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impact of the Magnitsky Act on the Russian economy
Much has been written about the Magnitsky Act, especially considering that it is a longstanding source of resentment among prominent Russians. However, remarkably little research has been done about the impact of the Magnitsky Act on the Russian economy.

What the Magnitsky Act Does

In 2014, the United States passed the Magnitsky Act, which was an effort to punish Russia for alleged human rights violations surrounding the death of a whistleblower who tried to alert the public to the alleged corruption that had been taking place in Russia for the previous several years. The intent was to sanction the individuals responsible for the death of Sergei Magnitsky, without impacting the majority of Russian citizens who had nothing to do with it.

The Magnitsky Act is notable because it attempts to punish solely the Russians responsible for Magnitsky’s death, rather than Russia as a whole. Rather than blanket import/export bans, the Magnitsky Act freezes the assets of the Russians implicated in the death of Sergei Magnitsky, the victim for whom the legislation is named. Additionally, it bans these individuals from obtaining visas to enter the United States.

The Magnitsky Act has been followed by the Global Magnitsky Act, which applies these punishments to any citizen of any country who is suspected of aiding the activity of the Russians in question. Additionally, other countries, including Canada and the United Kingdom, have passed their own versions of this legislation.

Impact of the Magnitsky Act on the Russian Economy

Although the intent of the Magnitsky Act was to have minimal impact on the Russian economy or the lives of average Russian citizens, it is fair to assume that there has been some effect. Russia retaliated in 2014 by banning all food imports from Europe and the United States for a period of one year. This is in addition to banning all adoptions of Russian children by American citizens, which has become a major point of contention in recent years.

After the passage of the original legislation, its authors stressed that the impact of the Magnitsky Act on the Russian economy was meant to be positive. The reasoning was that the Magnitsky Act would discourage the corruption and theft that supposedly limit Russia’s economic growth prospects. However, there is little evidence to prove that this has been uniformly the case.

Moving Forward with the Magnitsky Act

As an upper-middle income country, Russia’s standard of living and other metrics of assessing the average Russian’s state of economic affairs continue to lag behind the advanced industrial economies of the world. However, it is not possible to decisively say how much of this is due to the corruption that the Magnitsky Act and its supporters allege. More research should be done into the impact of the Magnitsky Act on the Russian economy, as it is difficult to say whether the authors of this legislation were right to craft it the way they did.

Because of this lack of decisive data, it is difficult to evaluate the impact of the Magnitsky Act on the Russian economy. There is no question that the Act plays an important normative role in signaling that the United States will exact consequences on violators of human rights, but whether it has the positive economic effects that its authors claimed it would is still not possible to assess. It seems likely that targeted sanctions like these could be a valuable tool to respond to potential human rights violations going forward, but they must be used with caution until a clear understanding of their broader impact is reached.

– Michaela Downey

Photo: Flickr

russian sanctionsCurrent U.S. sanctions against Russia began in 2014 as a response to the Russian annexation of Crimea in Ukraine.

Sanctions are generally an economic tool, though they may also include political or diplomatic measures. Modern economic sanctions have become increasingly sophisticated and are often targeted against narrow groups or even individuals instead of entire nations.

Economic sanctions have a spotty history of effectiveness regardless of how they are applied. They have had an effective political impact in isolated cases, like the heavy sanctions against South Africa’s former apartheid government. However, there are many counter-examples. The U.S. maintained sanctions against Iraq and its ruling Ba’ath party for over a decade after the 1990 invasion of Kuwait.  Those sanctions appeared to create no significant policy changes from Saddam Hussein’s government, but had a severe effect on the quality of life in Iraq.

10 quick facts about the current sanctions against Russia:

  1. The Russian sanctions mainly target the energy industry. U.S. energy companies may not do business with Russia, nor may they transfer oil or gas drilling technology to Russian agents. U.S. banks are prohibited from issuing long-term loans to Russian companies for energy-focused projects.
  2. The U.S. Department of the Treasury is the responsible agency for overseeing economic sanctions on behalf of the U.S. federal government.
  3. The European Union (EU) gets approximately 3o percent of its natural gas from Russian suppliers, making sanctions a difficult process for EU nations.
  4. The EU joined the U.S. in levying sanctions against Russia in September 2016 following the downing of Malaysian Airlines flight 17 over eastern Ukraine in July 2016. The flight was carrying 206 EU nationals.
  5. Russian sanctions have resulted in more than $1 billion in losses to ExxonMobil, the company formerly headed by U.S. Secretary of State Rex Tillerson.
  6. The International Monetary Fund estimated that the Russian GDP could be 1.5 percent lower in 2016 due to sanctions.
  7. The U.S. Congress passed additional sanctions against Russia in July 2017, reacting to evidence that Russia intentionally interfered in U.S. elections processes in 2016. The updated sanctions bill, signed into law in August 2017, constrains the power of the U.S. President to unilaterally reduce or remove Russian sanctions.
  8. The Russian sanctions affect dozens of specified Russian companies and government organizations, and include specific individuals in high-ranking positions in the intelligence and defense ministries.
  9. Since the imposition of Russian sanctions, the ruble has declined over 50 percent in value relative to the U.S. dollar.
  10. Sanctions have reportedly contributed to a sharp uptick in the number of Russians living in poverty (from 15.5 million in 2013 to 19.8 million in 2016). One foreign policy expert speculated in the Chicago Tribune that sanctions have even contributed to a decline in the Russian population.

Economic sanctions, despite their occasional success, have gained a reputation for harming the most vulnerable members of a targeted nation while often not having the intended effects on its government. North Korea would perhaps be the best modern example of this situation. It remains to be seen whether the current sanctions against Russia will change the behavior of its government without placing an undue burden on the population.

– Paul Robertson

Photo: Google