Economic Sanctions - Atlantic Council

Drones, defense, and diplomacy: Negotiations and the battlefield in Ukraine

Conflict Defense Technologies Europe & Eurasia Politics & Diplomacy

Russia’s current economic situation is surprisingly similar to Ukraine’s, although almost all trade between Russia and Ukraine has ceased. After two years of around 4 percent economic growth in 2023 and 2024, Russia is expecting growth of merely 1.5 percent this year, while official inflation is 10 percent. Since October 2024, the Central Bank of Russia has maintained an interest rate of 21 percent while complaining about stagflation.

The Russian and Ukrainian economies are both suffering from their extreme focus on the military sector. Including Western support, Ukraine’s military expenditure amounts to about $100 billion a year, which is no less than 50 percent of Ukraine’s GDP, with 30 percent coming from the Ukrainian budget in 2024. Meanwhile, Russia’s 2025 military expenditure is supposed to be $170 billion or 8 percent of GDP. Unlike the Ukrainians, the Russians complain about the scale of military spending. This makes sense. The Ukrainians are fighting an existential war, while Russia’s war is only existential for Putin.

Contrary to common perceptions, Russia does not have an overwhelming advantage over Ukraine in terms of military expenditure or supplies. Russia does spend significantly more than Ukraine, but much of this is in reality stolen by politicians, generals, and Putin’s friends. Furthermore, Western sanctions impede the Russian military’s ability to innovate. In contrast, Ukraine benefits from innovation because its economy is so much freer, with hundreds of startups thriving in areas such as drone production.

Russia is now entering a fiscal crunch. Its federal expenditures in 2024 amounted to 20 percent of GDP and are likely to stay at that level in 2025, of which 41 percent goes to military and security. However, the Kremlin has financed its budget deficit of about 2 percent of GDP with its national welfare fund, which is expected to run out by the end of the current year. As a result, Russia will likely be forced to reduce its public expenditures by one-tenth.

Low oil prices could add considerably to Russia’s mounting economic woes and force a further reduction in the country’s public expenditures. However, Israel’s attack on Iran may now help Putin to stay financially afloat by driving the price of oil higher.

Economically, this is a balanced war of attrition at present. Ukraine’s Western partners have the potential to turn the tables on Russia if they choose to do so. Ukraine has successfully built up a major innovative arms industry. What is missing is not arms but funds. The West needs to double Ukraine’s military budget from today’s annual total of $100 billion to $200 billion. They can do this without using their own funds if they agree to seize approximately $200 billion in frozen Russian assets currently held in Euroclear Bank in Belgium. This could enable Ukraine to outspend Russia and achieve victory through a combination of more firepower, greater technology, and superior morale.

Anders Åslund is the author of “Russia’s Crony Capitalism: The Path from Market Economy to Kleptocracy.”

—Josh Lipsky is the chair of international economics at the Atlantic Council, senior director of the GeoEconomics Center, and a former adviser to the International Monetary Fund (IMF).

Originally created as an economic coordination body, the G7 began to put foreign policy and national security on its agenda in the 1980s, as the Soviet Union’s political influence was waning. Soon after, Russia attended its first G7 Summit as a guest in 1991, formally joined in 1998, creating the Group of Eight (G8), and then was suspended in 2014 due to its annexation of Crimea.

In the years since, new geopolitical rivals have entered the fray: Since the COVID-19 pandemic, G7 summits and declarations have attempted to address China’s role in the global economy. Last year’s leaders’ communiqué was especially harsh on China—which was mentioned twenty-nine times—on everything from its material support to Russia’s war against Ukraine to Beijing’s malicious cyber activities. But China was once a guest at the forum, first joining in this capacity in 2003.

Other members of the G7+5, an unofficial grouping of large emerging markets—India, Mexico, Brazil, and South Africa—have been invited as guests in recent years. If that sounds familiar, it is because India, Brazil, and South Africa, along with Russia and China, are the founding members of the BRICS group of emerging economies, which some would consider a representation of the geopolitical and economic competition the G7 faces today.

This year, Australia, Ukraine, South Korea, Brazil, Mexico, and India were invited to attend as guests. These invitations are a signal of broad alignment among the G7 and its guests. These invitations demonstrate the importance of the guests’ economic might on the global stage, even though India has shifted away from the G7 quite significantly in the last fifty years, as seen in the graph above. In 1992, when Russia first attended the G7 as a guest, its gross domestic product (GDP) was less than 1 percent of the world’s GDP, and the combined economies of the five founding BRICS countries made up less than 9 percent of global GDP. At the time, the G7 represented 63 percent of the world’s GDP. Today, the G7’s share is now 44 percent of the world’s GDP and the founding BRICS members’ share has more than doubled to almost 25 percent.

—Ananya Kumar is the deputy director for future of money at the Atlantic Council’s GeoEconomics Center.

In 2024, G7 countries attracted over 80 percent of global private artificial intelligence (AI) investments, led primarily by the United States. In ten years, private AI investments have grown almost fifteen-fold. This month, the US Department of Commerce rebranded its AI Safety Institute as the Center for AI Standards and Innovation (CAISI)—shifting away from an emphasis on “safety” and toward promoting rapid commercial development.

Carney has said that he plans to put AI at the top of his agenda at the upcoming G7 Leaders’ Summit. He has been a long-standing advocate of AI—dating back to his 2018 presentation on AI and the global economy while he was governor of the Bank of England.

But while the United States leads in AI innovation and investment, Europe continues to set the pace on regulation, and China strategically develops its own AI models. All this leaves Canada asking where it fits in.

That may be why Carney hopes to lead on this issue. The G7 presidency offers Canada a unique opportunity to convene democracies to work together on AI. Rather than trying to outspend the United States or out-regulate Europe, Canada can focus on building connections—creating shared standards, developing trusted public-private data hubs, coordinating strategic investments, and outlining guidelines for common learning and collaboration across borders.

—Alisha Chhangani is an assistant director at the Atlantic Council’s GeoEconomics Center.

Ten years after the first G6 meeting took place in France, another landmark meeting took place at the Plaza Hotel in New York, in September 1985. At the meeting, then US Treasury Secretary James Baker convinced his counterparts from West Germany, France, the United Kingdom, and Japan to support a significant devaluation of the US dollar—what became known as the Plaza Accord.

Today, the dollar’s value relative to its G7 counterparts is on the rise again, fueled by tight monetary policy and expansionary fiscal spending. Although the current appreciation is milder than the surge seen in the early 1980s, the Trump administration may use the G7 Summit to raise concerns about the burden of being the world’s reserve currency, especially when it comes to export competitiveness. In late 2024, the current chair of Trump’s Council of Economic Advisers, Stephen Miran, proposed a “Mar-a-Lago Accord” as an updated version of the Plaza Accord, though no real progress on this is apparent. Moreover, this time a key global player is absent from the conversation—China.

—Bart Piasecki is an assistant director at the Atlantic Council’s GeoEconomics Center.

The finance ministers and central bank governors of the G7 already held their meeting last month in the Canadian Rockies, emerging with a consensus on tackling “excessive imbalances” and nonmarket policies. While the G7’s finance ministers and central bank governors’ communiqué didn’t call out China by name, it’s clear that’s who they were referring to. Simultaneously, the US-UK trade deal called for the United Kingdom to meet US requirements on the security of supply chains, which infuriated Beijing.

Washington wants coordinated economic security partnerships to help counter China and encourage more investment in the United States. But the United States has been calling for allies to divest from China for a while now. In response, G7 counterparts could point to the data above and ask: How much more do we need to give?

Over the past five years, nearly every G7 country, with the exception of Canada, has scaled down their investments in China and scaled up their investments in the United States. For example, Japan has reduced foreign direct investment in China by 60 percent over the past decade, including shuttering a major Honda plant in Guangzhou. Meanwhile, the Japanese carmaker pledged to put $300 million into a plant outside of Columbus, Ohio. This has been the trend as the United States’ G7 partners reassess their economic dependencies on China. But amid ongoing trade wars, how much are they willing to coordinate more closely with the United States?

—Jessie Yin is an assistant director with the Atlantic Council’s GeoEconomics Center.

Foreign aid, or official development assistance (ODA), from G7 countries dropped sharply in 2024, and early projections through 2025 and 2026 suggest even steeper declines ahead for most nations. The United States has exhibited the most drastic retreat, following the effective dismantling of the US Agency for International Development. But European countries have also scaled back development budgets and are redirecting funds toward defense and domestic economic issues. While ODA briefly surged in response to the COVID-19 pandemic and the war in Ukraine, that uptick masked a longer-term downward trend in traditional development funding as a percentage of G7 countries’ economies.

Most G7 nations have failed for years to meet the United Nations Sustainable Development Goals Target 17.2, which called for allocating 0.7 percent of gross national income to ODA. As of 2024, none of them has reached this benchmark. This retreat is particularly troubling given today’s fractured geopolitical and economic landscape. In such times, investing in global partnerships and life-saving aid through ODA is not just a moral imperative—it’s also a strategic one.

—Lize de Kruijf is a program assistant at the Atlantic Council’s Economic Statecraft Initiative.

A major focus heading into the G7 Summit will be how Carney handles his latest meeting with Trump. The two managed to have a cordial meeting in May, and Carney’s announcement this week that Canada will increase its defense spending could help to placate Trump, who has long complained about Canada’s lagging defense spending.

But Canada is also looking beyond its southern neighbor. Carney has invited the leaders of Australia, Brazil, India, Indonesia, Mexico, South Korea, South Africa, Ukraine, and Saudi Arabia to join him in Alberta. Under former Prime Minister Justin Trudeau, Canada’s relationships with both Saudi Arabia and India reached diplomatic low points. By inviting these leaders, Carney is demonstrating a willingness to reengage partners. In no area is Carney more likely to pursue new partnerships than in the defense sector. Canada stated its desire to join the ReArm Europe Initiative and has signed a major deal for an Australian radar system. Expect Carney to seek new partners as Canada rebuilds its defense capacity, potentially with some of the countries invited to this year’s G7.

—Imran Bayoumi is an associate director at the Atlantic Council’s Scowcroft Center for Strategy and Security.

Canada’s hosting of the G7 Summit in Alberta carries exceptional significance amid escalating tensions with the United States. Trump’s attendance, which will mark his first G7 Summit since 2019, signals renewed engagement with Canada. This could spark talks on renegotiating the United States-Mexico-Canada Agreement (USMCA) ahead of the trade deal’s first joint review in July 2026. The timing of the G7 Summit coincides with heightened Canadian nationalism and intense public focus on Canada-US relations, particularly around tariff disputes affecting sectors such as steel.

The Trump-Carney relationship differs markedly from previous dynamics between Trudeau and Trump, potentially enabling more productive G7 cooperation when US foreign policy dominates global conversations. The trilateral presence of Mexican President Claudia Sheinbaum, Trump, and Carney creates an opportunity for preliminary USMCA discussions. However, critical questions emerge: Will Mexico and Canada align against the Trump administration? Will Canada prioritize repairing bilateral US relations over Mexico-Canada ties? The summit’s outcome is likely to significantly shape hemispheric trade relationships and regional diplomatic strategies.

—Maite Gonzalez Latorre is a program assistant at the Adrienne Arsht Latin America Center and Caribbean Initiative.

Sophia Busch, Ella Wiss Mencke, Ethan Garcia, and Miguel Sanders contributed to the data visualizations in this article. The data visualization titled “US jobs rely on Mexico and Canada more than any other trade partner” originally appeared in an article by Sophia Busch published on January 16, 2025.

The post Seven charts that will define Canada’s G7 Summit appeared first on Atlantic Council.

Donovan cited in Newsweek on EC proposal to lower price cap on Russian oil

bpiasecki — Thu, 12 Jun 2025 16:50:02 +0000

Read the full article here.

The post Donovan cited in Newsweek on EC proposal to lower price cap on Russian oil appeared first on Atlantic Council.

Donovan quoted in China Daily on potential US reactions to proposed EC sanctions on Russia

bpiasecki — Wed, 11 Jun 2025 16:34:49 +0000

Read the full article here.

The post Donovan quoted in China Daily on potential US reactions to proposed EC sanctions on Russia appeared first on Atlantic Council.

Five questions (and expert answers) about the new EU sanctions plan for Nord Stream and Russian banks and oil

Atlantic Council experts — Tue, 10 Jun 2025 21:53:27 +0000

“Strength is the only language that Russia will understand.” That’s what European Commission President Ursula von der Leyen said Tuesday as she unveiled a proposed eighteenth European Union (EU) sanctions package against Russia for its war on Ukraine. Among the proposals are a ban on transactions with Russia’s Nord Stream gas pipelines, additional sanctions on more than twenty Russian banks, and a lowering of the oil price cap from sixty dollars to forty-five dollars. Approval for the package now rests with the twenty-seven EU member states, and some elements of the package, such as lowering the oil price cap, could prove contentious this coming weekend at the Group of Seven (G7) meeting in Canada. Below, our experts explain what was announced and what is at stake.

1. What impact would this proposal have on the Nord Stream gas pipelines?

This package could put the final nail in Nord Stream 2’s coffin, providing a much overdue, decisive vision for the future of Russian pipeline flows to Europe. Ending this zombie project debate once and for all also sends a clear message to global liquefied natural gas producers, which may be hesitant to expand partnerships with the European buyers as long as a relapse to Russian gas dependence is a possibility. This checkmate move from the European Commission still needs approval from EU member states, as well as watertight language on sanctions implementation to prevent caveats or exemptions. Moreover, the Commissions’s bold action on Nord Stream 2 brings the Commission’s Roadmap to fully end EU dependency on Russian energy closer to reality, just as the roadmap’s legislative proposals are expected later this month.

—Olga Khakova is the deputy director for European energy security at the Atlantic Council’s Global Energy Center.

***

The proposal is a welcome one to put an end to the questions about the restarting of the pipelines. The proposed rules would ban any EU operator from doing direct or indirect transactions for Nord Stream 1 or 2, making the operation of the pipelines impossible. More importantly, the proposal would end any rumors or quiet discussions around the future of the pipeline and shows the seriousness, at least in the Commission, around achieving energy independence from Russia. “There is no return to the past,” von der Leyen declared during Tuesday’s announcement.

—Jörn Fleck is the senior director of the Atlantic Council’s Europe Center.

***

After nearly two static decades of Germany’s Gazpromphilic foreign policy, and statements emerging in recent weeks from German politicians from the Social Democratic Party (SPD) and the Alternative for Germany (AfD) indicating openness to a revival of Nord Stream, today’s EU announcement of Nord Stream sanctions is nothing short of astonishing. That’s because it amounts to a de facto approval by new German Chancellor Friedrich Merz. Since assuming the Chancellery, Merz has taken steps toward a true Zeitenwende that were lacking in Germany since that political approach to Russia had been first announced by his predecessor Olaf Scholz, with Merz stating clearly and resolutely in late May that under his leadership, the German government will “do everything to ensure that Nord Stream 2 cannot be put back into operation.”

Merz doubled down on this rhetoric while sitting next to US President Donald Trump in the Oval Office last week, declaring Nord Stream to have been “a mistake.” Saying this next to Trump is especially important given recent reports that a US-based investor has sought to lobby the Trump administration to drop sanctions on Nord Stream to allow for American ownership of the pipelines. According to the investor, this move is an attempt to supposedly achieve the “de-Russification” of the projects—despite the logical incoherence of how such infrastructure could ever be truly “de-Russified” if it were still delivering Russian gas.

If the EU is able to successfully get this sanctions package through the gauntlet of member state ratification—no small task with the likes of Hungary and Slovakia waiting in the wings to go to bat for Russian President Vladimir Putin’s energy interests in Brussels—it will be a major step toward finally ending Russia’s energy grip over European political and security interests.

—Benjamin L. Schmitt is a senior fellow at the University of Pennsylvania’s Kleinman Center for Energy Policy and Perry World House.

2. How much would lowering the oil price cap from $60 to $45 hurt Russia’s economy?

That depends on how effectively the new price cap would be enforced and where the general price of crude would fluctuate. The impact would probably be significant but not as big as it would be if the United States could find a way to limit third-country purchases of Russian oil, either through US Senator Lindsey Graham’s bill or in another (and more practical) form.

—Daniel Fried is the Weiser Family distinguished fellow at the Atlantic Council and a former US ambassador to Poland.

***

Russia still relies on revenue from oil exports, so lowering the price cap could negatively affect how much money they can bring in. However, the price cap has been very difficult to enforce. In response to the price cap, Russia developed an expansive shadow fleet to export its oil, which created an additional challenge for Western sanctions enforcement authorities.

That said, lowering the price cap would be welcome considering the price of Brent Crude as of today, $67.24 per barrel, which is very close to the $60 price cap. When the price cap first went into effect in 2022, the price of oil was over $100 per barrel. Reducing the price cap is an acknowledgement that oil prices have dropped considerably since it was first introduced and reflects a commitment to restrict Russia’s ability to generate revenue.

—Kimberly Donovan is the director of the Economic Statecraft Initiative at the Atlantic Council’s GeoEconomics Center. She previously served in the federal government for fifteen years, most recently as the acting associate director of the Treasury Department Financial Crimes Enforcement Network’s Intelligence Division.

3. What else is in this sanctions package?

The most interesting aspect of this package is the “transaction ban” on “financial operators in third countries that finance trade to Russia, in circumvention of sanctions.” That sounds a lot like secondary sanctions, which historically have been controversial in the EU. If this passes, it could significantly strengthen EU sanctions by extending their reach.

—Kimberly Donovan

4. What are the chances of this proposal moving forward?

It’s worth keeping in mind that this is still just a proposal, and there is a long way to go before it is finalized. These sanctions proposals require the unanimous support of the EU’s twenty-seven member states, which, in and of itself, is no simple process of negotiations. The proposal will likely face two immediate hurdles from the likes of Hungary and Slovakia, whose respective leaders have delayed or played spoiler on the previous efforts for political leverage until their demands were met. However, the fact that there have been seventeen successful rounds of sanctions in the past suggests that solutions, however messy, incomplete, or last-minute, are possible. There is an important transatlantic angle as well. The EU wants to move together with the United States on Russia. So European holdouts will certainly not want to be seen as roadblocks should the Trump administration decide, for example, to push for further sanctions on Russia.

—Jörn Fleck

***

I don’t know how much has been vetted with Hungary nor what kind of pressure the Commission is prepared to put on Budapest if it attempts to block the proposal. But the Commission seems serious about ramping up pressure and announcing steps before the G7 Summit, where they will have a chance to obtain Japanese and Canadian support, and thus to present the United States with some decisions.

—Daniel Fried 

***

Brussels seems optimistic that the eighteenth sanctions package will pass. However, aspects of the sanctions package will need G7 support. This includes the proposal to reduce the price cap, which is why the Commission understandably announced the proposal in advance of G7 meetings this coming weekend in Canada. Further, support from Washington or lack thereof could sway how countries such as Hungary and Slovakia vote on the sanctions package.

—Kimberly Donovan

5. How might Washington react to this proposal?

That is a big question, and I can’t give a reliable answer. The European leaders at the G7 will have a chance to convince Trump that it is his own plan to end the war that the EU is backing, and that the United States ought to go all in to that end and agree to pressure Russia. But Trump, despite edging up toward imposing additional costs on Russia, has not yet done so, despite multiple opportunities and provocations from Putin.

