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Despite existing sanctions against Russia, German exports to Russia have gone up by twenty percent, and investments are increasing in the domestic economy, says Richard Sakwa, professor of Russian and European Politics at the University of Kent

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SHARMINI PERIES: It’s The Real News Network. I’m Sharmini Peries, coming you to from Baltimore. President Putin of Russia did not wait for Donald Trump to sign or veto the sanctions bill against Russia, Iran, and North Korea. The bill was passed by Congress last week. Russia has retaliated already against the US sanctions by demanding that US reduce its mission staff in Russia by 755, no later than September. Russia has also blocked access to property used by US diplomatic staff, in response to US seizing two Russian diplomatic properties here in the US. Russian government spokesperson, Dmitry Peskov, said there was no point in waiting for Donald Trump to sign the bill into law, as the legislation was adopted in Congress already. He also said that US would have to demonstrate the political will to improve relations with Russia by rehabilitation from aggravation of political schizophrenia. The US Vice President, Mike Pence, spoke out against Russia’s retaliation and its activities, while in Estonia. Let’s listen. MIKE PENCE: President Trump has called on Russia to cease its destabilizing activities in Ukraine and elsewhere, and to cease its support for hostile regimes like North Korea and Iran. Under President Trump, the United States will continue to hold Russia accountable for its actions, and we call on our European allies and friends to do the same. In a sign of our commitment, very soon President Trump will sign legislation to strengthen and codify the United States sanctions against Russia. Regrettably, last week Russia took the drastic step of limiting the United States’ diplomatic presence in their nation. SHARMINI PERIES: Joining us today to discuss the deteriorating US/Russia relations is Richard Sakwa. He is Professor of Russian and European Politics at the University of Kent, and an Associate Fellow of the Russia and Eurasia Program at Chatham House. His upcoming book is “Russia Against The Rest: Pluralism and the Post Cold War Crisis of World Order.” Richard, good to have you back. RICHARD SAKWA: My pleasure. SHARMINI PERIES: Richard, when President Obama left office, he imposed sanctions against Russia. He actually confiscated two Russian retreat compounds and asked diplomatic staff to return to Russia, all for alleged interference in the US elections, and hacking into the DNC email server. Remind us all of this, because we live in the USA, the United States of Amnesia, as Gore Vidal used to say. But take us back. Tell us how this all got started. RICHARD SAKWA: Yes. This was Obama’s, one of his final actions, which was the expulsion of 35 Russian diplomats on the 29th of December, as well as the [inaudible 00:03:17] confiscation, effectively of two Russian own compounds, one in Maryland, one in Upstate New York. At that time, late December, Putin did not respond. He wanted to see what Trump would do once he comes into office, after 20th of January. As you know, the last 6-7 months, there has been a hiatus while Russia was anticipating perhaps an improvement in relations, and there was much talk of an exaggerated expectation in Moscow about what could be done in Washington, but nobody left. There was a hope that after the endless pile of problems which had accumulated in the Obama years, that a new leader would offer, as often, a new opportunity, if not a new reset. As you know, they then met in Hamburg at the G20 summit in July, and they had quite a good conversation for two hours, 15 minutes, much longer than anticipated, and some informal discussions. But, as far as Russia is concerned, two things. First, that Obama in his final months or final weeks did almost everything possible to set a number of minds or to poison the well if you like of good relations, like poisoning the well so that his successor really wouldn’t really be able to do much or get started, certainly not immediately. We’ll come back to the issues of collusion alleged and so on later. So, Russia in the last few weeks has desperately … Well, not desperately, but forcefully saying, “Look, these two compounds were illegally confiscated, we want them back.” Then the United States side was saying they’re putting all sorts of conditions. Ultimately, it wasn’t going to happen, and with the voting in of the sanctions last week, which are quite draconian actually, it was to be expected that there would be a reaction. I’m a bit surprised about the scale of it. I thought that maybe up to 100 US diplomats would be expelled, and that the [inaudible 00:05:31] for the US diplomats can go out of town would be confiscated. But the scale of that, that the US is now being asked to reduce its diplomatic staff, including support staff, down to the same level as Russia’s, which is just about 450. It’s quite a draconian response, but it was anticipated that the scale of it is larger than I expected. SHARMINI PERIES: Richard, tell us about how significant these sanctions are that the Russians are now responding to. RICHARD SAKWA: This is far more serious. Well, the specific measures may not be so significant, in fact they are in many ways, but it’s a step change in a number of ways. First, they were not coordinated with the allies in the European Union, so that they were actual, which is a sign that Congress constantly condemns Trump for his unilateralism, and then what does Congress do? It imposes these things without consultation with its allies. Second, it’s quite explicit that the United States is hoping to achieve economic advantage out of them. In other words, it’s the type of that typical again, Trump in [inaudible 00:06:48], in affecting European energy interests above the building of Nord Stream 2 from near Saint Petersburg to Germany. Thirdly, the scale of it, these sanctions are a declaration that US law is universal across the world. It isn’t just affecting US companies, it’s affecting any company initially, even which had a slight involvement in an economic energy project in which a Russian company was involved. After discussion, it went up to where Russian companies got about 35% engagement. It’s quite draconian, so