The U.S. H.R.3364 Act and its consequences

On August 2^nd, 2017, under the pressure of the US Congress, President Donald Trump signed the H.R.3364 Act  to counter America's adversaries, mainly Russia. This move has escalated tensions between the U.S. and Russia, potentially leading to unpredictable consequences.

Increased sanctions

After Russia’s annexation of Crimea (March 2014), the US Administration under President Barack Obama induced its Western allies to impose various sanctions against Russia. According to US politicians, those sanctions would fragment Russia’s economy and prompt its collapse, thereby forcing Moscow to change its standpoints on issues and inciting Russian people to rise up and overthrow the political institution led by President Vladimir Putin.

However, those sanctions did not come to the US expectations. Under the pressure of the Senate and the House, on August 2^nd 2017, President Donald Trump signed the Countering America's Adversaries Through Sanctions Act H.R.3364, with a focus on Russia. Accordingly, the U.S. would freeze bank accounts of Russian banks, energy and defence companies, enterprises and officials abroad, while prohibiting US companies from making transactions with those individuals and organizations. The Act directs the Secretary of the Treasury, Director the National Security Agency, and the Secretary of State to hold Congressional hearings about top Russian enterprises involved in the Grand Kremlin Palace, including their relatives and information on their contracts with foreign businesses. Moreover, the Act prohibits banks and people from the U.S. and many other countries from taking part in joint projects between Russia and European countries to build the Nord Stream 2 gas pipeline. The US companies must cancel the supply of needed goods, services and technology for Russian ones’ oil and gas exploration and exploitation at seabed and continental shelf as well as Moscow’s projects on traffic, metallurgy and mining. According to the Act, companies from the European Union (EU) shall not get involved in joint ventures with Russia, such as Blue Stream, Nord Stream 2, Caspian Stream, and so forth.

Notably, the Act H.R. 3364 has taken all executive powers from President Donald Trump over lifting any US sanctions against Russia. Russian Prime Minister stated that the US sanctions against his country were much severer than the Jackson-Vanik Amendment against the Soviet Union 40 years ago and more comprehensive than all the others in the history of international relations to force Russia to submit itself to Washington’s political imposition on the world order led by the U.S., first and foremost on settlement of flashpoints in Ukraine and Syria. Those sanctions are believed to aim to damage Russia’s economy, weaken and make it collapse, and remove one of the biggest barriers to the US world hegemony.

Russia’s countermeasures

In 2014, after the U.S. and EU simultaneously imposed sanctions against Russia for the Ukraine crisis-related reason, President Vladimir Putin signed the executive order on Special Economic Measures to Protect Russian Federation’s Security. Accordingly, Grand Kremlin Palace requires central agencies to execute relevant measures to ban or restrict foreign economic operations involving the import to Russia of particular kinds of agricultural produce, raw materials and foodstuffs originating in countries that have decided to impose economic sanctions on Russian legal entities and/or physical individuals, or have joined such decisions. Following the order, Russian agricultural producers have persuaded the government to develop domestic production and reduce import quota from the West, thereby getting several Western countries’ agriculture into trouble with Russia’s potential consumer market. Taking advantage of Western financial companies’ panic selling shares in Russian oil and gas companies, Moscow has actively bought those with low price. Consequently, Russian energy companies have recovered most of their property from Western financial corporation. That has been seen as the victory of the Stalingrad battle in the World War II by economists.

What is more, when both the Senate and the House ratified the Act H.R. 3364 stepping up sanctions against Russia, Moscow ordered the U.S. to reduce its diplomatic staff working in Russia to this country’s number of diplomats in the U.S. by September 1^st, 2017. It is a fair countermeasure of Russia in accordance with international law that shocked Washington as it would have to withdraw 755 diplomats from Moscow, 20 times as many as Russian ones expelled from the U.S. in late 2016. That number of US diplomats to be expelled from Russia will directly impact on the US Embassy’s organizational structure and operation from within while the Russian presidential election is about to take place (2018). Therefore, after Russia announced its countermeasures, US diplomatic officials immediately had telephone conversations with Russian counterparts to negotiate about issues regarding Moscow’s countermeasures. However, it is believed worldwide that Moscow has exercised its legitimate rights to respond to the US groundless actions against Russia.

Consequences of the US and EU sanctions against Russia

In fact, since 2014, the US and EU sanctions have made Russia’s economy fall into a severe crisis; value of Russia ruble has decreased by more than 50% to U.S. dollar; foreign investors’ faith in this country has been undermined seriously. It is estimated that those sanctions have taken 40 billion USD per year from Russia’s economy. However, consequences of the Western sanctions have prompted Russia to comprehensively reform its economy and deal with the issues, namely corruption, bureaucracy, dependence on energy export, weaknesses in machinery industry and agriculture. As for Russia’s neighbouring countries and those far from Russia not involving in sanctions, Moscow’s new measures have helped them get into a large market of 143 people. Russian retailers have negotiated with countries, such as South Africa, Argentina, Brazil, Chile, China and other Asian countries about replacement of beef, fruits and vegetable from the Europe and the US. The EU sanctions have forced Russian consumers to use more domestic products, thereby somehow improving the internal strength of Russia’s economy. Russia’s industrial production has unceasingly increased while its agriculture has enjoyed benefits from the Western sanctions. According to the International Monetary Fund, Russia’s economy returned to growth in 2016 with the rate 1.5%.

Russia has taken the place of the U.S. as the world’s largest wheat exporter. This is an outstanding step paving the way for the development of other food crops. The dramatic development and the financial support initiative launched by President Vladimir Putin have brought about a “rush” for exploiting lands of Central Russia’s belt and many other fertile ones. The two hottest investment flows among Russian upperclass people consist of agricultural property and hotel service in Europe. President Vladimir Putin confidently told the Duma that “Russia could become the world’s largest supplier of healthy, ecologically clean, high-quality food that has long been missing in some western producers”.

Nevertheless, those sanctions have divided the U.S. from EU and its member states from one another as their enterprises have sustained losses. Many European countries have opposed the Act H.R.3364 and threatened to boycott the US sanctions. As Russia’s largest trade partner with 326.5 billion Euro worth of bilateral trade turnover in 2016, EU has suffered heavy losses from Moscow’s countermeasures, particularly food producers and exporters to Russia’s market. The countries prohibited from exporting food to Russia, namely the EU, the U.S., Canada, Australia and Norway have had to shift their direction of export to Asian, Latin American and Caribbean countries. According to the European Commission, EU member states have lost around 40-50 billion Euro during 2014 and 2015 due to limited access to Russia’s financial market and the ban on supplying goods and dual-use technology to Moscow. Moreover, it has cost them a lot of money to convert the structure of their investment, import and export. Economists reveal that the sanctions against Russia have caused severe losses for EU economies, which are 10 times as many as the US economy. The EU-Russia trade turnover decreased from 326.5 billion Euro in 2013 to 210 billion Euro in 2015, while the US-Russia total trade only decreased from 38.2 billion USD to 23.6 billion USD at the same time. Up to now, there have been 500 companies of the EU strongly disagreeing with the Act H.R.3364.

Besides, consequences of the US-Russia “confrontation” will ruin all efforts of President Donald Trump to normalize the US relations with Russia. And that will have a huge effect on efforts of the international community to deal with global threats and challenges.