University of Illinois Urbana-Champaign adjunct law professor Taisa Markus is an expert in securities law and cross-border capital markets. Markus, also a visiting professor at Kyiv Mohyla Faculty of Law, spoke with News Bureau business and law editor Phil Ciciora about U.S. sanctions on Russia.
Depending on the results of the presidential election, how do you foresee the continuation of U.S. sanctions on Russia playing out?
No matter who wins the presidential election, any action to continue or lift Russia sanctions must be taken judiciously and strategically. Sanctions can be a useful lever in any peace negotiation although issues such as security guarantees, accountability and reparations will and should be the primary focus. There is a strong case to keep sanctions in place to ensure that Russia complies with its obligations under any peace agreement. A deal to end the war within 24 hours, as proposed by former President Trump, would require unnecessary concessions with respect to sanctions.
Generally speaking, how constrained is the U.S. president in unilaterally lifting sanctions?
The answer is “it depends.” It’s a question of checks and balances and specific statutory provisions. Neither the president nor Congress acting alone have sole power over economic sanctions. This is because Congress, not the president, has power to regulate international commerce and therefore delegates the power over economic sanctions to the executive. The executive then implements and enforces sanctions.
Essentially, Russia sanctions can fall under one of two broad categories when it comes to easing sanctions.
Some critical Russia sanctions, including sanctions relating to cyber-related activities, election interference and the Russian technology, construction, financial and energy sectors have been imposed exclusively under national emergency declarations in response to the illegal annexation of Crimea and later in response to further Russian aggression. A national emergency declaration can be revoked by a president at which time, generally speaking, sanctions that rely solely on that order would be lifted. Congress can legislate over the revocation of a national emergency order, but that revocation is subject to a presidential veto that can only be overridden by two-thirds of both the U.S. House of Representatives and the U.S. Senate. Overriding a veto is typically a very high bar.
The second category is sanctions that have been imposed under statutes that may require the president to report to and consult with Congress and include very specific requirements for easing. Sanctions under the Magnitsky Act require only a “determination and report” by the president relating to corruption and human rights abuses or the national security interest. A sanctions statute enacted in 2017 after the illegal annexation of Crimea goes further and requires congressional review and more detailed certifications and reporting to relax sanctions. Later legislation includes certifications as to cessation of hostilities and, most recently, on reparations.
Congress can disagree with a president’s certifications and determinations, either because of a disagreement on the factual basis or because no basis exists or for any other reason, and issue a joint resolution of disapproval, which is then subject to presidential veto.
Overall, how effective have economic sanctions been against Russia since President Obama introduced them in 2014 in response to the Russian annexation of Crimea all the way through the ratcheting up after the full-scale Russian invasion of Ukraine in 2022?
The right way to think about this question is not in terms of whether Russia sanctions have led to regime change. Economic sanctions have historically been ineffective in this regard. Cuba is an obvious example. The South Africa sanctions in response to apartheid are a notable exception.
The better way to look at efficacy of sanctions is to consider what would happen in their absence.
Two areas where the unprecedented broad and coordinated Russia sanctions have impacted the Russian economy are financial services and energy.
Starting with financial services, the U.S. dollar is and will likely remain the dominant world currency. Cutting off access to the dollar and other reserve currencies raises financing costs. Exclusion from the international payment system SWIFT, the global capital markets and global financial institutions has negatively affected the Russian economy. This is evidenced by Russia’s efforts to create an alternative reserve currency that has gotten virtually no traction with potential partners such as the BRICS countries.
Another critical economic sector is energy. Russia funds its war machine predominantly through its energy sector, which is highly dependent on Western technology and services. The oil price cap, which prohibits companies from providing critical insurance and technical services to persons selling Russian oil below a price cap of $60, has led to Russia creating a shadow fleet of aging tankers to transport oil, shifting sales to countries including China and India and accelerating reliance on renewables and energy independence.
There is also a moral imperative justifying sanctions against countries that blatantly violate international law and commit atrocities. Would it really be OK to allow Russian financial institutions to freely access the U.S. banking system or for U.S. and European countries to fund Russia’s war machine through energy purchases? Or to support companies which make weapons (or components) used against?
How successful has Russia been in evading sanctions? Could that potentially be used as a pretense for relaxing some sanctions?
Russia has been successful in evading sanctions in the short term in particular by shifting trade to China and India, the use of transshipments and forming a shadow fleet of oil tankers. This has come at a significant cost.
The Russian economy is on a war footing and is characterized by lack of innovation, increased government controls, deficits, reliance on borrowing, brain drain, a labor shortage and inflation. The 2024 Russian budget adopted in December 2023 has 29% of total expenditures allocated to national defense. None of this can be good for Russia.
Russia’s short term success should not be a pretense for easing sanctions as their effectiveness will likely prove significant and because of the moral imperative.
How realistic is it to expect sanctions to stay in place until there’s a regime change in Russia?
Russia has repeatedly failed to comply with international agreements. Pursuant to the Budapest Memorandum, Ukraine gave up one of the largest nuclear arsenals in the world in exchange for security guarantees that Russia failed to uphold invading Crimea in 2014. The Minsk Agreement of 2014 contemplated the cessation of hostilities in Eastern Ukraine and Russia shortly thereafter breached that agreement. Given this track record, there is a strategic imperative to hold back some leverage in any peace agreement to ensure compliance. Sanctions can be a useful tool in that regard.
Much depends on our leaders and whether a judicious long-term approach to easing sanctions is taken. A president should also be cognizant of responses from our allies in a changing world order.