On September 17, 2018, the Valdai Club hosted an expert discussion on the prospects for US trade and sanctions wars, presenting the Valdai Paper, titled “Global Trade War? Contradictions of US Trade Policy in the Trump Era.” The author of the paper, Alan W. Cafruny, Professor of International Affairs on the faculty of Government, Hamilton College, took part in the discussion via video link.
Sanctions will remain an integral part of the US policy towards Russia in the coming years, no matter what administration will be in the White House. Their goal is to force Russia to change its foreign policy, and the sanctions regime will be increasingly tightened, even despite the negative reaction of the markets. At the same time, sanctions against Russia are part of a broader picture: for the US, trade wars and sanctions serve as a means of preserving its world hegemony. Such conclusions were made by participants in the expert discussion, held at the Valdai Club on September 17.
Speakers agreed that it is not the personality of President Trump, but structural and fundamental factors that stand behind the policy of sanctions. America feels the threat to its hegemony and presses on potential adversaries in various ways. According to Dmitry Suslov, deputy director of the Center for Comprehensive European and International Studies at the Higher School of Economics, the key element of American efforts to preserve hegemony is the geostrategic deterrence of China by trade wars. They should be separated from the trade restrictions imposed by Trump’s administration against the partner countries – the EU, Canada and Mexico. The purpose of these restrictions is to achieve the most favorable terms of trade for the US, and Trump will succeed, Suslov believes. According to the expert, an updated NAFTA will emerge sooner or later and the conditions of the TTIP will be revised so as to correspond to the US interests as much as possible. The next step should be the involvement of allied countries in the trade war with China on the side of the United States.
Russia plays a secondary role in this scenario. While challenging the United States’ political hegemony, it does not have enough weight to challenge its economic hegemony. Nevertheless, all the power of American sanctions is directed against Russia. According to Suslov, this is due to the fact that Moscow is a “conveniently cheap” geopolitical opponent in the short term. Such actions against China would have far-reaching consequences due to the huge interdependence of the two countries’ economies. Figuratively speaking, Russia is a “ball” in the sanctions game played by the United States. To pursue a similar policy towards China is the same as replacing the ball with a brick.
By implementing its sanctions course, the US is ready to act even contrary to the interests of its own companies operating in Russia. According to Alexis Rodzianko, President of the American Chamber of Commerce in Russia, despite the existing sanctions regime these companies have registered positive dynamics over the past two years. However, the main concern for them is the threat of new sanctions and counter-sanctions. The DETER bill, if adopted, would actually force all American companies to leave Russia. No less serious consequences would have the adoption in Russia of the law on criminal responsibility for the implementation of sanctions by the United States and other states, whose second reading was postponed. “We hope, for a very long time, better forever,” Rodzianko said.
The rigidity of sanctions against Russia is partly explained by the domestic political situation in the US: the opposition between the White House and Congress continues in connection with the alleged “Russian trace” in Donald Trump’s 2016 election campaign. As the midterm elections to Congress approach, a new round of sanctions should be expected. According to Suslov, Russia will be accused of interfering in these elections, even though it has no one to support there. The goal of Russia, in the opinion of the American establishment, is to “undermine democracy” in the United States.
Further prospects look rather gloomy. Sanctions against Russian companies are getting tougher every year. According to one of participants in the discussion, representing of a large mining company, the 2014 sanctions were only “child’s play” compared to those introduced on April 6, 2018. At the same time, as Rodzianko noted, the consequences of the most recent sanctions were not initially calculated, and their negative impact on the market forced legislators to soften punitive measures.
Sanctions pressure will grow and reach climax around the 2020 presidential election, Suslov believes. The purpose of the sanctions is to force Russia to make concessions and change its foreign policy. An important point here is the coherence of actions of the US and the EU. As Rodzianko said, after the adoption of CAATSA, the United States actually began to conduct an independent sanctions policy towards Russia, which drove a wedge between Washington and its allies.
However, these contradictions are not so great that one could speak about break-up of transatlantic solidarity on the issue of sanctions against Russia. According to Suslov, the turning point will be the situation around the Nord Stream-2 gas pipeline project. “If Germans capitulate and accept restrictions under the US sanctions, there will be an increase of American pressure on Russia,” the expert said. A possible escalation in Ukraine could contribute to the convergence of the US and EU positions on sanctions, he said.
Summing up the discussion, moderator Ivan Timofeev, programme director of the Valdai Discussion Club, stressed that the EU plays a critical role in the situation with sanctions against Russia: “If it joins the escalation, this will be a very serious negative signal for the markets.”
