. Yet the Russia sanctions bill is not limited to the gas sector; it targets various economic activities (including mines and railroads) and could even impact the maintenance of energy infrastructure already in operation. The law’s potential economic impact on Europe is aggravated by a high level of uncertainty, as much will depend on the way both the executive and U.S. courts interpret it.

Yet the main subject of worry may not lie in the rather usual economic and political competition between the United States and Europe. The dispute about the legality of extraterritorial sanctions has been going on for decades without affecting the quality of EU-U.S. cooperation too much. However, in this specific case, the situation has the potential to substantially undermine transatlantic cohesion at a time when the West as a whole is faced with important security challenges.

The law emerges in a context where U.S.-EU mutual confidence has already been shaken since the election of President Trump. Months of hard rhetoric about the European Union have yet to be erased by a more constructive and mutually beneficial approach. The adamant—if legitimate—call on NATO members to meet the 2 percent of gross domestic product (GDP) defense pledge made in 2014 was barely balanced by President Trump’s renewed commitment to NATO’s Article 5. Although the enactment of H.R. 3364 is a separate issue entirely, its passage might be taken in Europe as an additional signal that coordination with the United States on critical issues is becoming increasingly hard.

This unilateral U.S. step also risks complicating old divisions between EU members, evoking the memory of the Iraq War debates. The controversial Nord Stream 2 project is subject to a intense debate between those member states who claim economic interests are at stake and those, like Poland, who see it as a Russian gambit to make Europe more dependent on Moscow’s energy assets and punish Ukraine. There is no doubt that the law will increase tensions between national authorities and the European Commission as representative of the collective interest. Because the law was passed just after the European Commission announced it will open an Article 7 procedure against Warsaw, following claims that it is violating the European Union’s values, the Nord Stream issue could be escalated into an example of a lack of solidarity in the European Union. Unsurprisingly, Warsaw applauded the announcement of the bill, while German officials reiterated their strong and stiff opposition to it amidst Germany’s electoral campaign.

For months, Europeans had been watching this Russian interference issue pervade the entire U.S. political debate with increasing concern, even complicating the normal operation of U.S. institutions. It now seems that Europe cannot avoid being affected by this poisonous debate and that the new law risks contaminating the transatlantic link itself. Paradoxically, the blow has come from the U.S. Congress rather than from the president, who on other issues often appeared disdainful of European views such as the Paris climate change agreement. Those in Congress who had argued that the current administration’s foreign policy might damage the transatlantic relationship have finally reached almost unanimous consensus on a law that could inadvertently undermine it further. However, the latest amendments introduce some flexibility to the law, signaling Congress is willing to mitigate the consequences it will have on the European countries themselves. Ironically, European hopes to insulate the relationship from the effects of this law will depend now on President Trump and whether he chooses to refrain from using the many discretionary authorities this law gives him.

In sum, this bill was adopted at an unfortunate moment for the transatlantic relationship, featuring more negative side effects than intended and sending the wrong diplomatic signal to European allies. The Congress has succeeded in expressing its concern that energy cooperation with Russia should not come at the expense of transatlantic security. Its formulation leaves the door open for an implementation that limits adverse effects on Europeans, especially if the president makes sure that companies are not sanctioned for commercial projects that were already decided. Now is the time for increased transatlantic coordination on this issue to see how the legislation can be applied without damaging the U.S.-EU relationship. For the executive, this could be achieved by making sure implementation focuses on the law’s primary goal—targeting entities and interests allegedly involved in the Russian interference efforts during the U.S. presidential election rather than business ties between the European Union and Russia. Preserving transatlantic cohesion and unity when dealing with Moscow continues to be in the utmost interest of both partners.

Boris Toucas is a visiting fellow with the Europe Program at the Center for Strategic and International Studies in Washington, D.C.

Commentary is produced 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).