• New sanctions prohibit U.S. business with designated cyber attackers
  • Russia opts not to retaliate for now
  • Congressional briefings, and Republican senators, may force Trump’s hand

For those of us who live and breathe U.S. economic sanctions, we are used to most people largely ignoring what goes on in our world.

The United States’ recent imposition of new sanctions against Russia, however, was not one of those times.

With what felt like the whole world watching, President Obama, in a long-awaited and politically-charged move, issued an Executive Order (EO) imposing new sanctions against individuals and entities deemed to have engaged in certain cyber activities to tamper with, alter, or cause “a misappropriation of information with the purpose or effect of interfering with or undermining election processes or institutions.”

The U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC) responded immediately by designating six individuals and five entities under the EO. Among those are two Russian foreign intelligence agencies, three companies believed to have supported Russian cyber operations, and various Russian government officials. All of them have been declared Specially Designated Nationals (SDNs) under U.S. law and are thus essentially prohibited from participating in any U.S. business transactions.

President Obama also announced that he would expel 35 Russian diplomats from the United States and order the closure of two Russian-owned compounds in Maryland and New York that are believed to have housed Russian intelligence operations.

The purpose of the sanctions, according to the EO, is to “deal with the national emergency with respect to significant malicious cyber-enabled activities . . . in view of the increasing use of such activities to undermine democratic processes or institutions.” In other words: to respond to Russian state-backed hackers’ interference in the U.S. presidential election. (Both the FBI and CIA have concluded that Russia intervened in the election repeatedly, including by leaking information about former presidential candidate Hillary Clinton to sway the election in Trump’s favor.)

In a surprise departure from typical U.S.-Russian diplomatic protocol, Russian President Vladimir Putin did not immediately retaliate. Shaking off the advice of his Foreign Ministry, Putin decided not to expel U.S. diplomats or close two U.S. properties used by the U.S. embassy in Moscow, at least for now.

Putin is apparently banking on improved U.S.-Russian relations when Donald Trump assumes the U.S. Presidency in January. In a statement released on December 30, 2016, Putin said that Russia will not create problems for U.S. diplomats and will plan further steps based on policies enacted by the Trump Administration. He added that Russia retains the right to punish U.S. diplomats in the future.

It is yet to be seen how Putin’s hopes for improved U.S.-Russian relations will play out. For his part, Trump responded to the new sanctions with characteristic ambiguity, stating only that, “It’s time for our country to move on to bigger and better things,” but agreeing to an intelligence briefing on Russia’s involvement in the election hacks.

Trump will, of course, have carte blanche to remove these sanctions on day one of his presidency. (What an Obama Executive Order giveth, a Trump Executive Order can taketh away.) He is, however, likely to face some push-back – from the public at large and possibly the Republican establishment – should he try to do so.

For one thing, he will have to contend with Republican Senators John McCain and Lindsey Graham, who have balked at this most recent round of Russia sanctions and are leading the charge for even stronger measures. U.S. intelligence agencies are expected to brief Congress on the results of the hacking investigation prior to President Obama’s departure, which could, of course, add fuel to the Senators’ fire. If information showing that Russia interfered in the U.S. democratic process is publicized, it will be increasingly difficult for Trump to justify scaling back the U.S. response.

As with all things in these politically tumultuous times, however, only time will tell. Whatever the future holds for U.S. sanctions, one thing is clear: U.S. companies operating in Russia should, now more than ever, keep a close eye on these developments. What is permitted today may become prohibited tomorrow, and vice versa, and so on, for the foreseeable future.

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Photo of Thad McBride Thad McBride

Thad McBride advises public and private companies on the legal considerations essential to successful business operations in a global marketplace. He focuses his practice on counseling clients on compliance with U.S. export regulations (ITAR and EAR), economic sanctions and embargoes, import controls (CBP)…

Thad McBride advises public and private companies on the legal considerations essential to successful business operations in a global marketplace. He focuses his practice on counseling clients on compliance with U.S. export regulations (ITAR and EAR), economic sanctions and embargoes, import controls (CBP), and the Foreign Corrupt Practices Act (FCPA). He also advises clients on anti-boycott controls, and assists companies with matters involving the Committee on Foreign Investment in the United States (CFIUS). Thad supports international companies across a range of industries, including aviation, automotive, defense, energy, financial services, manufacturing, medical devices, oilfield services, professional services, research and development, retail, and technology. Beyond advising on day-to-day compliance matters, Thad regularly assists clients in investigations and enforcement actions brought by government agencies, including the U.S. Department of Justice (DOJ), the U.S. Treasury Department Office of Foreign Assets Control (OFAC), the U.S. State Department Directorate of Defense Trade Controls (DDTC), Customs and Border Protection (CBP), the U.S. Commerce Department Bureau of Industry & Security (BIS), and the Securities & Exchange Commission.