Analysis

Navalny poisoning raises prospect of new sanctions on Russia

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  • Political and Economic Risk Consulting
Oksana Antonenko

Oksana Antonenko

Navalny poisoning raises prospect of new sanctions on Russia

 

Russia faces the prospect of new Western sanctions following the poisoning of Russian opposition leader Alexei Navalny, a likelihood heightened by increasingly assertive Russian interference in post-election unrest in Belarus and US government reports of Russian interference in the upcoming US presidential election. 

  • Although Germany is under renewed pressure to end its support for the Russia-led NordStream II pipeline project, any EU sanctions in response to Navalny’s poisoning will likely include diplomatic and political steps before any economic sanctions are considered.
  • If Russia stages an overt military intervention in Belarus, the EU will likely expand sectoral sanctions, potentially including a further curbing of technology transfers.
  • While the US has several options for quickly augmenting existing sanctions, it is unlikely that the Trump administration will target Russia before the US elections in November; any US response will likely focus on individuals linked to the state.
  • A Congressional recess ahead of the US elections will make it difficult to adopt a new package of significant sanctions before November; expanded sanctions are likelier under a Biden administration. 

Novichok again…

Both EU and US officials have threatened new sanctions on Russia, a tactic in line with the precedent established following the use of Novichok in the Salisbury, UK, attack in 2018. Adopting sanctions may be more complicated this time around. The poisoning took place in Russia, and Russia has so far refused to cooperate with investigations. There are other factors as well: Russia has taken an increasingly assertive stance on the political crisis in Belarus, and the US has released official reports alleging attempts by Russia to influence the upcoming 2020 presidential election.

EU sanctions

Following the Salisbury attack, the EU created a new regime of restrictive measures against the use and proliferation of chemical weapons. There are currently four Russian GRU (military intelligence service) officers, all with connections to the 2018 attack, who are currently designated under this regime. The regime is due for review by 16 October, with the possibility of the list’s expansion to include individuals linked to Navalny’s poisoning if identified. 

The EU currently maintains a set of individual and sectoral sanctions against Russia for its involvement in the conflict in eastern Ukraine and its 2014 annexation of Crimea. Sectoral sanctions are extended every six months and are in force until 31 January 2021. Any changes to these sanctions require consensus among EU member states – a far from simple task given the traditional divergence of interests within the EU and the exacerbation of this dynamic by the current economic crisis. Sectoral sanctions have not been modified since their adoption in 2014, and despite a push for their expansion from some EU member states – namely Poland and Baltic States – other member states – Italy, Austria, Greece, Cyprus and Hungary – are advocating economic reengagement with Russia. 

This could change if Russia offers military support to President Alexander Lukashenko in Belarus. Under that scenario, the EU would likely reopen discussions about the expansion of sectoral sanctions, which could include further technology export bans and a range of financial sanctions on Russian companies.

In addition to EU sanctions, individual European countries may implement further sanctions in response to Navalny’s poisoning using Magnitsky laws, which were adopted by the UK and Baltic States. The UK has confirmed that it will work closely with the Organisation for the Prohibition of Chemical Weapons (OPCW) and the German government to ensure that Russia is “held accountable”. Any UK sanctions are likely to be in line with the EU response.

NordStream angle

Meanwhile, Merkel is under pressure domestically and internationally (from other EU member states and the US) to shelve the Russia-led NordStream II pipeline project as punishment for the Navalny attack. The German government has so far resisted pressure to abandon the project, which was unpopular with both the EU and the US long before the recent attack. The pipeline will supply a significant amount of natural gas to Germany but may leave Ukraine and other transit countries more vulnerable to Russian pressure. The US has already imposed sanctions on NordStream II and Trump will likely use the Navalny incident to apply more pressure on Merkel to end the project, which he has long opposed.

The US sanctions on Nordstream II, which is around 90% complete, triggered a suspension of construction but are unlikely to derail the project entirely. Russia will potentially be able to complete the remaining work in 2021 using Russian Gazprom vessels after overcoming logistical and time challenges of getting the vessels in place. Any German decision to freeze the project would be costly not only to Russia but to other foreign funders of the project.

While Nordstream II has probably never been in such a precarious position, there is substantial support for the project within the German government, particularly from the Social Democrats. The significant political and economic costs of abandoning it now make it unlikely that the government will shift its position. Yet Merkel has radically changed course in the past, as when she reversed a decision on nuclear power after Fukushima. Her 2 September statement confirming the use of Novichok was firm in its condemnation of Russia, suggesting a possible sea-change in this case as well. 

US sanctions

If the Trump administration decides to impose sanctions in response Navalny’s apparent poisoning, it would most likely do so under the 1991 Chemical and Biological Weapons Control and Warfare Elimination (CBW) Act, which mandates sanctions in response to chemical weapons attacks by foreign governments. The US in 2018-19 imposed several rounds of sanctions on Russia under the CBW Act in response to the March 2018 Salisbury (UK) Novichok nerve agent attack, culminating in a ban on US bank purchases of foreign currency-denominated sovereign bonds from Russia.

However, both a decision and any imposition of further economic sanctions are unlikely before the 3 November US election. CBW Act sanctions require an official determination that a foreign government has used a chemical agent as a weapon. In 2018, this determination was made five months after the Salisbury attack, with additional sanctions imposed a year later in August 2019 (nearly nine months after a subsequent determination that Russia had failed to meet remedial standards required by the CBW Act).

Congress is trying to accelerate the process this year. The bipartisan leaders of the US House of Representatives (lower house) Foreign Affairs Committee on 8 September required the administration to provide an assessment of the Navalny incident within 60 days (by 7 November). If a determination has not already been made by then, it would probably be required within a further 60 days of delivery of that report (by 6 January 2021), potentially triggering a further round of sanctions. Under the CBW Act, additional sanctions could include broad trade restrictions, terminating existing export licenses and waivers, further restrictions on bank transactions with the Russian government, suspending diplomatic relations, and blocking Russian air carriers from the US.

Of course, the administration could take other actions while a CBW Act review is pending. For example, the administration in April 2018 – in concert with European allies – expelled 60 diplomats and closed the Russian consulate in Seattle prior to reaching its official determination of a chemical attack. CBW Act sanctions, however, are unlikely before the election – and could get pushed into the next administration depending on how long it takes the US government to assess and reach a determination about the Navalny poisoning. 

Russian response

There are indications that Russian authorities are preparing a package of countersanctions. In July, the Russian government introduced to the State Duma a set of amendments to the law on the application of special economic measures. If the State Duma adopts these amendments – which usually depends on the Kremlin’s backing – the Russian state will have formal powers to effectively close down any companies of which sanctioned foreign citizens directly or indirectly control 25% of company voting rights.

Other reports indicate that the Russian government plans to extend the application of its 2013 law on "Measures Against Individuals who violate rights and freedoms of Russian Citizens" from targeting only Americans to include citizens of other countries. These sanctions include visa bans, confiscations of property, assets and shutting down companies under their control. These measures can be taken on the basis of Russian government recommendations with no possibility of legal challenge in international courts.

The escalation of sanctions rhetoric on both sides is likely to further limit foreign investment in Russia. This is something that Moscow can hardly afford amid a slow recovery in oil prices and a growing concern over the increase in COVID deaths, which may precipitate new waves of economic disruption.

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