Exclusive: U.S. Quietly Imposes New Russia Sanctions
(This article has been updated.) While the Obama administration has touted U.S. efforts to isolate Russia economically and diplomatically, it has quietly found another way to slap Moscow for its annexation of Crimea. Nearly a month ago, with no public notice, a small office in the Commerce Department abruptly stopped approving applications from U.S. firms ...
(This article has been updated.)
While the Obama administration has touted U.S. efforts to isolate Russia economically and diplomatically, it has quietly found another way to slap Moscow for its annexation of Crimea.
Nearly a month ago, with no public notice, a small office in the Commerce Department abruptly stopped approving applications from U.S. firms that want to sell Russia potentially dangerous products.
The Commerce Department’s Bureau of Industry and Security (BIS) suspended a raft of pending deals with Russia on March 1, just a day after Moscow sent troops streaming into Ukraine. The office didn’t disclose the move until this week, when it posted an oblique notice on its website. The suspension has not been previously reported.
"Since March 1, 2014, BIS has placed a hold on the issuance of licenses that would authorize the export or re-export of items to Russia," the notice says. "BIS will continue this practice until further notice."
In 2013, BIS approved 1,832 export contracts to Russia for so-called dual use products like lasers and explosives, according to the bureau’s annual report. The deals were worth roughly $1.5 billion, $800 million of which was for devices cryptically described as "designed to initiate an energetic charge."
The U.S. has also stopped authorizing exports of "defense articles and defense services to Russia" until further notice, according to a State Department official. The Directorate of Defense Trade Controls at the State Department has the power to approve or reject arms sales to Russia under a different licensing regime.
It’s unclear why the administration didn’t announce the suspension, but it could be because it’s unclear how effective it will be since the U.S. is not revoking existing deals with the Russian military or Russian companies, just refusing to approve new ones. In addition, Moscow could potentially procure products on the list from companies based in other countries. The Commerce Department declined to explain the move.
Still, whether or not the suspension hurts the effectiveness of the Russian military, the ban on new contracts could definitely hurt U.S. exporters. The BIS doesn’t name the specific companies that have pending deals with Russia.
"This will have an adverse impact on those U.S. companies that need a license to ship their goods to Russia, such as in the oil and gas and chemical processing industries," Doug Jacobson, a trade lawyer with the firm Jacobson Burton, said in an email. He first wrote about the BIS move Tuesday on his blog.
President Barack Obama has so far held off on the most damaging sanctions that could make it illegal for Americans to do business with whole Russian sectors like banking or energy, in part, out of economic concerns. Obama issued a new threat to expand Western sanctions against Russia during a speech in Brussels Wednesday.
"If Russia continues on its current course, however, the isolation will deepen, sanctions will increase and there will be more consequences for the Russian economy," Obama said at a press conference with European Council President Herman Van Rompuy.
Obama acknowledged last week, however, that targeting Russian industries could also be "disruptive to the global economy." Instead, the U.S. has opted to target Russian politicians, businessmen and a bank close to President Vladimir Putin.
Most commercial products exported to Russia don’t require approval from the U.S. government. But certain products that could be used for either civilian or military purposes, like chemicals, software, shotguns, and horses, require an "OK" from the Bureau of Industry and Security to be sold to anyone in Russia. Yes, horses transported by sea fall into that second category. And yes, the U.S. sold Russia $2 million worth of horses in 2013. It’s unclear whether horses on airplanes are considered as dangerous.