it’s why I say, yes it’s [incremental 00:07:35] in some ways, but it’s a huge jump at the same time. I don’t know what has [seized 00:07:41] Congress in imposing these draconian measures, and this is only the beginning of the response. This is the first element. Putin himself is trying to keep these down, but he has been under enormous pressure. I was in Saint Petersburg a few weeks ago and even people with [inaudible 00:08:03] liberal views were saying, condemning Putin for not having reacted to Obama’s provocations at the end of December last year. He has done the minimum really to satisfy Russian public opinion who is, as you can imagine, over the last few months, just getting fed up with this, what they perceive to be craziness coming out from Washington. SHARMINI PERIES: I think most of us thought with Tillerson’s appointment as Secretary of State, being a former Exxon CEO and having energy relations with Russia in the past, US was hoping to improve their relations with Russia, not sink them into the ground further. How will these sanctions affect Russian and corporate relations in particular with Russia? RICHARD SAKWA: In the short-term, this works to the advantage of the fracking gas lobby, because they were talking specifically about being able to fill the gap, perceived gap or possible gap, in European gas markets, by exporting, selling LNG, liquid of natural gas. That may be to their advantage of the gas fracking industry. However, all of the others, as you mentioned, ExxonMobil, where Tillerson, Secretary of State Tillerson, used to be the CEO, are not at all happy. More than that, the US Department of Justice slapped a two million dollar fine. It’s more petty cash, but nevertheless, a fine for having signed a contract in 2011-12, with Rosneft, for the exploration of arctic sea oil and other hard to get oil, including in the Black Sea. I think that some US corporations would not be particularly happy, but the scale of US/Russian economic links are relatively small, so that’s not I think a decisive factor. It’s the European companies who are hopping mad at the moment, to be absolutely honest, but just in this last few months, the German exports to Russia have gone up 20%, despite sanctions. What this is doing is going back to the 1980’s when the Reagan administration tried to stop the building of the [inaudible 00:10:30] and the West [inaudible 00:10:32] gas pipelines to Western Europe in the first place. Then, posed quite severe sanctions, but the Germans refused to accept it. Now, what’s happening, this is going to drive a wedge between Europeans and the United States. SHARMINI PERIES: Now, Richard, Russians resist these sanctions, partly because in the last few years, the Russian economy has really suffered due to the sanctions by the US, as well as European countries. How will these sanctions affect the Russian economy at this time? RICHARD SAKWA: Well, they’re coming out of [inaudible 00:11:07]. Yes, for two years, 2015-2016, those were really tough years. In 2015, the Russian economy contracted by 3.7%. Last year, by just about 1%. This year, there’s going to be a return to economic growth. In short, the sanctions do not have a major economic effect. It makes business more difficult, especially now in the more financial and energy sectors. However, many Russians see the sanctioned regime as actually a bit of a blessing in disguise. Russian agriculture is booming. Massive investments, just moving into fields which it didn’t have before. That is, meat production, chicken, pork, others, which United States used to sell to Russia which of course they can’t do now. Other sectors, even for example the Ukraine ban on gas turbine engines for ships. They’ve now managed to devise their alternatives. Even deep sea, the ocean even, drilling. They’ve managed to get some technology from China, but above all they’ve developed their own responses. Russia has become a much more self-sufficient and over the last few years, Russia has been working very hard to become sanctions proof. In economic terms, it won’t have much effect. It’s annoying, it makes life more difficult in certain sections, but it won’t change. But above all, it won’t change Russian political behavior. In fact, it will have the exact opposite effect to that intended. It will stiffen Russian resolve, it will at the moment, it will make even more what is at the moment the view in Moscow, that the United States is a country with which you cannot deal. [foreign language 00:13:06] as they say in Russian. You can’t deal with these people, and I think after these events of this last week, they won’t try to deal anymore. In other words, “Okay, on the ground in Syria, and their operations, perhaps we can talk. Ukraine, perhaps we can get a deal,” but basically, I think it’s a total breakdown of Russia’s trust in the ability, not just of Congress, but also of the presidency, to be able to deliver anything substantive. Not just for Russia, but in terms of global public goods, over North Korea, over Iran, over Syria, over Ukraine, and many, many other issues, including global warming. SHARMINI PERIES: All right, Richard. We are going to end this segment for the time being, and we’re going to continue our discussion with you, particularly just stepping back a bit and taking a wider look at the geopolitical space that Russia is in, and how these sanctions, particularly not only against Russia but also against Iran in the same bill, is pushing Russia and Iran closer together, alienating both of these countries, and the implications that’s going to have in terms of geopolitics. I thank you so much for joining us for now, and let’s continue in a few minutes. Thank you. RICHARD SAKWA: Thank you.

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Richard Sakwa is Professor of Russian and European Politics at the University of Kent and an Associate Fellow of the Russia and Eurasia Programme at Chatham House. He has published widely on Soviet, Russian and post-communist affairs. Recent books include The Crisis of Russian Democracy: The Dual State, Factionalism, and the Medvedev Succession; Putin and the Oligarch: The Khodorkovsky - Yukos Affair; Putin Redux: Power and Contradiction in Contemporary Russia and Frontline Ukraine: Crisis in the Borderlands. He is currently working on his latest book called Russia against the Rest: Pluralism and the Post-Cold War Crisis of World Order.