—Daniel Fried 

***

It’s unclear how Trump himself will react to the proposal. But what the US president should see in this proposal is a Europe that is a willing and serious partner. The administration has made clear that it expects Europe to step up for its own security and for Ukraine’s. This is part of Europe’s response to do just that. European leaders have been united on pushing for action on Russia given Moscow’s continued intransigence on cease-fire talks and devastating attacks on Ukraine. This proposal is another indication that Europe is putting real ideas on the table to boost US and Ukrainian leverage with Putin.

—Jörn Fleck

***

Members of Congress may welcome this package, as the spirit is consistent with the bill Graham introduced to get Putin to the negotiating table. However, we’ll have to wait and see how Trump reacts considering the stalled cease-fire talks and escalating violence on the battlefield.

—Kimberly Donovan

The post Five questions (and expert answers) about the new EU sanctions plan for Nord Stream and Russian banks and oil appeared first on Atlantic Council.

How Japanese economic statecraft has shifted from promotion to protection

Charles Lichfield — Fri, 06 Jun 2025 17:04:20 +0000

Is Japan ahead of the curve or playing catch-up on economic statecraft?

A vague “Japanese model” comes up in many conversations about industrial strategy in the United States. It is common knowledge that, in the second half of the twentieth century, Japan found new export destinations for its industrial output while working its way up the manufacturing value chain. Japan’s powerful (though now defunct) Ministry of International Trade and Industry (MITI) almost always receives credit for managing this success. In short, the casual evaluator of economic security policies might answer that Japan has known what it is doing for longer than the United States.

Self-critical Japanese specialists would find such a portrait saccharine and outdated.

From the 1970s onward, Japan gradually opened its current account and its economy to investment. By the 1980s, when US public opinion was turning against Japanese imports, MITI’s power had already greatly diminished. Alongside the rest of the Japanese government and the Bank of Japan, it struggled to recreate favorable conditions during the lost decade that started in the early 1990s. There has since been increasing alarm regarding China’s rise and its many consequences for the Japanese economy, including Japan’s dependence on Chinese imports and investment.

While these concerns had been building for some time, the spark that started a legislative bureaucratic overhaul to extend the government’s authority and centralize the chain of command came during the second term of late Prime Minister Shinzo Abe, from 2012–2020.

The outbreak of the COVID-19 pandemic and the subsequent weaponization of supply chains made Abe’s decisions seem remarkably prescient. Yet the world has changed even faster than he might have expected. Japan has built new policies and teams to deal with economic threats wrought by China and Russia, but these were designed to work in conjunction with partners, primarily the United States. Though suspended, President Donald Trump’s “liberation day” 31-percent reciprocal tariff on Japan casts doubt on whether Washington still considers Japan the United States’ closest partner in Asia.

Japan finds itself in a predicament remarkably similar to that of other US partners. But unlike the European Union, it is wary of threatening to deploy its economic statecraft policies against the United States. Instead, following in Abe’s footsteps, it hopes to rely on deals. This has proven successful in obtaining a green light for Nippon Steel’s purchase of US steel, as Trump lifted Joe Biden’s blocking of the transaction. But the welcoming of Japanese investment by no means guarantees a looser stance on Japanese imports to the United States.

Over three months, we conducted interviews with Japan’s economic security policymakers in Washington and Tokyo, who agreed to meet despite their busy schedules. The goal of this piece is to represent how these teams are organized and how they think about relevant issues. The fallout from Trump’s tariffs was front of mind in every conversation, yet it was still possible to present a comprehensive picture of where Japanese economic statecraft stands now, and how it will continue to prepare for more uncertainty.

From vision to legislation

Abe left a significant legacy in economic and defense policy. It should be no surprise that he also made a difference in the areas in which they overlap. Economic themes were present in Abe’s 2007 speech on the “free and open Indo-Pacific” during his shorter first term. In front of India’s Lok Sabha (or parliament), he committed Japan to promoting regional connectivity and economic partnerships. Nonetheless, the bureaucratic and legislative overhaul of economic security and economic statecraft came in the later years of Abe’s second term. Before that, security and economics were treated separately and their needs perceived as different.

On the security front, growing threats from China and North Korea helped Abe justify a reinterpretation of Japan’s pacifist constitution to expand the role of its Self-Defense Forces. In 2013, Japan created a National Security Council to centralize decision-making with the support of a National Security Secretariat (NSS). Two years later, the government passed security legislation allowing Japan to exercise collective self-defense, enabling it to aid allies under attack even if Japan itself is not directly threatened.

Concerns about economic security were already present, especially those relating to Chinese intellectual property (IP) theft and overreliance on Chinese manufacturing. However, these were clearly superseded by the need for a revitalization of Japan’s economy, which by then had suffered two decades of subpar growth. Abenomics, the prime minister’s signature economic policy, succeeded in reversing deflation and boosting consumer spending through increased government spending and quantitative easing. Attempts to improve competitiveness through structural reforms, including reform of the labor market, were somewhat less successful.

Abenomics was a net positive for Japan’s economic security, boosting consumption and making Japan (slightly) less reliant on exports. While economic revitalization was the priority, this didn’t prevent the prime minister and the political class from becoming more attuned to the economic security risks Japan faced. China’s decision to withhold exports of critical minerals for several months in 2010 was probably the first significant shock. But when Russia annexed Crimea and destabilized the Donbas region of Ukraine in 2014, Japan surprised observers by joining the United States and the European Union in imposing country-specific sanctions outside a United Nations (UN) mandate. These events were enough to kickstart an overhaul of Japan’s economic security landscape.

In 2015, Abe said in a speech to the US Congress that the United States and Japan “must take the lead to build a market that is fair, dynamic, sustainable, and is also free from the arbitrary intentions of any nation.” The subsequent years were characterized by more focus on economic security. The NSS created a specific economic security team in 2019, and Japan made several updates to legislation.

Before the changes of the late 2010s, Japan’s economic security policies were governed by the still extant Foreign Exchange and Foreign Trade Act (FEFTA) of 1949. This act originally imposed a tight regime of inbound investment screening, which was progressively hollowed out as Japan sought to bring itself in line with Organisation for Economic Co-operation and Development (OECD) and other international standards. Still, the division of labor set out by FEFTA hadn’t changed. The Ministry of Finance remained responsible for investment screening while the Ministry of Economy, Trade and Industry (METI)—the successor to MITI—became the natural decision-maker for export controls and subsidies.

To this day, FEFTA remains the legal basis for the Japanese government’s investment screening and export controls. However, vulnerabilities exposed by the COVID-19 pandemic made it clear that an additional layer of legislation would be needed—one that could build economic resilience by allowing the government and firms to cooperate in a more intensive way. This was the basic rationale of the Economic Security Promotion Act of 2022. This law created the position of minister for economic security, based in the prime minister’s office, although much of the engagement with firms and data collection is still run out of METI.

How the ministries and agencies are responding to new challenges

As the government of Japan has placed greater emphasis on economic security and updated its legislation, its departments haven’t significantly altered their division of labor in terms of economic statecraft. METI continues to lead on export controls, the Ministry of Finance on investment screening, and the Ministry of Foreign Affairs on sanctions. What has changed is how policies are coordinated, with the creation of teams explicitly devoted to economic security.

When it was created in 2014 to support National Security Council meetings, the NSS did not feature an economic security team. Instead, the Ministry of Foreign Affairs played this role by default given that it was already responsible for coordinating policy with other governments. While this ensured that Japan applied the measures to which it agreed in international forums, it was clearly insufficient to implement a holistic strategy of economic self-defense, resilience, and indispensability.

Since the 2019 creation of an economic security team within the NSS, the balance between internal and external coordination has become clear. The ten-person team is small but powerful. It can convene meetings between large, well-established ministries and bring their preferences in line with a more general sense of Japanese strategy, including Tokyo’s alignment with Washington. This role has become more prominent since the arrival of the first minister of state for economic security—who sits in the cabinet office, not inside METI or another large ministry—and a legislative mandate in the Economic Security Promotion Act for the NSS to coordinate economic security policy. The team’s access to the prime minister’s office also allows it to seek political guidance faster than experts in ministries can.

And yet, while the role of the NSS in economic security has clearly grown, the team’s small size and the long-standing roles of other ministries and agencies make the NSS a partial counterpart to the US National Security Council. The economic security team has a blue-sky thinking role and runs a regular program of cross-departmental tabletop exercises focusing on economic coercion, some of which have included US government specialists.

It’s important to remember that the NSS economic security team is not automatically at the top of the chain of command in the way the National Security Council (NSC) might be. Sensitive decisions on export controls and investment screening can also be settled by METI and the Ministry of Finance, respectively. Therefore, studying the role of each organization remains essential.

Ministry of Foreign Affairs

The Ministry of Foreign Affairs no longer carries out internal coordination on economic security, as this mandate has been moved to the NSS. Despite this shift, the ministry still plays a vital role in Japanese sanctions and helps coordinate international positions on other tools such as export controls. As we’ve found in other countries, such as France, the diplomats have two key qualities: they are present at every international summit and often must stand in for more expert colleagues when a deal is done, and they are good at finding compromises.

While Japan has participated fully in the recent Western sanctions coalition against Russia, this has been made possible by exemptions that Tokyo sought and obtained. The best example is the sanctions exemption for the Japanese-owned Sakhalin-2 oil and gas refinery from the Russian oil price cap and other measures that could stem the flow of liquefied natural gas. The Ministry of Foreign Affairs has also contributed to talks on how to make the sanctions effort work better, such as the Common High Priority Item list for export controls. In December 2023, it also pushed Japan to take the unprecedented step of using the legal basis of its Russia sanctions to sanction third-country entities enabling Russia to circumvent sanctions.

These decisions show that the ministry’s culture still prioritizes coordination with the United States. This worked well under the Biden administration, during which both governments managed to organize two 2+2 Summits of the Economic Security Consultative Committee, with the Ministry of Foreign Affairs and METI on the Japanese side and the Departments of State and Commerce on the US side. There is no clarity regarding whether this will continue under the second Trump administration.

Difficulties coordinating with the United States will be a culture shock for the ministry, but it will try to salvage what it can and keep pushing for unity in the Group of Seven (G7). The ministry is also leading on building understanding with the Global South, especially on economic security. Japan realizes better than some of its close partners that sanctions and economic statecraft can be easily misconstrued in third countries and can have adverse impacts on their economic development. Therefore, the ministry has taken on the task of explaining how its economic security policies do not contradict overarching principles such as the Free and Open Indo-Pacific, while also pushing for overseas development aid to be better coordinated with economic security priorities.

METI

Proponents of industrial policy have a starry-eyed view of the Ministry of Economics Trade and Industry’s predecessor—the Ministry of International Trade and Industry—and its role in steering Japan’s rise as an export powerhouse. The eulogizing is not entirely misplaced, but it perhaps overlooks how the powerful super ministry has needed to adapt, first to the shortcomings of Japan’s export-driven model and now to the era of economic coercion. METI can leverage deep sectoral knowledge on the Japanese economy and its interdependencies with the rest of the world, which other ministries do not have. Yet its officials still tend to downplay their readiness for the new challenges and say Japan has a lot to learn about the tools of economic statecraft.

One sign of this is that METI’s Trade and Economic Security Bureau, though run by long-standing official Hiroshi Ishikawa, is a recent creation and another result of the 2022 Economic Security Promotion Act. The bureau’s role is to implement the new legislation by taking a forensic approach to Japan’s problems and the cards it can still play. In close cooperation with firms, the finance sector, and universities, the bureau’s work is organized into three pillars. These are

“red” areas of disruptive technological innovation in which Japan needs to cultivate its indispensability but must beware of losing autonomy;
“blue” areas in which Japan has technological advantages and should maintain its indispensability; and
“green” areas of external dependence in which de-risking is needed.

So far, the approach has also made it easier to unlock larger subsidies for advanced semiconductors, which fit squarely within the “red” area in which Japan risks being left behind. The best example of this is the 1-trillion yen ($6.9 billion) subsidy for TSMC to build a factory on the island of Kyushu.

The three-pillar framework has been useful in raising awareness with firms. Some small and medium enterprises had been unaware that their intellectual property and production were part of what makes Japan indispensable to the global economy. This is usually good news. The exercises have made clear that Japan is ahead of the curve in synthetic biology. The Japan pavilion at the Osaka World Expo proudly features a human heart made of induced pluripotent stem (iPS) cells. But technological advantages are also bringing constraints, such as the US demand for a trilateral deal with Japan and the Netherlands to control the export of semiconductor manufacturing equipment or Tokyo’s own decision to restrict exports of drone technologies that can have military applications.

Ministry of Finance

Of all the ministries working on Japan’s economic security, the Ministry of Finance has had the most stable area of responsibility. Under the Foreign Exchange and Foreign Trade Act of 1949, the Ministry of Finance carries out investment screening. Policies were initially very strict; however, investment liberalization progressed after Japan joined the OECD in 1964. Since the second Abe administration, attention has shifted to the new challenge of economic security.

Unlike other export controls, which often face skepticism from Japanese members of parliament keen to help firms in their constituencies, inbound investment screening enjoys broad-based political support. In 2020, an amendment supported by politicians and driven by the changing international environment considerably tightened screening by requiring prior notification of any foreign direct investment (FDI) covering 1 percent or more of ownership in a firm in a sensitive sector—down from 10 percent. The measure is country agnostic, but the shift was apparently driven primarily by China.

Prior to a 1978 liberalization, the ministry also practiced outbound investment screening. Since 1998, a simpler post-investment reporting system has become standard practice for Japanese firms, but this does not include screening. Arguably, Japan’s modest venture capital ecosystem relative to that of the United States means it faces fewer dilemmas on outbound investment.

Japan will need to diversify its partnerships to weather the storm

Japan’s recent legislative and bureaucratic reforms were carried out with awareness of US political volatility, though perhaps not an expectation that the second Trump administration would engage in a trade war with its allies. While Tokyo welcomed early signals of US engagement, such as Secretary of State Marco Rubio’s participation in the Quad dialogues, it cannot ignore the reality that Washington is increasingly prone to economic coercion, even against allies.

This is not without precedent. US pressure in the 1980s contributed to Japan’s long economic stagnation. But today’s situation represents a larger shift and comes under more challenging geopolitical circumstances for a country like Japan, which now considers three of its neighbors to be bad actors. Japan must prepare for a strategic divergence from US economic policy, while identifying ways to prevent definitive ruptures wherever possible.

During the Trump presidency, Japan will be on a different course than the United States on green energy technology, as Japan is an export powerhouse in this field. It will also be at odds with the United States on overseas development assistance in regions where US retrenchment is enabling China’s advance. Institutions like the Japan Bank for International Cooperation (JBIC) already quietly prioritize projects with economic security value; this approach should be made more explicit to encourage greater uptake in Asia and Africa.

Deeper coordination with G7 partners and other likeminded countries is essential, including on the most worrying scenarios in the Strait of Taiwan. Japan shares many of the European Union’s concerns about the US tendency to frame every economic issue as a national security threat. Japan also prefers country-agnostic policies, instead of the tier-based or country-specific approaches US administrations have developed.

Tokyo prefers more predictable policies yet—unlike the European Union—it is unencumbered by internal divisions among twenty-seven member states. It has a unique opportunity to serve as an example of what open economies that do not wish to engage in economic coercion, but must be ready to stand up to it, should do. METI’s systematic approach to cultivating indispensability is certainly more advanced than what the rest of the G7 is doing. On the other hand, Japan remains vulnerable to coercion through its supply chains and much more work must be done to build resilient alternatives to China.

Japan is in a geopolitically challenging neighborhood and is witnessing the basic tenets of its foreign policy—from alignment with the United States to fostering a rules-based environment—come under unprecedented stress. Yet its advanced manufacturing base and recently updated legislation on economic security also provide it with more cards to resist economic coercion than most countries hold. Its public and private sectors are now largely aligned on these issues. Business leaders have even expressed support for former Economic Security Minister Sanae Takaichi becoming the next prime minister.

It’s hard to think of a more ringing endorsement from the private sector for prioritizing economic security.

About the author

Charles Lichfield is the deputy director and C. Boyden Gray senior fellow of the Atlantic Council’s GeoEconomics Center.

The report is part of a yearlong series on economic statecraft across the G7 and China supported in part by a grant from MITRE.

The contents of this issue brief have not been approved or disapproved by the Japanese government.

Explore the program

At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.

The post How Japanese economic statecraft has shifted from promotion to protection appeared first on Atlantic Council.

After partial relief, what’s next for Syria sanctions?

Alex Zerden — Thu, 29 May 2025 18:03:01 +0000

The Trump administration took a bold first step toward sanctions relief for Syria with the May 23 actions by the State Department and the Department of the Treasury. Unprecedented sanctions and related relief will help the Syrian people and fulfill US President Donald Trump’s May 13 commitment for the “cessation” of “sanctions.” Much will now depend on progress made in Syria and further relief efforts.

The United States has opened meaningful space for reconstruction and private sector engagement. Efforts to do so include the Treasury’s Office of Foreign Assets Control (OFAC) issuing General License (GL) 25 (including frequently asked questions on May 28), a State Department Caesar Act waiver, and Financial Crimes Enforcement Network (FinCEN) USA PATRIOT Act Section 311 exceptive relief for the systemically important Commercial Bank of Syria. Along with other relief, the measures remove obstacles to reconnecting the sanctioned Central Bank of Syria and certain Syrian commercial financial institutions to the global financial system.

While a significant signal, these announcements do not mean a return to business as usual with Syria after forty-six years of punishing economic measures directed primarily against the former Assad regime. Syria remains a high-risk jurisdiction due to years of conflict, endemic corruption, state institution collapse, narcotrafficking of captagon, insufficient anti-money laundering efforts, and inadequate financing of terrorism controls. In February, the intergovernmental Financial Action Task Force affirmed Syria’s status on its “grey list” of jurisdictions under increased monitoring. These relief measures announced by the State Department and the Treasury are also either temporary in nature (the 180-day Caesar Act waiver) or subject to revocation at any time (GL25 and the FinCEN Section 311 exceptive relief). Additionally, other US legal and economic restrictions remain in place, including the following:

Syria’s state sponsor of terrorism (SST) designation that, in part, removes some of Syria’s sovereign immunity in US courts;
foreign terrorist organization (FTO) designations with attendant material support criminal liability enforced by the Department of Justice and civilly by US terrorism victims;
United Nations sanctions, including on key members of the Syrian interim government; and
export controls administered by the Department of Commerce.

As an immediate next step to build on this momentum, the Trump administration can take the following measures:

Provide policy clarity on the outstanding restrictive economic measures and legal prohibitions related to the SST and FTO designations. The administration can publish a memorandum by the Department of Justice to articulate the administration’s prosecutorial policy involving alleged material support to FTOs operating in Syria. While novel, such guidance would provide greater legal clarity, especially for humanitarian organizations operating in Syria.
Work with Congress to review the statutory sanctions in place against Syria to ensure that they reflect the fall of the Assad regime and current political developments.
Work with allies and partners to calibrate the United Nations sanctions to current risks.
Provide guidance, including frequently asked questions, for the Caesar Act waiver and the FinCEN Section 311 exceptive relief, as well as interagency policy guidance on the roadmap for further relief.
Develop a policy for using and supporting partners with positive economic statecraft tools such as technical assistance to rehabilitate the financial sector, in addition to licensing, waiving, and removing restrictive economic measures.

