The Obama administration was against Russia sanctions before it was for them.
- By Jamila TrindleJamila Trindle is a senior reporter who covers finance, economics and business where they intersect with national security and foreign policy. Her beat spans everything from the economic underpinnings of conflict to sanctions, corruption and terror finance. Before coming to Foreign Policy magazine, Jamila reported for the Wall Street Journal’s Washington bureau, covering financial regulation and economics. She has also worked as a foreign correspondent in China, Indonesia and Turkey as a freelancer for NPR, Marketplace, The Guardian and others. She moved back to the U.S. to cover the post-crisis economy for PBS in 2009.
In 2009, after the death of an imprisoned Russian lawyer, American hedge fund manager Bill Browder began pushing Congress to sanction Moscow for alleged human rights violations. Lawmakers from both parties quickly signed onto the legislation. But it faced strong opposition from an unexpected source: the Obama administration.
Today, the White House argues that sanctions are the only way of punishing Russia over Ukraine. Two years ago, by contrast, the administration tried to stop the Magnitsky Act — named after the dead lawyer, Sergei Magnitsky — in its tracks for fears that it would derail its efforts to "reset" relations with Moscow. The tortured history of the legislation underscores the administration’s conflicting impulses when it comes to Russia and its ongoing struggle to decide if Russia is a rival asserting its power or an adversary actively seeking a confrontation with the West.
That debate has taken center stage in recent weeks because of Russia’s invasion and annexation of Crimea and its role in stirring up unrest in eastern Ukraine. But this time the Obama administration is heralding the benefits of freezing the assets of people close to Russian President Vladimir Putin as a way of pressuring him to de-escalate the ongoing crisis in Ukraine. So far, the U.S. has sanctioned 45 people and 19 entities, including four banks.
But in 2010, when Maryland Democratic Sen. Ben Cardin introduced the bill that Browder championed, the Obama administration balked. Magnitsky, an auditor with law firm Firestone Duncan, had worked for Browder’s firm, Hermitage Capital Management. He was imprisoned in 2008 after alleging that top Russian officials had effectively stolen $230 million from the government. Magnitsky died in prison in 2009 at age 37 after becoming ill and being denied medical care. Russian officials said he suffered a fatal heart attack, though they provided no evidence to support that contention.
Browder wanted the U.S. to go after the Russian officials responsible for Magnitsky’s death, but his timing was terrible. The bill began gaining steam in 2011, just as the administration was focused on normalizing trade relations with Russia ahead of its scheduled entrance into the World Trade Organization the following year. Officials from the State Department, Treasury Department, and President Barack Obama’s National Security Council fanned out across Capitol Hill to lobby against the bill and argue that the administration already had enough power to impose sanctions on Russia.
"The administration, starting with Hillary Clinton and then John Kerry, did everything they could do to stop the Magnitsky act," Browder said in an interview.
In early 2012, the Magnitsky Act got a surprising boost. The administration wanted to win congressional support for repealing the Jackson-Vanik Amendment, a Soviet-era law that denied Russia normal trade relations with the U.S. If the 1974 law remained on the books, U.S. companies who wanted to sell goods to Russia would face higher tariffs, putting them at a disadvantage to other international companies. Powerful lawmakers signaled they’d only support the repeal if the Magnitsky Act was signed into law. The two provisions were lumped together and approved by the House and the Senate in December 2012. Obama signed them into law almost immediately.
The administration added 18 names, mostly mid-level officials, to the Magnitsky list in April 2013, but supporters of the law want the administration to do more in light of Russia’s actions not only at home, but also in Ukraine. Sens. Robert Menendez (D-N.J.), Bob Corker (R-Tenn.), Ben Cardin (D-Md.) and John McCain (R-Ariz.) sent a letter to the administration in January asking the State and Treasury departments to "clarify when we can expect additional names to be added to the Magnitsky list."
Under the law, congressional leaders can suggest names to the administration and it must respond within 120 days. The deadline for the administration to respond to the senators’ January 17 letter is this Saturday. It is unclear whether the administration will add more names to the list or wait to see whether Russia tries to interfere with the Ukrainian elections on May 25, a move that U.S. and European officials have said would trigger further sanctions.
"While we can’t speak to the timing of any additional designations, we continue to investigate potential targets, and the administration is determined to fully implement the Act by making further designations as appropriate," Laura Lucas Magnuson, a National Security Council spokeswoman, said in an email.
In some ways, the administration has already gone beyond the Magnitsky list with the current Ukraine sanctions. Obama has said that the U.S. is prepared to ban business with whole sectors of the Russian economy if Moscow continues to foment unrest in Ukraine. Still, advocates of the Magnitsky list say it’s important because it condemns the Russian government’s actions against its own people, not just those of neighboring countries.
"While the world is naturally focused on Ukraine, it’s crucial to send the signal that the world has not forgotten about the human rights of Russians," said Vladimir Kara-Murza, a leading member of the People’s Freedom Party, a Russian opposition group.
Others worry that adding more names to the list would bring swift and harsh retaliation. After the U.S. passed the law in 2012, Moscow responded by banning the adoption of Russian orphans by American citizens.
"This was a sign of how far the Russian government is willing to go to hurt it’s own people to make a political point," said Jeff Goldstein, a senior policy analyst with the Open Society Foundations.