Are More Russia Sanctions the Answer? Treasury, State Preparing Reports That Go Beyond Punishment for Election-Meddling

Russian President Vladimir Putin delivers a speech at the Forum of Small Towns and Historical Settlements in Kolomna, Russia, on January 17. AFP via Getty Images/Alexander Nemenov

Congress and millions across the country have called for punishing Russia over its meddling and interference in the 2016 election that saw President Donald Trump rise to the nation's highest political office.

Days before the Treasury and State Departments must file congressionally mandated reports detailing potential new sanctions, a closer look at the issues involved shows that the undertaking goes far deeper than simply punishing Russia's economy, or payback for election interference.

Experts explained to Newsweek the impact current sanctions have already had on Russia's economy, particularly in the energy sector, while the Treasury and State Departments detailed the agencies involved and how U.S. policy would be applied.

The process is complex, involving European allies, Russian President Vladimir Putin and his backers, and may not really break from policies the U.S. has adhered to for years.

In July, Congress overwhelmingly passed the Countering America's Adversaries Through Sanctions Act of 2017 (CAATSA). The act, signed by the president in August despite his protest, ordered the Trump administration to sanction companies and individuals within Russia's defense and intelligence sectors.

The act stipulated that Congress could stop Trump from removing sanctions. He challenged it as unconstitutional, which only led to further accusations of the billionaire having ties to Russia he has not disclosed.

Suspicions were exacerbated when the administration missed a key CAATSA deadline. The administration had until early October to list the companies and people subject to sanctions, but did so three weeks late.

Eventually, 33 companies linked to Russia's defense sector, and six individuals tied to the intelligence sector, were named. Should companies around the world do business with those Russian entities and people named, they could be subject to penalties.

The administration has until Monday to submit the reports about possible new sanctions. John Huntsman, the U.S. ambassador to Russia, confirmed earlier this month that they would be published by the deadline.

Where the reports stand just before the deadline is unclear, but the undertaking involves several government agencies.

The Treasury is "actively working" to meet CAATSA's deadline for the reports on Russian oligarchs and the potential expansion of sanctions to include sovereign debt and derivative products, a department spokesperson told Newsweek. Further details on the status of the Treasury reports were not disclosed.

Its Office of Terrorism and Financial Intelligence and office of The Director of National Intelligence are also at work on the oligarch report.

Experts agreed that the sanctions currently in place against Russia have hurt its economy and, thus, the oligarchs who support Putin. Russia was subject to sanctions by the U.S., the European Union and others over its annexation of the Crimea from Ukraine in 2014, for supporting the separatist war and meddling in elections there, and for human rights abuses under the Magnitsky Act, said Yuval Weber, assistant professor at Harvard University's Department of Government.

How hard the sanctions have directly affected Russia's economy is disputable, but its oil industry has clearly been hit, according to Weber.

"The real damage to the Russian economy over previous years is that the price of oil fell, and the economy was [and is] dependent on that," he said. "As oil is sold in dollars, fewer dollars bidding for rubles created a huge decline in the value of the ruble, which in turn really hurt an economy dependent on imports for everything from food products to oilfield services."

Furthermore, the very threat or possibility of future sanctions is a deterrent to U.S. businesses and firms worldwide looking into working with a Russian firm, said Mario Mancuso, former undersecretary of Commerce for Industry and Security and senior Defense Department official.

"Every time you set a sanction, the effective impact of that sanction is actually broader," Mancuso explained. "If you're in international business and you read the sanctions regulations and you know that you can do business with a certain Russia person…you may nevertheless choose not to undertake the transaction even if it's permissible, because you may think, 'Wait a second, when will the other shoe drop?' And the U.S. government knows that."

A State Department official familiar with its efforts on the reports said the U.S.'s sanctions policies toward Russia firmly called for Putin's government to back out of Ukraine and to abide by the Minsk agreements. The 2015 deal was struck between Germany, France, Ukraine and Russia to maintain a ceasefire and for Ukraine to eventually gain its full sovereignty.

Secretary of State Rex Tillerson and President Donald Trump at Camp David on January 6. Getty Images/Chris Kleponis-Pool

"Our Russia sanctions policy has been carefully calibrated to incentivize Russia to fully implement its Minsk commitments, withdraw from occupied Crimea and cease malicious cyber intrusions and other malign activities that threaten our national security," the official told Newsweek.

The official added: "We have been clear that the path to a better relationship runs through Ukraine, and our policy with respect to Ukraine has not changed. "

Secretary of State Rex Tillerson said in June 2017 that the U.S. did not want to be "handcuffed" to the agreement, explaining it was possible that Ukraine and Russia could find some peace outside the deal's parameters.

But Tillerson supported sending United Nations peacekeepers to Ukraine to better install the Minsk accords, The Washington Post reported.

Russia used the sanctions as a sort of public relations tool, to make it appear as if the U.S. and the West were hindering Russians from purchasing European goods. The effort is for Putin to retain power or save face, and for his backers to maintain their support, Columbia University political science professor and Russia expert Elise Giuliano said.

"This has negatively impacted many Russian citizens who consume European goods," explained Giuliano. "Many Russian citizens don't even realize that they can't buy these goods anymore because of Russia's decision to impose sanctions on trade with Europe. They think these are part of the West's sanctions on Russia. "