The US government should be commended for acting swiftly to update sanctions and other authorities to better reflect the current realities on the ground. Significant work remains ahead to responsibly calibrate restrictive economic measures to achieve US foreign policy goals and support positive economic tools to allow the Syrian people to benefit from this dramatic change in US policy.

Alex Zerden is the founder of Capitol Peak Strategies, a risk advisory firm, an adjunct senior fellow at the Center for a New American Security, and a former Treasury Department financial attaché. You can follow him on X at @AlexZerden.

New Atlanticist May 13, 2025

Experts react: Trump just announced the removal of all US sanctions on Syria. What’s next?

By Atlantic Council experts

Our experts provide their insights on how the removal of US sanctions on Syria would affect the country and the wider region.

Civil Society Economic Sanctions

Econographics Apr 17, 2025

Russia Sanctions Database

By Kimberly Donovan, Maia Nikoladze, Lize de Kruijf

The Atlantic Council’s Russia Sanctions Database tracks the level of coordination among Western allies in sanctioning Russian entities, individuals, vessels, and aircraft, and shows where gaps still remain.

Eastern Europe Economic Sanctions

Econographics Apr 30, 2025

US-EU sanctions divergence would spell trouble for multinational companies

By Jesse Sucher

Economic Sanctions Economy & Business

Economic Statecraft Initiative

Housed within the GeoEconomics Center, the Economic Statecraft Initiative (ESI) publishes leading-edge research and analysis on sanctions and the use of economic power to achieve foreign policy objectives and protect national security interests.

Kimberly Donovan: Sanctions are a powerful, yet slow-burning tool

The post After partial relief, what’s next for Syria sanctions? appeared first on Atlantic Council.

Donovan and Nikoladze cited in the South China Morning Post on the rising role of gold in sanctions evasion

ntursun — Tue, 27 May 2025 14:26:02 +0000

Read the full article

The post Donovan and Nikoladze cited in the South China Morning Post on the rising role of gold in sanctions evasion appeared first on Atlantic Council.

Donovan and Nikoladze cited by Kitco News on the reasons behind the surge in gold demand

ntursun — Mon, 26 May 2025 15:16:17 +0000

Read the full article

The post Donovan and Nikoladze cited by Kitco News on the reasons behind the surge in gold demand appeared first on Atlantic Council.

Gold’s geopolitical comeback: How physical and digital gold can be used to evade US sanctions

Kimberly Donovan, Maia Nikoladze — Thu, 22 May 2025 19:41:35 +0000

On April 22, gold prices reached $3,500 a troy ounce, a record that is roughly double what it was three years ago. Gold has been appreciating in value at a record pace as many other financial assets struggle. This was the case during the 2008 global financial crisis and the COVID-19 pandemic, as well. What is different this time, however, is that the price increase has been driven not just by investors but also by central banks. Since Russia’s full-scale invasion of Ukraine and the Group of Seven’s (G7’s) subsequent imposition of unprecedented sanctions on Russia, central banks that are worried about getting sanctioned, want to protect themselves from a potential global financial crisis, or both have been stacking up gold at record levels.

Governments and private actors alike are giving gold’s role in the global financial system a boost, but with a twenty-first-century twist. Individual countries and groups of countries are experimenting with creating gold-backed digital assets and trading systems that bypass the dollar-denominated financial system. In many cases, these initiatives are for purely economic benefits. However, gold is also being used by US adversaries to evade sanctions or finance activities that counter US national security interests.

The rise of gold-backed currencies that circumvent the US banking system, coupled with sanctioned regimes’ growing interest in the adoption of alternative currencies and payment systems, could create a massive blind spot for US financial intelligence and sanctions enforcement efforts. To reduce the proliferation of these alternatives to the dollar-based financial system, the United States should temper its use of coercive economic measures that can cause gold prices to rise and promote dollarization through trade and investment ties, especially with third countries impacted by sanctions on US adversaries.

Why Russia is interested in gold

Russia’s central bank is among the top holders of gold in the world, having built gold reserves from 2014 to 2020 to hedge against Western sanctions. While the central bank’s gold reserves have not increased substantially since 2020, Russia’s Ministry of Finance is thought to be buying gold from domestic producers without reporting it. In 2021, the Ministry of Finance doubled the share of gold in Russia’s National Wealth Fund to 40 percent.

After the West froze $300 billion of the Russian central bank’s assets in response to Moscow’s full-scale invasion of Ukraine in 2022, this gold-hoarding strategy paid off. As gold prices skyrocketed this year, the value of Russia’s gold reserves increased by $96 billion, offsetting one-third of the frozen assets.

Gold has also played a major role in Russia’s illicit trade. For example, the United Arab Emirates (UAE), a BRICS+ member and a global hub for gold trade, as well as Turkey, have engaged in cash-for-gold trade with Russian banks. The Russia-based Lanta Bank and Vitabank received twenty-one shipments of currencies such as US dollars, euros, UAE dirhams, and Chinese renminbi worth $82 million from the UAE and Turkey in exchange for Russian gold. Late last year, the United States and United Kingdom sanctioned the network of entities and individuals involved in Russia’s illicit gold trade due to their role in generating revenue for Russia’s war chest. Additionally, Britain’s National Crime Agency published a red alert in late 2023 on gold-based illicit trade and sanctions circumvention.

Apart from using gold for reserves and sanctions evasion, Russia is also trying to leverage the BRICS+ grouping as a platform to advocate for the creation of a gold-backed BRICS+ currency. It remains to be seen if the group makes any tangible progress ahead of the next BRICS+ Summit in Brazil in early July. In the meantime, tracking the rise of gold-backed currencies and alternative payment systems across the world offers valuable insights into how they could be used for sanctions evasion.

The rise of gold-backed stablecoins

Gold-backed stablecoins—cryptocurrencies whose prices are pegged to gold—offer the most valuable property of gold, which is stability during financial uncertainty. They are also logistically more convenient to store and sell than physical gold. Companies such as Paxos* and Tether capitalized on these qualities, creating gold-backed stablecoins in 2019 and 2020, respectively.

Usually, each token of gold-backed stablecoin corresponds to a specific amount of gold. For example, by purchasing one unit of Tether Gold (XAUT), investors receive the ownership rights of one troy ounce of physical gold on a specific gold bar with a serial number. Each gold bar weighs four hundred ounces on average, so if investors would like to redeem a gold bar, they have to own units worth one full gold bar. Issuers of these stablecoins hold gold reserves in safe vaults, typically in the United Kingdom or Switzerland. Third parties regularly audit gold reserves to confirm that the supply of tokens does not exceed the amount of gold held by issuers.

Although commodity-backed stablecoins represent less than one percent of the market capitalization of fiat-backed stablecoins, governments are now following the lead of crypto companies in experimenting with them. Earlier this month, for example, the Kyrgyz Ministry of Finance announced that it will launch a gold-backed stablecoin called USDKG in the third quarter of 2025. The Kyrgyz Ministry of Finance holds gold reserves worth $500 million and plans to expand that number up to $2 billion. (This is separate from the gold reserves held by the National Bank of the Kyrgyz Republic, which was among the top buyers of gold in the last quarter of 2024.) USDKG will not track the price of gold, unlike well-established stablecoins such as Paxos Gold or Tether Gold. Instead, it will be pegged to the dollar but solely backed by gold reserves. USDKG holders will be able to redeem gold, other crypto assets, or fiat currency.

The reported objective of the gold-backed stablecoin is to facilitate cross-border inflows of remittances, which make up one-third of Kyrgyzstan’s gross domestic product. Russia accounts for more than 90 percent of remittances that flow into Kyrgyzstan, sent by migrant workers back to their families. Kyrgyzstan has not yet launched the stablecoin, but if it’s going to be used to facilitate cross-border flows with Russia, then there is a chance that certain actors could use USDKG to export sanctioned goods to Russia outside of US authorities’ oversight. Financial institutions in Kyrgyzstan have already been sanctioned for their involvement in Russia sanctions evasion schemes by the United States.

For example, earlier this year, the Treasury Department sanctioned Kyrgyzstan-based Keremet Bank for facilitating transactions on behalf of US-sanctioned Russian bank Promsvyazbank. The Kyrgyz Ministry of Finance sold the controlling shares of Keremet Bank to a firm connected to a Kremlin-linked Russian oligarch in 2024. According to the Treasury press release, the transaction was intended to turn Keremet Bank into a sanctions evasion hub that would enable Russia to receive payments for exports and pay for imports. Given sanctioned Russians’ strong interest in taking advantage of Kyrgyzstan’s financial system to import restricted technologies, they will likely be drawn to USDKG because of its ability to process transactions with Kyrgyz entities while completely bypassing the US banking system.

How the US can stem the digital gold rush

It is no coincidence that stablecoins account for 63 percent of all illicit crypto transactions and have become a preferred tool for sanctions evasion. They attract sanctioned entities because of their ability to transfer value pseudonymously with high speed and at low cost. While the US Senate recently advanced the GENIUS Act to regulate stablecoins, one of the major deficiencies of the bill is that it does not adequately regulate offshore stablecoin issuers. Even if put into law, the GENIUS Act would fail, for example, to regulate Tether, the largest offshore issuer of dollar-pegged stablecoins, which has been the subject of federal investigations because of its alleged widespread use by terrorist groups and Russian arms dealers.

Unlike US-issued or dollar-backed stablecoins, foreign-issued gold-backed stablecoins such as USDKG will likely escape US regulation because they don’t have a touchpoint with the US banking system. Their proliferation, along with gold-backed trading schemes, is driven to a large extent by the United States’ weaponization of the dollar, as well as uncertainty over US trade policy.

The United States has the power to indirectly reduce gold prices and encourage the adoption of dollar-backed assets by returning to being the provider of stability in the global economy. That can be achieved by dialing down the use of tariffs and other economic measures that could cause governments and private actors to turn to gold.

At the same time, the US government should promote the dollarization of economies such as Kyrgyzstan’s by continuing to provide financial assistance and deepening trade and investment ties with other third countries impacted by sanctions against Russia. Doing so will help close gaps in US financial intelligence, strengthen US sanctions enforcement, and lower the demand for currencies outside the dollar-based financial system.

Kimberly Donovan is the director of the Economic Statecraft Initiative within the Atlantic Council’s GeoEconomics Center. She is a former senior Treasury official and National Security Council director. Follow her at @KDonovan_AC.

Maia Nikoladze is an associate director at the Atlantic Council’s Economic Statecraft Initiative within the GeoEconomics Center.

Note: Paxos is a partner of the Atlantic Council’s GeoEconomics Center.

The post Gold’s geopolitical comeback: How physical and digital gold can be used to evade US sanctions appeared first on Atlantic Council.

Europe is striking back at Russia’s shadow fleet. Here’s what to know about the latest EU and UK sanctions.

Atlantic Council experts — Wed, 21 May 2025 22:00:06 +0000

Brussels and London are ratcheting up pressure on Moscow—without Washington. On Tuesday, the European Union (EU) and the United Kingdom approved scores of new sanctions against Russia, including the EU more than doubling the number of oil tankers and other vessels listed as part of the “shadow fleet” covertly trading Russian oil and gas. The EU package—the seventeenth since Russia’s war against Ukraine began—also adds new sanctions on individuals and companies, including the Russian oil giant Surgutneftegas. “This round of sanctions on Russia is the most wide-sweeping since the start of the war,” EU foreign policy chief Kaja Kallas said. Below, Atlantic Council experts shine a light on the sanctions and what they reveal about Europe’s faceoff with Russia.

Click to jump to an expert analysis:

Rachel Rizzo: Europe is no longer waiting for the United States to act

Elisabeth Braw: Spotlight who is replenishing Russia’s shadow fleet, too

Aleksander Cwalina: There is still more the EU can do to tighten the screws to Russia

Olga Khakova: If Trump also goes after the shadow fleet, it could bring Putin to the table

Sanctions are a powerful, yet slow-burning tool

The EU’s seventeenth package is a welcome addition to the extensive sanctions the Group of Seven-plus (G7+) coalition maintain on Russia in response to Russia’s ongoing war in Ukraine. The latest package further brings EU sanctions in line with US and UK designations on Russian oil producers including Surgutneftegas, as well as the ongoing strategy to target Russia’s illicit oil trade using shadow fleet vessels.

The extent and timing of this latest sanctions package demonstrate Europe’s resolve to maintain economic pressure on Russia, and they are a clear signal that Europe maintains strong economic leverage in potential negotiations with Russia to end the war.

It’s hard not to notice that the sanctions were announced the day after US President Donald Trump spoke with Russian President Vladimir Putin and posted on social media that “Russia wants to do largescale TRADE with the United States when this catastrophic ‘bloodbath’ is over, and I agree.” There is growing concern about a potential divergence in US and EU foreign policy, and the latest EU package is a strong reminder that EU sanctions could remain in place even if Washington decides to ease its sanctions or open avenues for trade and finance with Moscow.

That said, EU sanctions require renewal every six months and need consensus by all twenty-seven members. If the United States does not maintain economic pressure on Russia, then there is concern that Hungary may break with the bloc and veto EU sanctions on Russia’s economy when they are up for renewal in July.

Sanctions are a powerful, yet slow-burning tool. The multilateral sanctions that G7+ coalition partners levied against Russia are finally having the intended effect. Russia’s economy is struggling, interest rates and inflation remain high, Russia is drawing down on its National Welfare Fund, and the country is in a wartime economy. This is why Moscow’s primary demand from the Black Sea cease-fire talks was lifting sanctions.

To get a better and bigger deal with Russia over the war in Ukraine, it would be in Washington’s best interest to not only engage its European allies in negotiations, but also to join them in issuing additional sanctions to deny Moscow the opportunity to gain leverage at the negotiation table.

Europe is no longer waiting for the United States to act

The latest round of EU sanctions against Russia highlights the EU’s willingness to do something it hasn’t yet done since February 2022: take ownership over the outcome of Russia’s war in Ukraine. The United States has always been in the driver’s seat, with the Biden administration both shaping and leading the West’s response to the war. The re-election of Trump brought an almost 180-degree shift in the US approach, with a much more conciliatory tone toward Russia emanating from the White House, along with a hope that Trump’s dealmaking skills could get both sides to the table for a cease-fire. That approach has yet to bear fruit.

This is where the EU’s pressure becomes important. It highlights the bloc’s willingness to act independently of the United States and use its own tools to get Russia to the table without waiting for the United States to provide political cover. With European Commission President Ursula von der Leyen leading the charge, the hope is that the EU stays united on the sanctions front for the foreseeable future, squeezing Russia’s war machine (and its broader economy) to the point where Putin has no other choice than to stop the war.

—Rachel Rizzo is a nonresident senior fellow at the Atlantic Council’s Europe Center. Her research focuses on European security, NATO, and the transatlantic relationship.

Spotlight who is replenishing Russia’s shadow fleet, too

Every sanction helps reduce the shadow fleet’s activities, and the EU’s diligent efforts to identify shadow vessels are to be saluted. The EU should be especially proud of its latest package, which includes sanctions against an extraordinary 189 shadow vessels and some of the ships’ owners. The latter is especially important, since the owners do their best to operate in the shadows and are extremely hard to trace.

However, the shadow fleet’s main characteristic remains in place: the fact that it can be constantly replenished. It can be replenished because there are ship owners willing to sell their retirement-age ships into the shadow fleet. In fact, doing so is commercially advantageous for them: Retiring old vessels involves paying for them to be scrapped, while selling them into the shadow fleet brings in money—a lot of it.

Unfortunately, a few shipowners, including in Western countries, undermine sanctions against Russia by selling their ships into the shadow fleet. Perhaps even worse, by doing so, they willingly create risks on the high seas, because shadow vessels pose hazards to other vessels, to the maritime environment, and to coastal states. Publishing their names would send a strong message.

—Elisabeth Braw is a senior fellow with the Atlantic Council’s Transatlantic Security Initiative in the Scowcroft Center for Strategy and Security.

There is still more the EU can do to tighten the screws to Russia

On the sidelines of the G7 finance ministers’ meetings in Banff, Canada, this week, the United States opposed language in a joint statement that included “further support” for Ukraine. The United States also expressed reluctance to describe the Russian full-scale invasion of the country as “illegal,” further distancing Washington from its G7 counterparts. This follows a concerning trend as Trump has talked about Washington stepping back in peace talks and eventually restarting US trade with Russia.

In contrast, the European Commission pushed forward and adopted its seventeenth sanctions package against Russia, underlining European Union unity and clarity. The package closed some remaining loopholes that allow Russia to fund its war machine and access key Western technology for military use. In doing so, it reiterated EU solidarity with Ukraine.

The package was received well in Kyiv, with Ukrainian President Volodymyr Zelenskyy calling the newest round of sanctions “strong” and saying that they will limit Moscow’s ability to continue its invasion.

However, more can be done to tighten the screws on Russia.

Kyiv and its European allies are already discussing how to raise the stakes in a harsher eighteenth EU sanctions package if Moscow does not make serious efforts toward a cease-fire. This would most likely target the Russian banking and energy sectors and aim to further limit the Russian shadow fleet that Moscow uses to evade maritime trade restrictions. The EU and its partners should continue to target these industries. The bloc should also seriously consider seizing assets from sanctioned individuals in the EU for Ukraine and implementing secondary sanctions that limit third-party purchasing of Russian oil—both steps recommended by Kyiv.

As European leaders are becoming increasingly frustrated with Washington’s stalling and Putin’s faux negotiations and maximalist demands, the EU should lead by example and take bold steps to continue aiding Ukraine and putting pressure on Russia.

—Aleksander Cwalina is an assistant director at the Atlantic Council’s Eurasia Center.

If Trump also goes after the shadow fleet, it could bring Putin to the table

Putin’s strategy of buying time with deceitful “peace” promises is shown to be failing in the face of the new EU and UK sanctions, as funding for Moscow’s war starts to run out.

The shadow fleet carries more than 60 percent of Russian oil exports, according to a recent estimate, and the new sanctions will help strengthen enforcement of the price-caps mechanism on Russian oil. Currently, there are some discussions at the G7 level on lowering the price cap for the next sanctions package. But lowering the price cap will only impact Russia if it is enforced. Otherwise, Russia will continue to send large quantities of its oil through the shadow fleet, ensuring it continues to rake in profits.

In addition to curtailing Russia’s oil profits, the shadow fleet sanctions protect European coastlines from the potential environmental damage and sabotage that the Russian shadow fleet could cause. Europe is achieving this by refusing the provision of services, insurance, and port access to these metal-scrap grade ships.

The United States has already sanctioned 183 vessels. Now, Trump has an opportunity to forge his legacy as a peacemaker by joining the EU and UK sanctions on 342 vessels to bring Putin to the negotiating table. Moscow will only take US pressure seriously if it is implemented with decisiveness and strength—something the Trump administration has demonstrated effectively in tough negotiations with other nations.

—Olga Khakova is the deputy director for European energy security at the Atlantic Council’s Global Energy Center.

The post Europe is striking back at Russia’s shadow fleet. Here’s what to know about the latest EU and UK sanctions. appeared first on Atlantic Council.

Tannebaum interviewed by Bloomberg on President Trump’s call with Putin and how the US can pressure Russia

irosales — Tue, 20 May 2025 14:57:09 +0000

Listen to the full interview here

The post Tannebaum interviewed by Bloomberg on President Trump’s call with Putin and how the US can pressure Russia appeared first on Atlantic Council.

Mühleisen quoted by Reuters on the IMF and World Bank’s potential role in Syria’s reconstruction

irosales — Fri, 16 May 2025 16:49:41 +0000

Qutaiba Idlbi: This is an opportunity to secure a long-term US strategic victory in the region

The post Mühleisen quoted by Reuters on the IMF and World Bank’s potential role in Syria’s reconstruction appeared first on Atlantic Council.

Experts react: Trump just announced the removal of all US sanctions on Syria. What’s next?

Atlantic Council experts — Tue, 13 May 2025 20:51:11 +0000

“We’re taking them all off.” US President Donald Trump announced on Tuesday that Washington will remove all US sanctions on the Syrian government. The announcement comes five months after the overthrow of dictator Bashar al-Assad’s regime, in a snap opposition offensive led by new President Ahmed al-Sharaa’s militant group.

The new Syrian leadership and its supporters have pushed for sanctions relief to help rebuild from the rubble of more than a decade of civil war—accompanied by promises of establishing a more free and tolerant Syria. But skepticism remains regarding al-Sharaa’s past links to al-Qaeda and communal massacres against minority groups that have taken place since he came to power.

How will the removal of US sanctions affect Syria’s economy and future US-Syria relations? And what are the wider implications for the region? Our experts offer their insights below.

Click to jump to an expert analysis:

Kirsten Fontenrose: Watch for a Saudi-Syria deal, Russia’s renewed presence, and Iran’s next moves

Daniel B. Shapiro: Trump is making a smart gamble, Congress should back him up

Sarah Zaaimi: A US carte blanche to al-Sharaa may lead to sectarian backsliding

Thomas S. Warrick: Trump has made clear that he is listening to Arab leaders

Amany Qaddour: Now is the time to move beyond politicizing aid

Alan Pino: A clear signal to Iran

Kimberly Donovan: Lifting the complex Syrian sanctions regime will require careful strategy

Celeste Kmiotek: Bashar al-Assad must be held accountable\

Maia Nikoladze: This move aligns US Syria sanctions policy with the EU and UK

Ömer Özkizilcik: This represents a diplomatic success for Saudi Arabia and Turkey

Sinan Hatahet: Engagement must go beyond sanctions relief

Diana Rayes: A critical reprieve for Syrians everywhere

Elise Baker: Now is the time to establish the Syria Victims Fund

Lize de Kruijf: Without meaningful financial support, the US risks ceding influence in Syria

This is an opportunity to secure a long-term US strategic victory in the region

Trump’s decision to lift US sanctions on Syria is a pivotal shift that could define his legacy in the Middle East. The move signals an opportunity to secure a long-term US victory in Syria by stabilizing the region, countering rivals such as Russia and China, and opening economic opportunities for US businesses.

Trump has long portrayed himself as a dealmaker, and his record on Syria supports that image. Unlike the Obama and Biden administrations, Trump responded decisively to al-Assad’s chemical weapon attacks in 2017 and 2018, launched airstrikes to deter further atrocities, and cooperated with Turkey in 2020 to halt the Assad regime’s and Russia’s assault on Idlib. He also signed the Caesar Syria Civilian Protection Act, which crippled the Assad regime financially, leading to its fall last December. Now, however, those same sanctions are undermining the prospects of Syria’s new post-Assad regime government, which is attempting to rebuild and distance itself from Iranian and Russian influence.

The current sanctions are weakening a new government that seeks US and Gulf support. If these sanctions were to stay in place, Syria’s economy would remain in free fall, making it increasingly reliant on Russia, China, and Iran. This would open the door to renewed extremism, regional instability, and the resurgence of the Islamic State of Iraq and al-Sham (ISIS). Lifting sanctions will allow US companies to compete with Chinese firms for contracts in Syria’s expected $400 billion reconstruction effort. It will also enable Trump to leverage Gulf funding, create jobs in both Syria and the United States, and demonstrate Washington’s role as a stabilizing force. A prosperous Syria would reduce refugee flows, weaken Hezbollah and the Islamic Revolutionary Guard Corps, and eliminate Syria as a threat to Israel—a country with which the new Syrian leadership seeks peaceful relations.

The new Syrian government is not without flaws, but it has made pragmatic moves. It started reintegrating territories with the Syrian Democratic Forces, cracked down on drug trafficking, made efforts aimed at protecting minorities, and distanced itself from Hezbollah and Iranian forces. These steps show a willingness to cooperate with the West and align with its goal of regional stability. If Trump follows through, he could secure a rare bipartisan win, outmaneuver Russia, and reshape the future of Syria in a way that serves US interests and regional peace.

—Qutaiba Idlbi is a senior fellow with the Atlantic Council’s Rafik Hariri Center and Middle East Programs where he leads the Council’s work on Syria.

Watch for a Saudi-Syria deal, Russia’s renewed presence, and Iran’s next moves

I am hearing that the lifting of US sanctions on Syria took some members of Trump’s own administration by surprise. Since January, Syria has been a counterterrorism file, not a political one. Al-Sharaa received a list of milestones from the US administration this spring, and meeting these would have meant a gradual rollback of sanctions. So this sudden lifting must feel like a new lease on life for the Syrian ruler.

But this sudden decision to lift sanctions should not be interpreted as a sign that the United States is making Syria a priority. In fact, it indicates the opposite. Both Saudi leader Mohammad bin Salman and Turkish President Recep Tayyip Erdogan will have had to promise Trump that they will hold al-Sharaa accountable and will shoulder the burden of reconstruction. The United States has never colonized or invaded Syria, and the United States committed a lot of manpower and funding into supporting opposition to al-Assad under the first Trump administration. It is hard to make an argument that the United States has any obligation to fund Syria’s reconstruction. That responsibility will fall to those who pressed Trump to lift sanctions.

Going forward, there are three things to watch:

One, watch for Saudi Arabia’s deal with al-Sharaa. He will owe them big time for making this happen. (Erdogan will argue that he is owed as well, having greased the skids on a phone call with Trump just before his meetings in Riyadh.) Expect Saudi Arabia to require that foreign fighters be ejected from senior government roles and demand that Iran is kept out of Syria. Look for Saudi companies to be granted the contracts to undertake reconstruction projects in Syria, an easy give for al-Sharaa and a no-brainer in this situation.

Two, for Europe especially, watch Russia. Moscow may find it easier to establish its interests in Syria now. Saudi Arabia and Israel will see a Russian presence as a way of counterbalancing Turkey’s influence in Syria.

Three, watch for shifts in Iran’s foreign policy. Syria is now proof that Trump will in fact lift sanctions under certain conditions—if your leadership promises to change its stripes and favored foreign partners vouch for you. Expect to see a charm offensive by Tehran.

— Kirsten Fontenrose is a nonresident senior fellow at the Scowcroft Middle East Security Initiative in the Atlantic Council’s Middle East Programs. Previously, she was the senior director for the Gulf at the National Security Council during the first Trump administration, leading the development of US policy toward nations of the Gulf Cooperation Council, Yemen, Egypt, and Jordan.

Trump is making a smart gamble

Trump’s announcement that he will provide sanctions relief to Syria is a gamble, but it is the right one. The collapse of the Assad regime, whose brutality, misrule, and collaboration with malevolent regional actors destroyed Syria, has given long-suffering Syrians a chance to build a different future.

The road to recovery will not be an easy one. Many are rightly suspicious of Syria’s new acting president, Ahmed al-Sharaa, and others in his Hayat Tahrir al-Sham movement, due to their violent jihadist past. As one cannot look inside another’s soul, it is unknown if they have truly shed their extremist ideology amid a rebranding since coming to power in December.

What can be judged are actions. So far, al-Sharaa has said and done many of things Western and Arab nations have called for. He is making efforts to be inclusive, including appointing women and minorities into his cabinet. He says strict Sharia law will not be imposed. He has begun negotiations with the Kurdish Syrian Democratic Forces on their peaceful integration into Syrian national institutions. He claims to want Syria to pose no threat to any of its neighbors, including Israel, and he wants to keep Iran from re-establishing influence in Syria. He is aligning himself with moderate Arab states and US partners like Saudi Arabia and the United Arab Emirates.

These words and actions must be tested and verified over time. But to have any chance to succeed in stabilizing Syria, the new government needs resources to make the economy function. Reconstruction and resettlement of refugees, not to mention restoring services disrupted by years of civil war, will be expensive. Without a significant measure of US sanctions relief, none of this is possible. It would nearly guarantee Syria’s descent back into chaos and provide fertile ground for extremists.

Congress should work with Trump on crafting sanctions relief such that, if necessary, sanctions can be restored. But Trump is right to seize this opportunity.

—Daniel B. Shapiro is a distinguished fellow with the Atlantic Council’s Scowcroft Middle East Security Initiative. From 2022 to 2023, he was the Director of the N7 Initiative. He has previously served as US deputy assistant secretary of defense for the Middle East and as US ambassador to Israel.

A US carte blanche to al-Sharaa may lead to sectarian backsliding

Lifting sanctions presents a tremendous opportunity to revitalize the Syrian economy and provide a genuine chance for the al-Sharaa government to implement the vision for social unity it has advocated since December. However, the United States should make sure not to give carte blanche to the new Syrian regime and lose all of its leverage over a ruler who has only recently self-reformed from a dangerous radical ideology, especially when it comes to managing ethnic and religious diversity.

Al-Sharaa has publicly and repeatedly pledged to build a nation for all Syrians, regardless of their identities. He also appointed a Christian woman to his newly announced government and welcomed a delegation of Jewish religious officials to return for the first time since their synagogue was closed back in the 1990s. Still, his first five months in power have also been marked by violent confrontations with certain religious minorities and the ascension to power of foreign fighters with questionable pasts. Back in March, over one thousand Alawites were killed in a violent crackdown on the minority’s stronghold on the Syrian coast. Meanwhile, the Druze remain divided, and many refuse to turn in their arms, fearing the escalation of sectarian tensions.

Similarly, many other sects remain anxious about their future, including Christians and Twelver Shia, who saw the lowering of the Sayeda Zainab flag—a revered pilgrimage site on the outskirts of Damascus—as a sign of the prevalence of a monochrome orthodox version of Islam. Another worrying signal was the sweeping authority provided to the presidency in the new Syrian constitution, which also excluded mention of minority rights and societal diversity, making Islam the only supreme law of the land.

Al-Sharaa and his entourage have a historic chance to start anew and build a plural and inclusive Syria for all its citizens. Until then, Washington and its allies should continue monitoring the state of minorities in this complex sociocultural context and signal to the new lords of the land that lifting sanctions is a provisional chance and not an unconditional license to lead Damascus into another sectarian spiral.

—Sarah Zaaimi is a resident senior fellow for North Africa at the Atlantic Council’s Rafik Hariri Center and Middle East programs, focusing on minorities and cultural hybridity. She is also the center’s deputy director for media and communications.

Trump has made clear that he is listening to Arab leaders

No one can say that Trump does not listen to Arab leaders—clearly, he does. Arab leaders were united in telling Trump and his administration that the United States should lift sanctions against Syria to help move the country toward peace with all its neighbors.

Officials in the Trump administration had different views on how to respond to al-Sharaa’s statements calling for peace with Syria’s neighbors and openness to the West. But no one expected Trump to announce the lifting of sanctions on this trip. As recently as April 25, a senior administration official said that the new Syrian government needed to combat terrorism, prevent Iran from regaining influence in Syria, expel foreign fighters from Syria’s government and security apparatus, destroy all chemical weapons, adopt nonaggression policies toward all neighboring countries, and clear up the fate of missing American Austin Tice. “We will consider sanctions relief, provided the interim authorities take demonstrable steps in the directions that I have articulated,” he said. “We want Syria to have a second chance.”

On March 20, I and other US experts on the Middle East called for Syria to express interest in joining the Abraham Accords. I think that al-Sharaa’s April 19 offer to discuss joining the Abraham Accords did exactly what it needed to do: It broke through to get Trump’s attention.

Trump is now willing to give Syria a second chance. Sanctions against terrorist groups like Hayat Tahrir al-Sham, which brought al-Sharaa to power (with support from Turkey), are likely to remain in place. Syria needs to make substantive progress on sidelining extremists within al-Sharaa’s ranks and engaging in serious talks (either direct or indirect) with Israel that could eventually lead to joining the Abraham Accords. Trump could change his mind tomorrow, but for now, it is clear Trump is listening.

—Thomas S. Warrick is a nonresident senior fellow in the Scowcroft Middle East Security Initiative and a former deputy assistant secretary for counterterrorism policy in the US Department of Homeland Security.

Now is the time to move beyond politicizing aid

What a monumental shift for Syria—one of the most significant since the December fall of the Assad regime.

Having just returned recently from the country, I could clearly see that the humanitarian situation has stagnated. The Trump administration’s massive US Agency for International Development (USAID) cuts—amid already dwindling funds for Syria—have had a catastrophic impact. The soul-crushing sight of destroyed buildings across the country as a result of the regime’s brutality was still visible in so many of the previously besieged areas like Douma and Harista of Eastern Ghouta. The Assad regime’s deprivation, oppression, and collective punishment of millions has left the country in a state of decay.

In my view as a humanitarian and public health practitioner, sanctions have been one of the most critical hindrances to early recovery. Syria’s health sector is decimated after over a decade of destruction to critical civilian infrastructure like hospitals and clinics—not to mention schools and marketplaces— from aerial attacks by the regime and its allies.

As long as sanctions are in place against the new government in Syria, the recovery of the country is impossible, and civilians will continue to the pay the price, just as they did under the Assad regime. Beyond the need for Syria’s early recovery and reconstruction from a physical infrastructure standpoint, the country needs to heal. This is an opportune moment to capitalize on this shift. The politicization of aid throughout the entirety of conflict has translated to the suffering of millions. Now is the time to move beyond that politicization of aid and recovery efforts and give Syrians the chance to start the healing process. Lifting sanctions will allow for that and bring Syria back from being a pariah state.

—Amany Qaddour is a nonresident senior fellow for the Atlantic Council’s Middle East Programs. She is also the director of the 501(c)(3) humanitarian nongovernmental organization Syria Relief & Development.

A clear signal to Iran

Trump’s decision to lift economic sanctions on Syria provides a needed lifeline to Syria’s struggling economy, aligns Washington’s Syria policy with that of regional Arab powers, and pointedly signals a determination to prevent Iran from rebuilding its presence and influence in this key country.

Popular unrest—including increasing criticism of al-Sharaa and his new government—has been growing in Syria over the poor economy and living conditions as the country attempts to recover from over a decade of civil war. The lifting of US sanctions opens the way for an infusion of regional and international aid, investment, and expertise to help the al-Sharaa government begin rebuilding the country and heading off the political instability that could otherwise arise.

Removing sanctions also shows US support for efforts by Washington’s Arab partners in the Gulf, Egypt, and Jordan to reintegrate Syria into the moderate Arab fold after decades of alignment with Iran. The controversy over the invitation of al-Sharaa to the Arab Summit in Baghdad because of his and his follower’s past ties to al-Qaeda makes clear that Syrian reintegration will need to proceed slowly, based on a demonstrated commitment to eschew all ties to terrorism and apply equal justice to all minorities in Syria.

Finally, Trump’s decision to lift sanctions on Syria puts down a marker that Washington is not only determined to prevent Iran from getting a nuclear weapon, but to check Iranian efforts to try to restore its badly weakened resistance axis aimed at threatening Israel and wider reigonal domination.

—Alan Pino is a nonresident senior fellow with the Scowcroft Middle East Security Initiative at the Atlantic Council’s Middle East programs.

Lifting the complex Syrian sanctions regime will require careful strategy

Trump’s announcement in Riyadh that the United States will end sanctions on Syria is a major foreign policy shift. Lifting sanctions on Syria is complicated and will require strategy to determine which sanctions to pull down and when, as well as what measures implement to enable the snap-back of sanctions should the situation in Syria deteriorate.

Syria has been on the US state sponsor of terrorism list since 1979 and is subject to sanctions and export controls pursuant to numerous executive orders and legislation for a range of issues including human rights abuses, smuggling Iranian oil, and supporting terrorist groups. A further complicating factor is that Hayat Tahrir al-Sham (HTS), which overthrew the Assad regime, is leading the interim Syrian government. HTS, formerly known as al-Nusrah Front and once al-Qaeda’s arm in Syria, is designated as a terrorist organization by the United States, Canada, and other governments. HTS is also designated as a terrorist group by the United Nations (UN), a designation that all UN member states must comply with, including the United States. The UN designation of HTS and al-Sharaa include an asset freeze, travel ban, and arms embargo.

Trump’s announcement is a welcome shift in US foreign policy. The Syrian government and the Syrian people will need sanctions lifted to have a chance of rebuilding the country. This is a delicate and complicated situation on top of a complex sanctions regime. To move forward with this shift in foreign policy, as a next step, the United States will need to consider which sanctions it is willing to lift on Syria to meet specific goals and it will need to start engaging with the United Nations to consider if and how sanctions should be lifted on HTS.

Bashar al-Assad must be held accountable

Trump’s removal of sanctions on Syria is a welcome development. As many organizations have argued, while the sanctions were a tool meant to influence Bashar al-Assad and his regime, they instead became a tool “to punish the Syrian people and hinder reconstruction, humanitarian aid, and prospects of economic recovery.”

However, from the information available, it is unclear how the United States will approach targeted sanctions designating individuals and entities for human rights abuses under executive orders related to Syria (as opposed to broad-based sectoral sanctions). While these designations, too, must be lifted when an individual no longer meets the relevant criteria, this does not mean that Washington should embrace impunity. Namely, the US must not allow al-Assad and his allies who have been designated for serious violations of human rights to walk away without consequences. While al-Assad may have fled Syria, he has yet to provide redress for a “horrifying catalogue of human rights violations that caused untold human suffering on a vast scale.”

Lifting targeted sanctions could allow al-Assad, for example, to enter the United States, to access previously frozen US assets, and to engage in transactions involving the US dollar. Instead, Washington could pursue targeted designations under other relevant programs, such as the Global Magnitsky program for serious human rights abuse. The Trump administration could additionally use this moment as an opportunity to re-commit Washington to pursuing domestic criminal accountability for atrocities in Syria and other accountability avenues.

—Celeste Kmiotek is a staff lawyer for the Strategic Litigation Project at the Atlantic Council.

This move aligns US Syria sanctions policy with the EU and UK

Trump’s announcement on lifting Syria sanctions is a surprising and welcome alignment of Washington’s sanctions strategy with that of the European Union (EU) and United Kingdom. European officials have been calling on Washington to remove sanctions on Syria because multinational companies and large banks will not enter the Syrian market as long as US secondary sanctions remain in place.

While the specifics of the US sanctions removal plan are yet unknown, Washington should use the EU and UK sanctions-lifting playbook. In February, the European Council announced that the EU would lift sectoral sanctions on Syria’s energy and transport sectors, delist four Syrian banks, and ease restrictions on the Syrian central bank. However, EU sanctions against the Assad regime, the chemical weapons sector, and the illicit drug trade, as well as sectoral measures on arms trade and dual-use goods, will remain in place. Last month, the United Kingdom followed suit and lifted sanctions on the Syrian central bank and twenty-three other entities. Like the EU, the United Kingdom still maintains sanctions on members of the Assad regime and those involved in the illicit drug trade.

Washington should replicate the EU’s and United Kingdom’s gradual approach to lifting sanctions. This means starting with the finance and energy sectors to create a favorable environment for multinational companies to enter the Syrian market. At the same time, the United States should promote the dollarization of the Syrian economy, provide financial assistance, and help the Syrian government establish regulatory oversight to prevent the diversion of funds from reconstruction efforts.

—Maia Nikoladze is an associate director at the Atlantic Council’s Economic Statecraft Initiative within the GeoEconomics Center.

This represents a diplomatic success for Saudi Arabia and Turkey

Trump’s decision to lift all sanctions on Syria carries profound significance for the Syrian people. It offers them a genuine opportunity to rebuild their country and begin the process of recovery. While the sanctions were originally enacted with the intent of protecting civilians and deterring the Assad regime from further war crimes, over time—especially following al-Assad’s fall—they became a major hindrance, primarily harming ordinary Syrians.

Yet, beyond its humanitarian implications, this move also marks a geopolitical win for the United States. By removing sanctions, Washington enables its allies to invest in Syria, preventing Damascus’s potential reliance on China and Russia, both of which could potentially circumvent sanctions to gain influence. This declaration by Trump should not merely be viewed as a lifting of punitive measures; it is also the first step toward formally recognizing the interim Syrian authorities as the legitimate government of Syria.

Regionally, the end of sanctions represents a diplomatic success for Saudi Arabia and Turkey. As the principal supporters of the new Syrian government, both nations worked in tandem to persuade the Trump administration to shift its stance—initially marked by hesitation—toward greater engagement with Syria’s new leadership. Their coordinated diplomatic efforts played a pivotal role in shaping this policy reversal.

This shared success could also pave the way for deeper regional collaboration between Riyadh and Ankara, highlighting the potential of US allies in the region when they act in concert. Syria is slowly but steadily turning from a regional conflict zone into a zone of regional cooperation.

—Ömer Özkizilcik is a nonresident fellow for the Syria Project in the Atlantic Council’s Middle East Programs. He is an Ankara-based analyst of Turkish foreign policy, counterterrorism, and military affairs.

Engagement must go beyond sanctions relief

Washington’s decision to lift its sanctions on Syria emerges within a geopolitical context marked by unprecedented regional alignment around the newly formed Syrian government, led by Ahmed al-Sharaa. This government has uniquely achieved consensus among historically divergent regional powers, long characterized by strategic competition over regional hegemony. Al-Sharaa’s administration has been credited with fostering this consensus through a national vision, closely aligned with regional objectives aimed at overall stability, collective benefit, and cooperation, rather than the zero-sum dynamics that al-Assad used to impose on his direct and indirect neighborhood.

However, two regional actors remain notably wary despite the broader regional consensus. Iran—an ally of the ousted Assad regime—views the consolidation of authority by the current government in Damascus as potentially adverse, perceiving it as a direct challenge to its strategic and security interests in the Levant. Israel, similarly, remains skeptical due to ongoing security concerns and its direct military involvement within Syrian territory.

From a practical standpoint, lifting sanctions must be matched by corresponding bureaucratic agility. This includes swift administrative measures that enable Syrian public and private institutions to comply with international legal frameworks effectively. The cessation of sanctions should not only be a political gesture but also a procedural and institutional reality. To achieve this, regional governments alongside European and US counterparts, must proactively facilitate knowledge transfer, reduce procedural hurdles, and accelerate essential reforms. Such reforms represent a fundamental prerequisite to ensuring that the lifting of sanctions translates into tangible economic and political progress for Syria.

—Sinan Hatahet is a nonresident senior fellow for the Syria Project in the Atlantic Council’s Middle East Programs and the vice president for investment and social impact at the Syrian Forum.

A critical reprieve for Syrians everywhere

This policy shift has already brought what feels like a collective sigh of relief for a population weighed down by a humanitarian and development crisis. Today, the majority of Syrians live below the poverty line. More than 3.7 million children in Syria are out of school—including over half of school-age children. Only 57 percent of the country’s hospitals, including only 37 percent of primary health care facilities, are fully operational Despite widespread need, humanitarian aid is lacking—largely exacerbated the Trump administration’s now-dropped sanctions and its enduring foreign aid cuts.

Sanctions relief is a critical first step in stabilizing essential systems, particularly the health sector, which the Syrian government has identified as a national priority. It will help restore access to essential medicines, supplies, and equipment. This shift will also unlock broader international investment, encouraging governments and private sector actors to reengage in Syria as a key regional player. Infrastructure firms, pharmaceutical companies, and development partners that have long been on standby now have an opportunity to support early recovery and rebuild systems that sustain daily life.

This policy change is also seismic for Syrians who have been displaced for decades around the world. Supporting early recovery efforts through sanctions relief will enable safe and voluntary returns while contributing to broader regional stability, and countries hosting Syrian refugees should follow Trump’s lead.

—Diana Rayes is a nonresident fellow for the Syria Project in the Atlantic Council’s Middle East Programs. She is currently a postdoctoral associate at Georgetown University’s School of Foreign Service.

Now is the time to establish the Syria Victims Fund

With the downfall of the Assad regime, sanctions imposed “to deprive the regime of the resources it needs to continue violence against civilians and to pressure the Syrian regime to allow for a democratic transition as the Syrian people demand” are no longer appropriate, and are in fact hindering much needed rebuilding and recovery in Syria. But lifting sanctions alone is not enough.

Over the past fourteen years, the United States and other Western countries have been profiting from enforcing sanctions against Syria. Where companies and individuals have violated Syria sanctions, the United States and other countries have taken enforcement action, levying fines, penalties, and forfeitures in response. The proceeds are then directed to domestic purposes, with none of the recovery benefitting Syrians.

Now is the time to change this policy. Syria is finally ready for rebuilding and recovery, refugees are returning, and victim and survivor communities are beginning to heal. In addition to lifting sanctions on Syria, the United States and other countries should direct the proceeds from their past and future sanctions enforcement to benefit the Syrian people and help victim and survivor communities recover. This can be done by listening to the calls from Syrian civil society and establishing an intergovernmental Syria Victims Fund, which the European Parliament has endorsed.

—Elise Baker is a senior staff lawyer for the Strategic Litigation Project. She provides legal support to the project, which seeks to include legal tools in foreign policy, with a focus on prevention and accountability efforts for atrocity crimes, human-rights violations, terrorism, and corruption offenses.

Without meaningful financial support, the US risks ceding influence in Syria

The United States lifting sanctions on Syria is a necessary first step, but it is not enough to unlock the meaningful foreign investment that Syria needs for its recovery and reconstruction. After years of conflict and isolation, Syria needs more than an open economy—it must rebuild trust and demonstrate long-term stability. Investors will not return simply because sanctions have been lifted—they need assurances of stability, legal protections, and clear signals from the international community.

Private investors often follow the lead of governments and multilateral institutions. Countries that receive significant foreign aid post-conflict also tend to attract more private capital. Europe and the United Nations have begun developing a positive economic statecraft approach, pledging billions in grants and concessional loans to support Syria’s recovery. However, the United States has yet to commit financial support this year, citing expectations that others will shoulder the burden. This creates a leadership vacuum and leaves space for geopolitical rivals to step in.

Countries including Turkey, Saudi Arabia, Qatar, Russia, and China have already begun doing so, rapidly expanding their influence in Syria through investments in oil, gas, infrastructure, reconstruction projects, and paying off Syria’s World Bank debt. In exchange for financial support, they are gaining access to strategic sectors that will shape Syria’s future—and the broader dynamics of the region. If the United States is absent from Syria’s recovery, its risks ceding long-term influence to adversaries. 

Reconstruction is not only a humanitarian imperative—it is a strategic opportunity. The lifting of sanctions opens a door, but a coordinated positive economic statecraft response—including tools like World Bank risk guarantees and US development finance—is necessary to ensure Syria’s recovery aligns with broader international interests.

—Lize de Kruijf  is a project assistant with the Economic Statecraft Initiative.

The post Experts react: Trump just announced the removal of all US sanctions on Syria. What’s next? appeared first on Atlantic Council.

From A to F, here’s how to grade a possible nuclear deal with Iran

Jonathan Panikoff — Mon, 12 May 2025 17:32:44 +0000

Sunday’s fourth meeting between US President Donald Trump’s Middle East Special Envoy Steve Witkoff and Iranian Foreign Minister Abbas Araghchi didn’t end with a framework agreement, as reports before the meeting indicated it could. But sufficient progress was apparently made that negotiations will continue, and the sides may have gotten closer together on key differences. That progress comes even as public comments from both sides highlight conflicting redlines, suggesting that behind closed doors, one or both sides are willing to be more flexible than they’re saying in public. It could also mean that either Iran or the United States is confident it can convince the other side to move off its current position.

If Iran and the United States ultimately bridge these differences and reach a deal, how will we know if it’s a good one? Here’s my guide for how to grade various potential outcomes of these high-stakes negotiations.

A: Resolution of the nuclear problem and regional malign influence

The issue of Iran’s nuclear program is almost certainly the focus of the talks, and an understandable one given how close Iran is to having enough enriched uranium for a bomb. But if it is indeed the only issue on the table, siloing it off from the Islamic Republic’s efforts to advance its ballistic missile program, regional malign influence, terrorism operations, and global assassination and hostage-taking campaigns is a mistake—one that ensures a great deal worthy of an A grade is already off the table.

In seeking a narrow, nuclear-only deal, Trump is almost certainly ensuring most, if any, of those other challenges will simply never be addressed, just as they were not after the 2015 Joint Comprehensive Plan of Action (JCPOA). That would leave Iran’s position in the Middle East strengthened and the region less safe overall.

B: Full dismantlement

To get a good deal and earn a solid B grade, Trump would have to ensure that Iran fully dismantle its nuclear program, giving up its right to enrichment for civilian nuclear power. Iran claims this is the purpose of its current program, but the option to have nuclear power exists without enrichment. Other countries import the fuel, run it through their reactors, and ship the spent fuel back to its origin.

This agreement alone would not be enough to achieve a B grade, though. Iran would also have to agree to give up all of its centrifuges, which are used for spinning uranium to build a stable nuclear device, and allow them to be removed from the country. In other words, a good deal means Iran being willing to give up its program fully, similar to what Libya did in 2003. Witkoff recently said that if Iran doesn’t want a nuclear weapon, as its leaders have long claimed, then “their enrichment facilities have to be dismantled. They cannot have centrifuges.”

But such a scenario is highly unlikely. Iran has continuously professed its right to enrich uranium and its current “moderate” political leaders, President Masoud Pezeshkian and Araghchi, would almost certainly struggle to convince an already skeptical Supreme Leader Ali Khamenei to agree to give up a right he has long advocated—particularly given how things ended for Libya’s dictator. Moreover, Pezeshkian and Araghchi would probably be concerned that even offering that trade could prompt such intense blowback from hardliners that their own leadership could be at risk.

C: “Civilian” enrichment with stringent conditions

In a deal worthy of a C grade, Iran would be permitted to enrich uranium to 3.67 percent, the course of action seemingly preferred by at least some in the administration, including Vice President JD Vance. Such an amount would be sufficient for Iran to have a civilian program, but Iran would have to accept more permanent restrictions than existed as part of the JCPOA deal.

Iran would have to give up its more advanced centrifuges—known as IR-8, IR-6, and IR-2 centrifuges—that, in essence, provide it with the capability to more quickly enrich uranium than its original IR-1 design. But there would also have to be strict limits on the IR-1s themselves. Otherwise, production capacity would eventually exceed that of more advanced centrifuges; it would just take a while.

Moreover, a deal earning a C would not put a time limit on the restrictions or have sunset clauses like in the JCPOA, something Witkoff claimed would be the US position, stating, “there’s no sunsetting of their obligations.” Among the most critical sunsetting provisions in the JCPOA were those that expired in 2023 related to ballistic missiles and those set to expire in 2031 that lifted restrictions on Iran’s uranium enrichment level and stockpile. Finally, Iran would have to agree to inspections from not only the International Atomic Energy Association (IAEA) but also from the permanent five members of the United Nations Security Council and Germany, aka the “P5+1” nations that negotiated the JCPOA.

Such a deal would be far from ideal. The threat of Iran being able to obfuscate its enrichment development would be perpetually present, no matter how intense the inspections. But even if Iran complied with the new agreement and restrictions, the domestic conditions in Iran, and the regional situation in the Middle East, will not remain stagnant. If conditions deteriorate, an Iranian regime under threat could quickly decide to restart its nuclear program. Iran could give up a lot in a deal, but there is no Men in Black “neuralyzer” to erase Iranian knowledge of how to properly enrich uranium and create a nuclear weapon.

D: “Civilian” enrichment with advanced centrifuges

For a below-average D grade, a deal would have the same bounds as for a C, but without Iran agreeing to give up its more advanced centrifuges or allowing in inspectors from the P5+1 to monitor its compliance with the agreement. Such a deal would leave Iran perpetually on the cusp of having a nuclear weapon, with less leverage than ever by the United States and its allies to prevent it.

F: “Civilian” enrichment with sunset clauses

And finally, an F would be the correct grade for a deal that permits an Iranian civilian nuclear program with domestic enrichment, does not compel Iran to give up its centrifuges (only to put them in storage), prohibits non-IAEA inspectors, and contains multiple sunset clauses.

Allowing sunsets almost ensures Tehran’s return to the concept of strategic patience and that some years from now, the world will once again be at risk of another crisis over Iran getting a nuclear weapon. Buying time is not always an unreasonable strategy; it wasn’t during the original JCPOA. But that was at a time when Iran was months to years from having enough enriched uranium for a single bomb. Today, Iran is only days away.

Trump may well be on his way to getting a deal with Iran over its nuclear program. But whether it passes the test will depend on its details.

Jonathan Panikoff is the director of the Scowcroft Middle East Security Initiative at the Atlantic Council and a former deputy national intelligence officer for the Near East on the US National Intelligence Council.

The post From A to F, here’s how to grade a possible nuclear deal with Iran appeared first on Atlantic Council.

Donovan hosted by ACAMS for a podcast on geopolitical trends and the emergence of the Axis of Evasion

ntursun — Fri, 09 May 2025 16:33:54 +0000

Listen to the full episode

The post Donovan hosted by ACAMS for a podcast on geopolitical trends and the emergence of the Axis of Evasion appeared first on Atlantic Council.

Sanctioning China in a Taiwan crisis report cited by King Dollar

cwheelock — Wed, 07 May 2025 13:45:29 +0000

Read the full book here

The post Sanctioning China in a Taiwan crisis report cited by King Dollar appeared first on Atlantic Council.

US-EU sanctions divergence would spell trouble for multinational companies

Jesse Sucher — Wed, 30 Apr 2025 16:26:08 +0000

As the policies of the new US administration sow turmoil across markets, early signs suggest that the tools of economic statecraft are not likely to get “DOGE-d” out of existence. Waves of staffing culls, budget cuts, and even real estate sales are forcing reductions across the federal government. But the leadership of the key agencies that administer economic statecraft are reinforcing their intent to strengthen and expand the work of economic statecraft. In addition to tariffs, the United States continues to flex its geoeconomic muscles by using export controls and associated licensing requirements, revamping inbound and outbound investment screening policies, and issuing a steady stream of sanctions targeting priorities like Iran’s weapons and oil networks, as well as transnational crime along the US southern border.

At the same time, threatening allied countries and fellow NATO members with tariffs or invasion upends any potential cooperative economic statecraft with these same states. It may seem like business as usual in certain corridors of the executive branch. The reality is that trade tensions and geopolitical shake-ups rattling traditional US alliances are weakening these tools and exacerbating business uncertainty at a time when the global economy may be least able to afford it.

As a force multiplier, partnerships are key to effective economic statecraft. To paraphrase Daleep Singh, former US deputy national security advisor for international economics, the force of economic statecraft is directly related to the size of the coalition implementing and enforcing the authorities. Multilateral sanctions and cooperative targeting amongst allies have been key pillars of US sanctions policy to date. They reinforce legitimacy by demonstrating agreement across governments and enable safe and legitimate markets to take shape, compounding confidence in the global flow of goods and services. Yet the actions of the current US administration—in many ways picking up where it left off—are straining US relations with stalwart friends like Canada and the European Union (EU). Ursula von der Leyen, the president of the European Commission, went so far as to say that “the West as we knew it no longer exists.”

The fracturing of traditional alliances carries significant consequences for companies facing multijurisdictional compliance obligations, meaning an already complex situation will become more chaotic. The United States used to expend significant diplomatic effort to convince its allies to harmonize sanctions and trade controls. This level of cooperation can no longer be taken for granted and may lead to more significant divergence, particularly regarding Russia. The Kremlin has already requested various forms of sanctions relief in exchange for a ceasefire in Ukraine. The United States has also quietly delisted some high-profile targets like Karina Rotenberg and Antal Rogan, with the secretary of state going so far as to publicize that Rogan’s “continued designation was inconsistent with US foreign policy interests.” Companies are taking notice, too. Raiffeisen Bank International, after years of concerns over its business in Russia, is reportedly slowing its efforts to exit Russia with the notion that “rapprochement between Washington and Moscow” may be in sight.

This complexity was foreshadowed in the wake of Russia’s February 2022 reinvasion of Ukraine and the 2018 US “maximum pressure” sanctions campaign against Iran. These events led to greater discord between US and allied sanctions and may contain clues for how the present situation could evolve. For example, when the first Trump administration withdrew from the Iranian nuclear deal, the EU expanded its “blocking statute.” The statute was intended to protect EU companies engaged in otherwise lawful business from the effects of extra-territorial application of US sanctions, but it ultimately produced a series of headaches and lawsuits for major multinational companies. Will the United States attempt the same, and try to shield US persons from EU and United Kingdom (UK) sanctions? Major multinational companies suddenly freed from the burdens of US sanctions may find themselves held back by EU or UK and risk drawing the ire of the US government if they err on the side of caution so as not to violate European laws.

The United States cannot expect to practice status quo ante economic statecraft while simultaneously trying to reshape the global order. US allies rightfully followed the lead of prior US administrations in establishing robust tools of economic statecraft, and these will not be “deleted” at the whims of the United States—if anything, present conditions suggest the EU may need to strengthen these tools. At the current rate, US actions are likely to produce a number of adverse consequences beyond diplomatic disunity and compliance nightmares. The United States may drive illicit finance into the US economy, for instance, if major US clearing banks are compelled to handle Russia-related transactions and the administration is already deemphasizing anti-corruption initiatives.

To be sure, US lawmakers may have leverage to prevent the Trump administration from providing wholesale sanctions relief. Some members are pushing for strong, new sanctions requirements tied to any Ukraine ceasefire deal. The negotiations between Presidents Trump and Putin and their teams are unpredictable, to say the least. However, it is becoming clear that no matter what the future holds, we may have already seen the zenith of transatlantic synchronization on sanctions and trade controls. The nadir is shaping up to be a mess.

Jesse Sucher is a nonresident senior fellow at the Atlantic Council’s Economic Statecraft Initiative.

The views and opinions expressed herein are those of the author and do not reflect or represent those of the US Government or any organization with which the author is or has been affiliated.

Testimony Feb 21, 2025

Kimberly Donovan testifies to the US-China Economic and Security Review Commission on the Axis of Autocracy

By Kimberly Donovan

On February 20, Economic Statecraft Initiative Director Kimberly Donovan testified to the US-China Economic and Security Review Commission at a hearing titled, “An Axis of Autocracy? China’s Relations with Russia, Iran, and North Korea.”

China Economic Sanctions

New Atlanticist Mar 26, 2025

There’s a right way to lift sanctions on Russia. Follow these Dos and Don’ts.

By Daniel Fried, Kimberly Donovan

A former US diplomat and a former US Treasury official offer eleven guiding principles for moving forward in negotiations on sanctions relief with Russia.

Conflict Economic Sanctions

Econographics Apr 17, 2025

Russia Sanctions Database

By Kimberly Donovan, Maia Nikoladze, Lize de Kruijf

Eastern Europe Economic Sanctions

The post US-EU sanctions divergence would spell trouble for multinational companies appeared first on Atlantic Council.

Why the US must not let Syria slip away

Luke Wagner — Tue, 29 Apr 2025 20:25:32 +0000

Amid reports that President Donald Trump and Syrian interim President Ahmed al-Sharaa will meet during Trump’s scheduled May visit to Saudi Arabia, the future of the two new governments’ uneasy relationship should be coming more into focus.

Currently, ideological differences, sanctions, and on-again-off-again tariffs suggest that US policymakers do not share Damascus’s interest in developing US-Syrian economic and security partnerships. If this is the case, the United States would be balking at a generational opportunity to assert American interests in the Middle East. However, if Washington deepens its economic and security engagements with the new Syrian government, the United States could realize historic opportunities to limit Chinese and Russian influence in the Middle East and enfeeble the Iranian Axis of Resistance for years to come.

Better us than them

Without a clear horizon for lifting sanctions and avoiding future tariffs, al-Sharaa’s government is likely to turn to other nations to develop future partnerships, starting with China and Russia.

Syria’s interim President Ahmed al-Sharaa attends an interview with Reuters at the presidential palace, in Damascus, Syria March 10, 2025. REUTERS/Khalil Ashawi

A bipartisan group of Washington lawmakers has said as much. In mid-February, Republican Senate Foreign Relations Committee Chair Jim Risch warned that limited or no American engagement with the new Syrian government would provide an opening for Russia and Iran to wield substantial influence in Syria again. Likewise, Democratic Senator Jacky Rosen said that the United States cannot allow China and Russia to swoop in and assert their regional interests over the United States.

In the case of China, Jonathan Fulton and Michael Schuman of the Atlantic Council described President Xi Jinping’s recent effort to expand Chinese political, economic, and cultural power in the Middle East as “a campaign to remake the world order and roll back American hegemony.” Not contesting its efforts to expand its influence into Syria would be a major misstep for Washington.

While bolstered Chinese-Syrian relations pose a long-term threat to American influence in the Middle East, Russian presence in Syria poses a more immediate threat to regional stability and US interests.

Russian President Vladimir Putin had been the longstanding economic and security guarantor of the Assad family, thereby ensuring the former regime would do nothing to upset their Russian patrons. Despite the rise of a new government, Russian military presence remains, and presumably, Moscow would be interested in maintaining its clientelist relationship with Damascus. This should be deeply concerning for Washington, particularly as Russian-Iranian ties deepen.

SIGN UP FOR THIS WEEK IN THE MIDEAST NEWSLETTER

But at least so far, enduring sanctions coupled with Trump’s briefly imposed 41 percent tariff on Syria have been unfortunate early signals that Washington’s interest in developing economic relations with post-Bashar al-Assad Damascus is yet to emerge. This posture lacks foresight—investing in Syria as it recovers from a decade of civil war, corruption, and mismanagement may not yield immediate fruit for Washington, but could certainly support its long-term regional interests.

Chiefly, an additional economically stable regional partner, in gratitude to American assistance rather than indebted to Chinese and Russian patronage, would better position the United States to promote regional security and integration while countering Iranian influence.

By lifting sanctions and tariffs and encouraging private investments into the Syrian economy, the United States could offer Damascus a compelling alternative to Chinese and Russian partnerships. Ultimately, crowding China and Russia out of the new Syria would present the United States a generational opportunity that it should be remiss to pass upon.

Don’t be a dumb Axis

The Iranian Axis of Resistance has never been weaker. Syria will be key to keeping it that way.

During the December 2024 collapse of the Assad regime, Iran lost a key strategic ally and the unfettered ability to use Syrian territory to support its destabilizing proxy activities. But Tehran’s regional misfortunes did not end there. Israel’s wars in Gaza and Lebanon have diminished Iran’s capacity to use Hamas and Hezbollah as immediate threats to American regional interests. Even in Iraq, Iran-backed militias have scaled back their strikes on American and Israeli targets, perhaps signaling their fear of drawing Washington’s ire that has recently been directed towards the Houthis in Yemen.

Although this new security landscape favors the United States and its regional allies for the time being, don’t expect it to last, at least not without American encouragement.

Washington’s course of action will play a significant hand in whether the Iranian Axis of Resistance remains weak, and US strategy should include support for Syrian efforts to remove remnants of Tehran’s proxy activity. It seems, at least, that the United States has an ally in al-Shara to those ends, who in interviews has said Iran’s proxies “fuel instability” and pose “a strategic threat to the entire region.”

To find an immediate area for American and Syrian security collaboration, US policymakers should look to the Syrian-Lebanese border, which has been the site of extensive smuggling networks operated by drug cartels and the Iranian-Hezbollah axis.

For decades, these networks existed to enrich, arm, and provide manpower for Iranian regional proxies. From Lebanon to Syria, diesel fuel and the amphetamine narcotic Captagon flowed. From Syria to Lebanon, smugglers trafficked humans and weapons. However, with American logistical and military support, Syrian and Lebanese forces could effectively shut down these illicit smuggling networks, disrupting supply lines crucial to the survival of Iran’s regional proxies, curtailing the harmful Captagon trade, and limiting Iranian support to destabilizing groups.

But opportunities for US-Syrian collaboration could flourish well beyond the Syrian-Lebanese border. With a continued US military presence in Syria, Washington could develop a sustained security partnership with Damascus to eliminate Iranian proxy activity that occurs in and passes through Syria.

However, if the United States does not act, Iranian proxy activity could persist and accelerate. For example, if sustained, Captagon flows would continue to fund violent, destabilizing groups. Weapons and manpower would flow to Hezbollah and other groups in Lebanon and potentially find new homes in Syria, where the central government’s securitization is lacking. In the extreme, these outcomes could produce pockets of lawlessness in Syria, test the endurance of the new Syrian government, and even lead to its collapse.

Washington balking today would dramatically increase the likelihood of these adverse outcomes materializing. Consequently, the chaos and instability emanating from a collapsing state would suck the United States back into Syria. US policymakers should engage Damascus now, when the Iranian Axis of Resistance is at its weakest, rather than in a decade when Iran has again turned Syria into a hotbed of chaos for which they can exploit.

Luke Wagner is a young global professional at the Atlantic Council’s Rafik Hariri Center and Middle East Programs.

The post Why the US must not let Syria slip away appeared first on Atlantic Council.

Russia Sanctions Database featured in Ukraine’s ZN.ua newspaper

ntursun — Mon, 28 Apr 2025 13:51:04 +0000

Read the full article

The post Russia Sanctions Database featured in Ukraine’s ZN.ua newspaper appeared first on Atlantic Council.

Tannebaum interviewed by Bloomberg on trade deals and developments in Ukraine-Russia negotiations

ntursun — Thu, 24 Apr 2025 18:55:04 +0000

Watch the full interview

The post Tannebaum interviewed by Bloomberg on trade deals and developments in Ukraine-Russia negotiations appeared first on Atlantic Council.

US-led peace talks hampered by Trump’s reluctance to pressure Putin

Olivia Yanchik — Tue, 22 Apr 2025 21:20:14 +0000

During the 2024 election campaign, US President Donald Trump famously vowed to end the Russian war on Ukraine “in 24 hours.” Three months into his presidency, the US leader now appears to be rapidly losing patience with a faltering peace process that is showing few signs of progress. Trump stated on April 18 that he wanted a ceasefire agreement in place quickly and would “take a pass” if Moscow or Kyiv “make it very difficult” to reach a peace deal.

Trump’s latest comments reflect mounting US frustration. Speaking on the same day in Paris, United States Secretary of State Marco Rubio warned that the US may soon “move on” from efforts to broker a peace deal between Russia and Ukraine if there is no progress in the coming days. “We are now reaching a point where we need to decide whether this is even possible or not,” Rubio told reporters.

It is not difficult to see why the Trump White House is feeling discouraged. While Ukraine agreed to a US proposal for an unconditional 30-day ceasefire on March 11, Russia has so far refused to follow suit. Instead, the Kremlin has offered a long list of excuses and additional conditions. This has led to accusations that Russian President Vladimir Putin has no real interest in peace and is deliberately engaging in stalling tactics in a bid to drag out negotiations and continue the war until he has political control of Ukraine.

Stay updated

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

Critics of Trump say he has been too reluctant to pressure Putin and has done little to convince the Kremlin dictator that the time has come to abandon his invasion. They claim Trump has consistently signaled his readiness to offer Russia concessions while adopting a noticeably tougher stance toward Ukraine. This has included multiple statements blaming Ukraine for Russia’s invasion.

Since the very early stages of Trump’s peace initiative, the US has ruled out the prospect of Ukraine joining NATO. This was recently underlined by US envoy General Keith Kellogg, who confirmed that NATO membership for Ukraine was “off the table.” Kellogg’s comments were welcomed by the Kremlin. “Of course, this is something that causes us satisfaction and coincides with our position,” noted Kremlin spokesman Dmitry Peskov.

The US has also made clear that it expects Europe to play a leading role in any peace settlement, including the provision of security guarantees for Ukraine to prevent any future repeat of Russia’s current invasion. This is part of a broader foreign policy transition that looks set to see the United States reduce its historic commitment to European security in order to focus more on Asia.

After taking office in January, Trump threatened to target Putin’s energy sector and extended some existing sanctions, but he has so far chosen not to impose any additional economic measures against Moscow. When Trump unveiled landmark new tariffs in early April, Russia was one of the few major economies not on the list.

US officials said the decision not to impose tariffs was because bilateral trade had already effectively stopped due to sanctions imposed following Russia’s February 2022 full-scale invasion of Ukraine. However, trade with Russia is greater than trade with a number of countries subject to the new tariffs. Meanwhile, Trump and other US officials have frequently talked up the prospect for greater economic cooperation between Russia and the United States.

In the diplomatic arena, the Trump White House has sought to avoid direct criticism of Russia in favor of more neutral messaging that prioritizes the need for peace. This approach has seen the United States siding with Moscow at the United Nations and voting against UN resolutions condemning the Russian invasion of Ukraine. US officials also reportedly refused to back a statement by the G7 group of nations condemning Russia’s recent Palm Sunday attack on the Ukrainian city of Sumy, which killed dozens of civilians.

Eurasia Center events

Russia Sanctions Database

Drones, defense, and diplomacy: Negotiations and the battlefield in Ukraine

Conflict Defense Technologies Europe & Eurasia Politics & Diplomacy

The Kremlin has responded approvingly to the dramatic recent shift in the United States approach toward Russia’s invasion of Ukraine. In early March, Russian officials noted that US foreign policy now “largely coincides with our vision.” However, while Putin has good reason to welcome the Trump administration’s stance on Ukraine, he has so far shown little interest in reciprocating by offering any concessions of his own. Far from it, in fact. Since the start of bilateral talks with the United States in February, the Russian military has significantly increased its bombing campaign against Ukrainian cities. In recent weeks, Russian forces have launched a major new spring offensive in Ukraine.

The Kremlin’s negotiating position in ongoing US-led talks is similarly hard line and reflects Russia’s continued commitment to ending Ukrainian independence. Moscow’s demands include official recognition of Russian control over four partially occupied Ukrainian provinces, a complete end to all Western military support for Kyiv, and the drastic reduction of the Ukrainian army to a mere skeleton force, apparently with the intention of leaving Ukraine defenseless against a future phase of Russia’s invasion.

Russia’s uncompromising current approach reflects Putin’s conviction that he can eventually outlast the West in Ukraine, and that by saying no, he will push Trump to offer more concessions. So far, Putin’s logic appears to be working. Trump’s efforts to win over the Kremlin seem to have convinced many in Moscow that they are now firmly on track to secure an historic victory and have no reason to offer any meaningful concessions. If Trump is serious about achieving a lasting peace in Ukraine, he must demonstrate that he is prepared to turn up the pressure on Putin and increase the costs of continuing the invasion.

Olivia Yanchik is an assistant director at the Atlantic Council’s Eurasia Center.

As a result of sanctions, the United States maintains leverage over Russia’s oil revenues from China and India. Meanwhile, the European Union (EU) and its member states control Russia’s energy exports to Europe, the majority of Russia’s blocked assets, and Russia’s ability to reconnect to the Society for Worldwide Interbank Financial Telecommunications (SWIFT).
2025 is predicted to be a difficult fiscal year for Russia, and may be the last year it can rely on the National Welfare Fund to cover its fiscal deficit. This explains why Russian President Vladimir Putin is simultaneously trying to prolong negotiations and seek sanctions relief.
Lifting sanctions on Russia could impact US energy and financial dominance. Russia’s liquified natural gas (LNG) projects would directly compete with US LNG exports. Russia has also openly advocated for dedollarization within BRICS.

Sanctions have emerged as a central element of negotiations between the United States and Russia over the ceasefire in Ukraine. April 20 has been reported as a date by which US President Donald Trump intends to reach a ceasefire deal with Russia, although Russia is attempting to delay progress. However, excluding Ukraine and the EU from the negotiations could undermine Washington’s sanctions strategy—whether this involves lifting or intensifying them, both of which have been suggested by the Trump administration at different times. Considering the centrality of sanctions in the Ukraine negotiations, this edition of the Russia Sanctions Database:

Explains who controls which economic leverage over Russia
Assesses Russia’s negotiating power based on the performance of its economy
Analyzes the implications of lifting sanctions on Russia for US global dominance in energy and finance

What type of economic influence do Western powers exert on Russia and who controls it?

The United States maintains significant economic leverage over Russia as a result of sanctions and the traditional strength of the dollar in the global economy. However, the EU, as a historical trading partner with Russia, controls the levers causing Russia the most economic pain. The United States cannot deliver the economic relief Russia is seeking on its own and will need to work with its European partners on a negotiated settlement.

The United States maintains leverage over Russia’s oil revenues from China and India. The main economic leverage of the United States over Moscow is Washington’s ability to prevent Russian oil exports to China and India with secondary sanctions. Oil revenue is the lifeline of the Russian economy, and the rerouting of oil shipments from Europe to China and India as a result of the price cap and other restrictive measures kept the Russian economy afloat since 2022. This changed when the United States created the Russia secondary sanctions authority at the end of 2023 and expanded the definition of Russia’s military-industrial complex in 2024 to capture more entities and activity under secondary sanctions. Oil payments from China were suspended or delayed over Chinese banks’ concerns about secondary sanctions. On January 10 of this year, the Treasury Department designated two of Russia’s most significant oil producers and exporters—Gazprom Neft and Surgutneftegas—which resulted in Chinese and Indian refineries canceling their orders of Russian oil and looking for alternative suppliers in the Middle East. Further, on March 12, General License (GL) 8L, which allowed for energy transactions with sanctioned Russian entities pursuant to the price cap, expired. Companies that continue to transact with sanctioned Russian energy entities are exposing themselves to the threat of US sanctions. Thus, the main lever of the United States over Russia right now is its ability to influence China and India’s decisions to continue or discontinue importing Russian oil.

The EU is home to SWIFT. The EU and its member states control the outcome of one of Russia’s primary demands within the Black Sea ceasefire negotiations—reconnection to SWIFT. Certain Russian financial institutions were “de-SWIFTed” when the EU sanctioned them in 2022. Russia is demanding reconnection with SWIFT as a precondition for a ceasefire in the Black Sea. But if the United States unilaterally decides to lift its sanctions on Russia as part of the negotiated deal over the war in Ukraine, Russia will still be subject to European sanctions and restrictions. The EU has indicated its sanctions on Russia will remain in place until the “unconditional withdrawal” of Russian troops from Ukraine. In fact, Europe is considering additional sanctions on Russia according to a joint statement by the foreign ministers of Spain, Germany, France, Italy, Britain, and Poland. Because SWIFT is based in Belgium and must comply with EU law and sanctions, the EU is the primary arbiter of Russia’s reconnection to SWIFT.

The EU and its member states control Russia’s energy exports to Europe. The United States no longer imports Russian oil, and nor does the United Kingdom. Prior to Russia’s invasion of Ukraine in 2022, Russia was the largest source of EU imports of oil and gas. Russia rerouted its oil exports to China and India using a shadow fleet in response to the Group of Seven price cap and sanctions, which allowed the Russian economy to stay afloat. In the case of gas, Russia decided to stop the flows of pipeline gas to stymie European support for Ukraine, which did not work due to warm winters and US LNG. Russia ended up losing access to the lucrative and geographically proximate European market for both oil and gas exports. The price cap has also negatively affected Russia’s revenue from oil sales. The EU will decide if and when Russia regains access to the European energy market, and if the price cap and other restrictive economic measures the Europeans impose are lifted.

The EU and its member states control the majority of Russia’s blocked assets. Out of the estimated $280-300 billion worth of blocked Russian Central Bank and National Welfare Fund assets, at least $5 billion sits in the United States. Euroclear, a Belgium-based Financial Market Infrastructure service provider, holds approximately $210 billion, making the EU the most relevant decision-maker on the fate of the assets.

Western powers have more diffuse control over measures such as exports of sensitive technology, but the measures listed above are clear chokepoints. Ensuring that the United States and EU move together in sanctions removal or escalation against Russia will be critical in shaping effective outcomes that ensure stability and peace for Ukraine.

Assessing Russia’s negotiating position based on the performance of its economy

Putin is trying to prolong negotiations while pushing Washington to remove sanctions. Russia’s willingness to negotiate reflects the state of Russia’s economy and challenges in financing its costly war. In the weeks leading up to the thirty-day energy ceasefire—which has been in place since March 25 and intended to stop strikes on both parties’ energy infrastructure—Russia’s industry and trade ministry asked Russian companies to identify which sanctions Moscow should seek to have lifted during peace talks. Participants in the inquiry—many of whom work as major exporters, consultants, lawyers, economists, and advisors—identified sanctions on energy and payment systems to be the most painful and the first they would like to see come down. Gazprom, a Russian energy giant, has been hit the hardest by sanctions. For the first time since 1999, Gazprom recorded a net loss of $7 billion in 2023 and a net loss of $12.89 billion in 2024. Sanctions on Russian oil have squeezed its lucrative oil trade, with reports that Russian oil cargoes are stuck at sea as companies struggle to find buyers. In February 2025, Russia’s export volumes of seaborne crude oil fell by 9 percent on a month-over-month basis, while export revenues decreased by 13 percent.

Sanctions on Russia’s financial sector limited its ability to access international debt markets. To cover deficit spending, Russia has instead turned to domestic bond issuance as well as its National Welfare Fund (NWF), but three years into the war its liquid assets have shrunk by 60 percent. 2025 is predicted to be a difficult fiscal year for Russia and might be the last year it can rely on the NWF to cover its fiscal deficit. Russia’s corporate debt has surged by nearly 70 percent since 2022, with a large portion of this debt consisting of preferential loans that Russian banks made to its defense contractors. As Russia’s economy grows more precarious, sanctions relief for its financial sector could give the country some breathing room to fight the economic pressures created by sanctions. Relief could also mitigate inflation and economic overheating that prompted its central bank to increase interest rates to a high of 21 percent.

The combination of these factors explains why Russia demands that lifting sanctions be a precondition for any ceasefire deal. However, given Russia’s track record of violating ceasefire agreements, prematurely lifting sanctions could facilitate the recovery of the Russian economy while failing to achieve a meaningful ceasefire in Ukraine.

Implications of lifting sanctions on Russia for the US global dominance in energy and finance

Lifting sanctions on Russia will have implications not just for Ukraine, but also the United States’ global dominance in energy and finance. Policymakers will need to carefully consider options to lift sanctions against Russia.

Since 2022, the United States has played a crucial role in filling the energy gap left by Russia, particularly by becoming the world’s largest exporter of LNG. Over 80 percent of US LNG exports are now sent to Europe. Although 17 percent of Europe’s LNG imports still come from Russia, the EU has set a target to eliminate Russian oil and gas imports by 2027. A return to pre-war energy supplies is unlikely, even if sanctions are eventually eased. Consequently, the EU is increasingly turning to the United States for LNG to meet its energy needs, though continuing to do so is contingent on the United States’s ability to meet demand.

Under the Trump administration, the United States has worked to expand its LNG production by issuing additional project permits. However, some hesitation exists within the industry due to unpredictable capital costs and a poorer economic outlook, including the risk of rising material costs caused by the 25 to 50 percent tariffs on steel, which are vital for constructing LNG facilities. Moreover, the US natural gas market is heavily dependent on associated gas production from oil wells. Should sanctions on Russian energy be lifted, the potential increase in global oil supply could drive down oil prices, which might slow US oil drilling and reduce natural gas production.

Before the war, Russia had ambitious plans to increase its LNG exports to 100 million tons per year by 2030, up from just under 35 million tons in 2024. Despite the sanctions, Russia has reaffirmed its target to reach 100 million tons per year by 2035. Should sanctions be eased, Russia’s energy exports could experience a significant boost, especially if stalled projects like the Arctic LNG 2 and smaller LNG facilities such as Portovaya and Vysotsk resume. Together, these projects could add between 8.8 million and 16.4 million tons of LNG per year to global markets.

While the United States remains a dominant force in the LNG export market, Russia’s ambition to reclaim its position as a key global energy player means that it could once again emerge as a significant competitor to the United States. Sanctions relief, especially, could accelerate the development of Russia’s energy projects.

In addition to threatening ambitions for US global energy dominance, lifting sanctions on Russia could reduce US financial dominance, erode the power of US financial sanctions, and limit US visibility of transactions and potential sanctions evasion. Since 2014, when Russia was first sanctioned due to its invasion of Crimea, the Central Bank of the Russian Federation (CBR) has developed a Russian version of SWIFT called Sistema Peredachi Finansovykh Soobcheniy (SPFS). It also created the Mir National Payment System to avoid relying on American companies such as Mastercard, Visa, and American Express. The international reach of SPFS has expanded significantly since 2022, when ten major Russian banks were banned from SWIFT. As of 2024, SPFS included 160 foreign banks. Russian banks have also issued co-badged Mir and UnionPay cards, allowing Russians to take advantage of UnionPay’s substantial presence in 180 countries.

Russia is also the primary driver and advocate of the dedollarization agenda within BRICS. Moscow leverages BRICS as a platform to advocate adopting alternative currencies for trade and reserves, in direct conflict with the United States’ interest in maintaining dollar dominance. In fact, Trump has threatened to impose 100 percent tariffs on the BRICS members if they continue efforts to create a BRICS currency or “back any other currency to replace the mighty US dollar.”

Sanctions on SPFS and Mir payment systems thwart Russia’s ability to expand the reach of its alternative payment systems and to connect SPFS with China’s payment system, the Cross-Border Interbank Payment System. Mir has recently connected with Iran’s Shetab interbank network, which will allow for the use of respective bank cards in both jurisdictions. The CBR seeks to increase the number of countries using Mir from eleven to twenty-five by 2025 and has been in negotiations with several countries including China, Egypt, India, Indonesia, and Thailand. However, warnings and sanctions imposed by the United States in September 2022 caused many banks in Mir’s eleven operating countries to abandon the use of the payment system. Like Mir, sanctions have curtailed efforts to expand SPFS through deterrence and by limiting the domestic use of SPFS. In November 2024, the Office of Foreign Assets Control issued an alert warning that any foreign financial institutions and jurisdictions that join or already have joined SPFS may face sanctions pursuant to Executive Order 14024.

If US financial sanctions on Russia are lifted, Russia will almost certainly continue to expand the reach of its alternative payment systems and advocate for the adoption of alternative currencies. China and other BRICS members are likely to work with Russia on payment system integration if they are no longer facing the threat of secondary sanctions. Developing and integrating payment systems is a highly technical and complex process, and the use of non-Western currencies will also pose an additional challenge. However, Russia is likely to prioritize its work on financial payments if the United States lifts sanctions.

Conclusion

Western economic pressure on Russia has created the conditions that are bringing Putin to the negotiation table. As the US delegation continues to negotiate with Russian counterparts over a ceasefire deal and, ultimately, peace for Ukraine, it is crucial to remember that Russia is a US competitor in global energy dominance and has led the dedollarization agenda within BRICS. Sanctions relief for Russia carries consequences not only for Ukraine and Europe, but also for the United States’ goals to dominate in the global energy and financial sectors. It is equally important to have a clear understanding of the economic levers European allies control over Russia and ensure that the EU and Ukraine are actively involved in negotiations to shape effective outcomes.

Finally, the EU should uphold sanctions against Russia collectively, rather than shifting toward autonomous sanctions regimes. The EU needs to unanimously renew sanctions against Russia every six months. This year, the renewal of sectoral sanctions is due for January and July, while listings are due for renewal in March and September. Hungary disrupted the renewal process both in January and March, agreeing to it only after securing certain concessions from the EU. Recognizing that not being able to renew sanctions against Russia is now a possibility, EU officials and member states have started working on alternative solutions, including tariffing Russian imports and implementing autonomous sanctions. A fragmented EU sanctions approach would diminish the bloc’s collective economic leverage over Russia and risk exposing divisions within the bloc that Moscow could take advantage of.

Authors: Kimberly Donovan, Maia Nikoladze, Lize de Kruijf, and Nazima Tursun

Past editions

November 2024 edition

After Russia’s illegal full-scale invasion of Ukraine in February 2022, Western partners imposed unprecedented financial sanctions and export controls against Russia. This edition includes the last update of the database.

Russia Sanctions Database

May 2024 edition

The Atlantic Council’s Russia Sanctions Database tracks the restrictive economic measures Western allies have placed on Russia and evaluates whether these measures are successful in achieving the stated objectives.

Russia Sanctions Database

November 2023 edition

Following Russia’s invasion of Ukraine in 2022, the West imposed severe sanctions and export controls. These measures aim to cut Russia’s export revenues, weaken its military, and damage its economy.

New Atlanticist Mar 28, 2024

The axis of evasion: Behind China’s oil trade with Iran and Russia

By Kimberly Donovan, Maia Nikoladze

Beijing has developed a way to import Iranian and Russian oil while bypassing the Western financial system and shipping services.

China Economy & Business

Testimony Feb 21, 2025

Kimberly Donovan testifies to the US-China Economic and Security Review Commission on the Axis of Autocracy

By Kimberly Donovan

China Economic Sanctions

New Atlanticist Mar 26, 2025

There’s a right way to lift sanctions on Russia. Follow these Dos and Don’ts.

By Daniel Fried, Kimberly Donovan

A former US diplomat and a former US Treasury official offer eleven guiding principles for moving forward in negotiations on sanctions relief with Russia.

Conflict Economic Sanctions

Join our list

Economic Statecraft Initiative

The post Russia Sanctions Database appeared first on Atlantic Council.

Russia Sanctions Database: November 2024

Kimberly Donovan, Maia Nikoladze — Thu, 17 Apr 2025 12:00:00 +0000

Please note, this is the November 2024 edition of Atlantic Council’s Russia Sanctions Database.

After Russia’s illegal full-scale invasion of Ukraine in February 2022, Western partners imposed unprecedented financial sanctions and export controls against Russia. These measures aim to achieve three objectives:

1. Significantly reduce Russia’s revenues from commodities exports;
2. Cripple Russia’s military capability and ability to pursue its war;
3. Impose significant pain on the Russian economy.

The Atlantic Council’s Russia Sanctions Database tracks the restrictive economic measures Western allies have placed on Russia and evaluates whether these measures are successful in achieving the stated objectives.

The Database also centralizes the financial designations of more than five thousand Russian entities and individuals sanctioned by the Group of Seven (G7) jurisdictions, Australia, and Switzerland. The Database is updated quarterly and can be queried to determine if an individual or entity is designated. Please refer to the appropriate designating jurisdiction’s websites and platforms for additional information and confirmation. The data provided in the Database is intended for informational purposes only.

Key takeaways:

Sanctions against Russia have caused major restructuring of the global supply chains, especially in the oil and precious gem industries.
The price cap coalition members imported $9 billion worth of Russian oil products from third countries in 2023. Sanctioning Russian oil, even at the expense of raising global oil prices, might be the only way of reducing Russia’s oil revenues.
India is now the second largest provider of restricted technology to Russia and a primary transshipment hub for the highly advanced US-trademarked chips.

How to use this database to reveal sanctions gaps: Click on the check mark () and cross mark () filters at the top of each column. Doing so will build a list of entities/individuals that are sanctioned by one country but not by another.

The seven jurisdictions covered in this database are the United States, the United Kingdom, the European Union, Switzerland, Canada, Australia, and Japan. Data in the database was last updated on November 8, 2024

Objective 1: Significantly reduce Russia’s revenues from commodities exports

Lengthening of global oil trade routes

Restrictive economic measures against Russia’s energy sector have caused major restructuring of the global oil market and lengthening of oil trade routes, but Russia is still generating revenue from oil exports to India and China.

When the European Union (EU) banned seaborne Russian oil imports, the United States stepped in and became the largest supplier of crude oil to Europe. US crude oil exports to Europe increased by 23 percent in June 2024 year on year. However, as the United States became the top oil exporter to Europe, it lost half of its share of the Indian market. India opted for cheaper Russian oil as a result of the oil price cap and cut US crude oil imports by 47 percent in 2023.

This reshuffling in the global energy market resulted in the lengthening of oil trade routes: The United States and the Middle East are shipping oil to Europe, while Russia is shipping oil to India and China, which in some cases re-export refined Russian oil to Europe.

Longer oil trade routes created new loopholes in the Group of Seven (G7) sanctions regime. For example, since the G7 does not have import restrictions on refined Russian oil from third countries, Europe has been buying Russian oil products such as fuel from India, lengthening the supply chain even more. Between December 2022 and December 2023, the price cap coalition members imported about nine billion dollars worth of Russian-origin oil products from India and other third countries.

Additionally, longer, multiparty trade routes are also ultimately related to enforcement issues. In response to the oil price cap, Russia has built up a shadow fleet of tankers that can easily take advantage of these routes. At the same time, Russia has developed a multiparty blending market against which sanctions are proving more complicated to enforce.

Russia seems to be repeating Iran’s sanctions evasion playbook, which has been to re-export blended and refined crude oil through third countries. It might be time for the G7 to take a more comprehensive step and replace the oil price cap with sanctions on Russian oil. The price cap leaves much room for maneuvering both for Russia and third countries to profit from re-exporting. Sanctioning Russian oil would significantly increase global oil prices and negatively impact the global economy. However, if India were to stop importing Russian oil, Russia would lose a significant market for its crude oil, perhaps even becoming fully dependent on China just like Iran, who has to sell oil at a much lower price than Russia.

The Treasury Department’s November 21 action designating Gazprombank demonstrates the Biden administration’s resolve to restrict Russia’s ability to generate revenue from commodity exports. Gazprombank was previously designated by the United Kingdom, Australia, New Zealand, and Canada.

Proposed G7 restrictions could irreversibly damage the global diamond industry

The G7 has introduced phased prohibitions on the imports of Russian-origin non-industrial diamonds. They are likely to cause shock waves in the global diamond industry, but it is unclear whether they would weaken Moscow’s ability to finance the war on Ukraine. Russia’s diamond industry generates about $3.8 billion in revenue annually, a minuscule amount compared to the about $100 billion Russia received in oil and gas revenues last year. While not being a critical commodity exporter for Russia, the Russian state-owned diamond mining company Alrosa has the largest share of the global diamond market (31 percent) and produces 35 percent of the world’s rough diamonds. This asymmetry implies that diamond restrictions will not impact Russia’s war chest, but will negatively impact the $100 billion global diamond industry.

Russia still continues to profit from diamond sales despite sanctions. For example, in 2023, Hong Kong imported $657.3 million worth of diamonds from Russia, a dramatic 1,700 percent increase from the previous year. However, countries at the low end of the supply chain, such as India, that refine and polish diamonds and other precious gems, will no longer be able to re-export polished Russian diamonds to the G7. This will especially impact India which will have to either export polished Russian diamonds to other markets or import rough diamonds from other countries. In either case, India’s diamond industry will suffer from major supply chain restructuring.

The G7 countries are in the process of creating new requirements for tracing the origins of all diamonds before they enter G7 and EU countries. The “mandatory traceability program” will go into effect on March 1, 2025 and will likely increase compliance costs across the diamond industry. In particular, the EU will require all non-Russian diamonds to go through Antwerp, Belgium to verify their origins. Industry leaders have expressed concerns about bottlenecks and the advantage Antwerp would be getting over other sellers in case this mechanism is approved.

The World Federation of Diamond Bourses has acknowledged the need to trace diamonds’ origins but raised concerns about the plan the G7 has suggested. The cost of compliance with sanctions, including the cost of shipping diamonds to Belgium while paying for freight insurance will likely increase the price of non-Russian diamonds, ultimately making Russian diamonds comparatively less expensive and therefore more attractive to consumers.

The G7 governments should take into consideration concerns from the world’s diamond industry and African stakeholders, and create the space for diamond experts to present an alternative plan for traceability that meets the G7’s intent.

Objective 2: Cripple Russia’s military capability and ability to pursue its war

Can India manage to enjoy the benefits of trading with Russia without facing the consequences?

After the United States pressured the United Arab Emirates and Turkey to comply with critical technology export controls on Russia, India has emerged as a primary transshipment hub and the second largest supplier of restricted technology to Russia. As it turns out, Russian authorities began finding solutions to transact with Indian companies through clandestine channels shortly after Russia invaded Ukraine.

When the G7 imposed sanctions on Russia, India increased imports of cheap Russian oil. India was paying Russia in rupees for a portion of these imports, resulting in Moscow accumulating a considerable amount of rupees it could not spend anywhere else, similar to the phenomenon with China that we discussed in our analysis of the “axis of evasion.”

According to the Financial Times, by October 2022, Russia’s Industry and Trade Ministry made a secret plan that would kill two birds with one stone: Russia would buy sensitive electronic components from India with the 82 billion rupees (about one billion dollars) the Russian banks had accumulated from oil exports. The payments would take place in a “closed payment system between Russian and Indian companies, including by using digital financial assets”, and outside of Western oversight. It is difficult to determine if the plan worked because the Financial Times obtained the information about this plan from leaked Russian documents. However, given that India is now the second largest sensitive technology provider to Russia and Russian banks maintain branches in several Indian cities, it is safe to assume that it did.

If everything follows the current trajectory, India will increase technology exports to Russia to address the massive trade imbalance with Moscow. Specifically, in the fiscal year ending in March 2024, New Delhi imported $65.7 billion worth of crude oil from Russia and exported only $4.26 billion worth of goods. To restore the trade balance, India exported items such as microchips, circuits, and machine tools worth more than $60 million both in April and May, and $95 million in July. Thus, it is now in India’s interest to export more electronics to Russia so it can correct the trade imbalance before the end of the fiscal year.

The United States is aware of India’s increasing role in supplying Russia’s military-industrial complex with critical technology. The Treasury Department included nineteen Indian entities in its latest tranche of designations of Russia’s military procurement networks. At the same time, the State Department sanctioned more than 120 additional entities and individuals supporting Russia’s military-industrial complex, and the Commerce Department imposed export controls on forty foreign entities to prevent them from obtaining US technologies. One of the designated companies is Shreya Life Sciences, an Indian drugmaker that, according to the Treasury Department’s sanctions designation, has exported restricted high-end servers optimized for artificial intelligence to Russia. Indian authorities’ cooperation with the United States and G7 allies will be significant in ensuring Indian companies such as Shreya Life Sciences stop undermining the sanctions and export controls regime against Russia.

As a starting point, the United States and its G7 allies should increase engagement with Indian authorities and encourage India’s Financial Intelligence Unit to share information through Egmont Group channels that may shed light on the closed payment channel that Indian companies supposedly used to transact with Russian companies, and whether this channel is still operational. Western allies should strongly encourage India to consider the exposure risk Indian financial institutions have with Russian banks that have been sanctioned or removed from the SWIFT messaging system and have branches in India, such as Sberbank, VTB Bank, and Promsvyazbank, as Indian financial institutions transacting with these Russian banks are subject to US secondary sanctions.

Indian banks should consider their exposure to and risk of connecting with Sistema Peredachi Finansovykh Soobscheniy or “System for Transfer of Financial Messages” (SPFS). The Treasury recently warned foreign financial institutions that SPFS is considered part of Russia’s financial services sector. As a result, banks that join Russia’s financial messaging system may be targeted with sanctions.

Finally, the G7 partners should take into account India’s high dependence on imported energy. India imports 88 percent of its oil and is working toward increasing the role of renewables in the energy mix. Engaging with Indian authorities on finding alternative energy resources and suppliers would be a recommended next step for the G7 allies. This would also help India address the payment challenges it has experiencing with Russian authorities, who have been demanding that Indian companies pay Russian companies in renminbi instead of rupees.

Objective 3: Impose significant pain on the Russian economy

G7 countries issued unprecedented coordinated sanctions on Russia following Russia’s invasion of Ukraine in 2022. Western sanctions have significantly impacted Russia’s ability to fight its war and have made it more difficult for Russia to operate. There are indications that Russia’s economy is struggling. For example, the Central Bank of Russia recently increased the interest rate to 21 percent. Russia’s National Welfare Fund is declining as well as its export revenues as a result of sanctions. However, after nearly three years of war and sanctions, Western partners have not fully achieved their objectives.

As the war continues on, the effects of restrictive economic measures are waning as Russia has created workarounds and mechanisms to transact and trade with its partners outside the reach of Western sanctions. Russia has adapted and evolved into a wartime economy. Measures such as export controls are making it more difficult for Russia to import battlefield technology and materials. However, Russia is finding solutions such as partnering with Iran and North Korea to obtain missiles, unmanned aerial vehicles, and other military equipment.

Further, Russia is not the only country affected by Western sanctions. Russia’s neighboring countries are struggling to comply with sanctions as they have historically relied on economic ties and trade with Russia and have few opportunities to develop alternatives. Meanwhile, entire industries, including oil and precious gems, have had to develop and implement new ways of doing business and adjust to sanctions compliance. Technology companies also continue to have trouble complying with export controls. Their sensitive Western technology and dual-use goods continue to end up on the battlefield in Ukraine.

Going forward, Western partners must continue economic pressure on Russia in concert with military assistance to Ukraine. Sanctioning Russian oil will be critical in imposing pain on the Russian economy since oil and gas revenues filled one-third of Russia’s budget in 2023. However, if the United States and its G7 allies continue to leverage economic measures to change the course of wars and behaviors of states, they will need to have clearly outlined objectives and measures of assessment before pulling the trigger on sanctions. Developing a comprehensive understanding of the industries such measures will target will be critical for managing expectations of what sanctions can achieve, and what ramifications they will have for the global economy.

Above all, the United States and G7 allies need to recognize that the use of economic tools comes at a cost, such as oil price increases and supply chain reshuffling. Economic tools avoid the damage of human deaths, but they require economic and financial sacrifice. It is now up to the G7 allies to decide what is a bigger priority: Oil prices or international security.

Authors: Kimberly Donovan and Maia Nikoladze

Contributions from: Mikael Pir-Budagyan

New Atlanticist Mar 28, 2024

The axis of evasion: Behind China’s oil trade with Iran and Russia

By Kimberly Donovan, Maia Nikoladze

Beijing has developed a way to import Iranian and Russian oil while bypassing the Western financial system and shipping services.

China Economy & Business

Testimony Feb 21, 2025

Kimberly Donovan testifies to the US-China Economic and Security Review Commission on the Axis of Autocracy

By Kimberly Donovan

China Economic Sanctions

New Atlanticist Mar 26, 2025

There’s a right way to lift sanctions on Russia. Follow these Dos and Don’ts.

By Daniel Fried, Kimberly Donovan

A former US diplomat and a former US Treasury official offer eleven guiding principles for moving forward in negotiations on sanctions relief with Russia.

Conflict Economic Sanctions

Join our list

Economic Statecraft Initiative

The post Russia Sanctions Database: November 2024 appeared first on Atlantic Council.

The EU could respond to Trump’s tariffs with a new ‘anti-coercion instrument.’ Here’s what to know.

Erik Brattberg, Jacopo Pastorelli, and Benjamin Schwab — Tue, 08 Apr 2025 14:05:11 +0000

In 2016, Europeans were taken by surprise when US President Donald Trump was elected and began challenging long-held assumptions about globalization and free trade. Consequently, the European Union (EU) was only able to respond to US tariffs in an ad-hoc manner. This time around, however, Brussels has prepared itself for a more contentious global economic order, developing an economic-security toolbox designed to deter third counties from “coercing” the continent. While the tools were mainly formed with China’s unfair trading practices in mind, the EU is now considering whether to use them in response to the Trump administration’s declaration of “economic independence” and its latest round of “liberation day” tariffs.

As part of the EU’s “open strategic autonomy” strategy, the strongest card that the bloc has in its hand is the “anti-coercion instrument.” Confronted with Washington’s array of tariffs across three fronts—25 percent on automotive and car parts, 25 percent on steel and aluminum, and 20 percent “reciprocal” tariffs across the board—Brussels may soon be ready to play its newest ace.

What is the anti-coercion instrument?

The anti-coercion instrument was originally conceived as a deterrent against efforts by third countries to influence policy using economic leverage. It was in part inspired by Washington’s use of Section 301 of the 1974 US Trade Act to apply trade-restrictive or interventionist measures to defend US commercial interests. Lithuania’s experience of a de facto Chinese embargo campaign in 2021 turbocharged the debate in Europe, underscoring the urgency to equip the EU’s existing toolbox with a more flexible and World Trade Organization–compatible defense instrument.

Entered into force in late 2023, the framework is noteworthy for at least two reasons:

It allows the European Commission to impose a wide range of retaliatory measures beyond higher import duties. This includes applying export controls, restricting intellectual property rights, curtailing foreign investments, banning services, or applying duties to digital platforms. The tool could also be used to exclude access to the European single market and public-procurement tenders.

Using the anti-coercion instrument requires “only” a qualified majority: that is, 55 percent of the EU’s twenty-seven member states representing at least 65 percent of the union’s population. No individual member state can use the instrument, but a member state, a company, or the European Commission can submit a request to initiate the examination process.

The tool has not been used before, and its powers are broad enough that it could take a number of different forms if implemented, some more severe, others less so.

If, for example, the EU deployed a forceful use of the instrument against the United States, then it could restrict US banks’ access to the EU’s massive public procurement market, which is estimated to be worth over two trillion dollars per year (a plan floated earlier this year in Brussels). It could also restrict US tech giants’ access to the lucrative European market. Either or both of these steps could lead to an unprecedented escalation of the trade war that Trump started.

What needs to happen before the EU deploys the instrument?

The anti-coercion instrument is meant to be a consultation process, expected to last between three and six months, rather than a single measure. The European Commission must first examine the alleged economic coercion. If it concludes that a third country is indeed exercising economic coercion as defined by the act, it must first attempt to conduct dialogue with the third country to reach a negotiated solution. Only if this fails can the EU move to impose economic response measures under the anti-coercion instrument.

Will the EU use the anti-coercion instrument against the US?

The anti-coercion instrument has not yet been used, but European Commission President Ursula von der Leyen did appear to leave the door open on April 1, just ahead of Trump’s tariff announcement. “Europe holds a lot of cards. From trade to technology to the size of our market. But this strength is also built on our readiness to take firm countermeasures. All instruments are on the table,” von der Leyen said.

So far, the EU has responded to Trump’s steel and aluminum tariffs by announcing its first round of own duties on €26 billion in US imports into the EU effective April 15. Against the backdrop of the new US tariffs impacting €380 billion in European exports and projections estimating a 0.3 percent contraction of Europe’s gross domestic product over the next two years, the instrument would allow Brussels to ratchet up the pressure on Washington proportionally. Faced with the prospects of the anti-coercion instrument restricting market access to US tech giants and financial services companies, freezing some US investment in Europe, or suspending some US intellectual property right protections, the Trump administration may feel pressure to strike a deal with Brussels.

There are clear risks, however. Most prominent is that the use of the anti-coercion instrument might invite further retaliatory measures from the United States, which could in turn either increase further duties on EU imports or even escalate and target European firms’ reliance on US cloud and digital infrastructures for their operations.

For now, some EU leaders remain hesitant to unleash the anti-coercion instrument, preferring to use other tools, such as retaliatory, sectoral counter-tariffs on some exports, such as bourbon from Kentucky, that hit Republican-leaning states especially hard. With these counter-tariffs, Brussels is trying to show its firmness while preventing further escalation and a tit-for-tat transatlantic trade war. However, if the Trump administration doubles down and takes additional measures, in particular retaliating against EU regulations, such as the Digital Markets Act, the Digital Services Act, or member states’ digital service taxes, then more European leaders may view the tool as a necessary step to pressure Washington.

Erik Brattberg is a nonresident senior fellow at the Atlantic Council’s Europe Center.

Jacopo Pastorelli is a program assistant at the Atlantic Council’s Europe Center.

Benjamin Schwab is a young global professional at the Atlantic Council’s Europe Center.

The post The EU could respond to Trump’s tariffs with a new ‘anti-coercion instrument.’ Here’s what to know. appeared first on Atlantic Council.

Kumar quoted by Central Banking on the Bank of Russia’s role in sanctions evasion and building alternative payment infrastructure

irosales — Fri, 04 Apr 2025 17:10:03 +0000

The post Kumar quoted by Central Banking on the Bank of Russia’s role in sanctions evasion and building alternative payment infrastructure appeared first on Atlantic Council.

Still no consensus on using frozen Russian assets to support Ukraine

Mark Temnycky — Tue, 01 Apr 2025 14:16:15 +0000

A bipartisan group of United States senators have recently called on the Trump administration to consider handing Ukraine over $300 billion in frozen Russian assets. In a March 21 letter addressed to US Secretary of State Marco Rubio, senior Republicans including Lindsey Graham joined their Democrat colleagues in pressing for the frozen funds to be allocated to the Ukrainian war effort.

The appeal is part of a lively ongoing discussion on both sides of the Atlantic over the fate of hundreds of billions of dollars in Russian sovereign assets that have been frozen since Russia’s full-scale invasion of Ukraine began in February 2022. Over the past three years, many have advocated using the funds to back Ukraine’s defense or cover the costs of the country’s reconstruction, but a range of political, financial, and legal considerations have so far prevented any firm moves toward seizure.

Canada and the United States have both introduced legislation empowering governments to confiscate frozen Russian assets, while the French parliament recently passed a non-binding resolution on the use of frozen Russian funds to back Ukraine. Others such as Polish Prime Minister Donald Tusk have voiced their support for the initiative. For now, however, Ukraine’s international partners can only agree on using the interest from the frozen funds to cover loans for Kyiv.

Stay updated

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

Opponents say using Russia’s frozen assets to finance Ukraine’s defense and recovery could have far-reaching negative ramifications for the Western financial system that would outlast the current war. They warn that seizing Russia’s assets would undermine the international credibility of Western financial institutions, and may also lead to direct and indirect countermeasures from the Kremlin that could further fuel global instability.

Speaking at a gathering of EU leaders in Brussels in late March, Belgian Prime Minister Bart De Wever said any move to confiscate the Russian assets would be considered “an act of war.” The Belgian PM, whose country holds the largest share of the frozen Russian funds, warned that the proposed seizure would carry “systemic risks to the entire financial world system” and could spark retaliation, with any remaining Western assets located inside Russia likely to be targeted.

In addition to these considerations, the legal basis for the seizure of Russia’s frozen sovereign assets remains subject to considerable debate. Any court order commanding a government to seize Russian assets would be illegal under international law, Durham University professor of financial law Federico Luco Pasini told Euronews recently. However, if there was an executive decision by the government to seize the assets, “this could potentially bypass the issue,” Pasini stated. Others believe legal precedents exist, with some pointing to the use of frozen state assets to compensate victims of Iraq’s 1990 invasion of Kuwait.

Eurasia Center events

Drones, defense, and diplomacy: Negotiations and the battlefield in Ukraine

Conflict Defense Technologies Europe & Eurasia Politics & Diplomacy

The idea of making Russia pay for the devastation it has caused in Ukraine has obvious appeal, with many seeing it as a form of international justice. Supporters believe the use of Russian funds would be particularly appropriate in this context, given the fact that few if any Kremlin officials are likely to be held legally accountable for war crimes committed in Ukraine. Using Russian money would also reduce the burden on taxpayers throughout the West and ease the political pressure on governments struggling to fund the largest European war since World War II.

Discussions over the possible transfer of frozen Russian assets to Ukraine have gained considerable momentum in recent months following the return of Donald Trump to the White House. The Trump administration’s decision to briefly pause military aid to Ukraine and the broader US foreign policy pivot away from Europe have highlighted the need to find alternatives to continued United States support for Ukraine.

The emergence of an axis of authoritarian regimes centered on Moscow is also now helping to convince many in the West that unprecedented measures are required. With North Korean soldiers fighting for Russia against Ukraine and Iran providing the Kremlin with large quantities of attack drones to bomb Ukrainian cities, there is a growing sense of insecurity in Western capitals. “Russia, China, Iran, and North Korea are hostile to democratic states’ interests and values. They are increasingly working together to undermine the international order,” noted former British Prime Minister Rishi Sunak in a recent article backing calls to hand Russia’s frozen assets to Ukraine.

Faced with the new geopolitical realities of an expansionist Russia and an isolationist United States, many policymakers across Europe may soon become more sympathetic to the idea of using Russia’s frozen sovereign assets to fund Ukraine’s ongoing fight for survival. However, there is still no consensus on the issue amid widespread reluctance to set what opponents believe would be a dangerous precedent. While supporters argue that the seizure of Russia’s assets could be legally justified, any decision will ultimately be a test of Western resolve and a matter of political will.

Mark Temnycky is a nonresident fellow at the Atlantic Council’s Eurasia Center and an accredited freelance journalist covering Eurasian affairs.

Stay updated

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

The issue of removing existing sanctions in exchange for Russian compliance with peace-building steps is already under discussion. Even at this early stage in the US-led peace process, there are signs of diverging opinions on opposite sides of the Atlantic with regard to the use of sanctions as a tool to bring Russia to the negotiating table. Moving forward, unity on sanctions policy will be crucial.

Many if not most of the current sanctions measures imposed on Russia since 2022 in response to the full-scale invasion of Ukraine are likely to remain in place until a peace agreement can be implemented. In the postwar period, it will be important to maintain or impose targeted sanctions that can restrict Kremlin access to cutting edge military technologies. This will help limit Russia’s ability to rearm.

Countries across Europe are already debating significant increases in defense spending, with many governments planning to invest in expensive air defense systems in order to guard against the kind of Russian bombing campaigns they have witnessed in Ukraine. While these air defense upgrades are clearly necessary, it would also make sense to take steps that could potentially prevent Russia from replenishing its missile and drone arsenals by denying Moscow the ability to acquire key components in large quantities.

Eurasia Center events

Director, Economic Statecraft Initiative

Drones, defense, and diplomacy: Negotiations and the battlefield in Ukraine

Conflict Defense Technologies Europe & Eurasia Politics & Diplomacy

In addition to baseline sanctions on military technologies, Western leaders should also explore the possibility of agreeing on comprehensive sanctions packages to be triggered in the event of renewed Russian aggression against Ukraine or elsewhere. A credible rapid response mechanism would send an unambiguous message to Moscow regarding the inevitable and severe economic consequences of further invasions.

This approach could build on the sanctions experience of the past three years. Western policymakers could increase collaboration to better identify Russia’s vulnerabilities and address potential loopholes, such as the role of third party intermediaries in bypassing sanctions measures. Much would depend on the readiness of participating countries to work together in order to present the Kremlin with a united front.

No sanctions measures, whether imposed or implied, can ever hope to fully replace the hard power of military deterrence. Russian expansionism and the isolationism of the current US administration mean that a high degree of European rearmament is already inevitable. This also means that the Ukrainian military will likely remain at the heart of Europe’s new security architecture for many years to come, and will be a major focus for defense sector investment. At the same time, tools such as sanctions can help further deter the Kremlin.

There is currently no consensus over the impact of sanctions on efforts to end Russia’s full-scale invasion of Ukraine. Nevertheless, with sufficient political will and Western unity, sanctions can become an important component in postwar efforts to safeguard Ukraine’s security and provide Europe with a degree of stability. This approach is economically appealing. While expanding defense budgets will significantly increase the burden on European taxpayers, sanctions are the single most cost-effective way of containing Russia and enhancing international security. As such, they should be utilized to their maximum potential.

Dr. Ilona Khmeleva is the Secretary General of the Economic Security Council of Ukraine (ESCU).

Economic threats to Canada’s national security
An unexpected threat: Overdependence on trade with the United States
Lack of economic power consolidation by Canada’s federal government
Mapping Canada’s economic statecraft systems: Sanctions, export controls, tariffs, and investment screening

Economic threats to Canada’s national security

Cyberattacks on Canada’s critical infrastructure

Canada’s critical infrastructure has become a target of state-sponsored cyberattacks. In 2023, Canada’s Communications Security Establishment (CSE)—a signals intelligence agency—said that Russia-backed hackers were seeking to disrupt Canada’s energy sector. Apart from accounting for 5 percent of Canada’s gross domestic product (GDP), the energy sector also keeps the rest of Canada’s critical infrastructure functioning. CSE warned that the threat to Canada’s pipelines and physical infrastructure would persist until the end of the war in Ukraine and that the objective was to weaken Canada’s support for Ukraine.

Beyond critical infrastructure, Canadian companies lost about $4.3 billion due to ransomware attacks in 2021. More recently in February 2025, Russian hacking group Seashell Blizzard was reported to have targeted energy and defense sectors in Canada, the United States, and the United Kingdom. Russia and other adversarial states will likely continue targeting Canada’s critical infrastructure and extorting ransom payments from Canadian companies.

Theft of intellectual property

Canadian companies have become targets of Chinese state-sponsored intellectual theft operations. In 2014, a Chinese state-sponsored threat actor stole more than 40,000 files from the National Research Council’s private-sector partners. The National Research Council is a primary government agency dedicated to research and development in science and technology. Apart from undermining Canadian companies, theft of Canada’s intellectual property, especially research on sensitive technologies, poses a threat to Canada’s national security.

Chinese influence on Canada’s academic sector

Adversarial states have taken advantage of Canada’s academic sector to advance their own strategic and military capabilities. For example, from 2018 to 2023, Canada’s top universities published more than 240 joint papers on quantum cryptography, space science, and other advanced research topics along with Chinese scientists working for China’s top military institutions. In January 2024, Canada’s federal government named more than one hundred institutions in China, Russia, and Iran that pose a threat to Canada’s national security. Apart from calling out specific institutions, the federal government also identified “sensitive research areas.” Universities or researchers who decide to work with the listed institutions on listed sensitive topics will not be eligible for federal grants.

Trade weaponization by China

Trade weaponization by China has undermined the economic welfare of Canadians and posed a threat to the secure functioning of Canada’s critical infrastructure. For example, between 2019 and 2020, China targeted Canada’s canola sector with 100 percent tariffs, restricting these imports and costing Canadian farmers more than $2.35 billion in lost exports and price pressure. In Canada’s 2024 Fall Economic Statement, which outlined key measures to enhance Canadian economic security, the Ministry of Finance announced its plans to impose additional tariffs on Chinese imports to combat China’s unfair trade practices. These included tariffs on solar products and critical minerals in early 2025, and on permanent magnets, natural graphite, and semiconductors in 2026.

However, the imposition of 25 percent tariffs by Washington on both Canada and China could result in deepening trade ties between the two. Canada exported a record $2 billion in crude oil to China in 2024, accounting for half of all oil exports through the newly expanded Trans Mountain pipeline. Increased trade with China would increase Canada’s exposure to China’s coercive practices, and would be a direct consequence of US tariffs on Canada.

An unexpected threat: Overdependence on trade with the United States

A new and unexpected threat to Canada’s economic security emerged from the United States when the Trump administration threatened to impose 25 percent tariffs on all Canadian goods (except for the 10 percent tariffs on energy imports). The United States is Canada’s largest export market, receiving a staggering 76 percent of Canada’s exports in 2024. Canada relies on the United States particularly in the context of its crude oil trade, shipping 97.4 percent of its crude oil to the United States.

Canada had already started working on expansion to global markets through pipeline development even before Washington announced tariffs. It has succeeded in the expansion of the Trans Mountain pipeline in May 2024, which has enabled the export of Canadian oil to Asia. Canada is reviving talks on the canceled Energy East and Northern Gateway pipelines—the former would move oil from Alberta to Eastern Canada, and the latter would transport oil from Alberta to British Columbia for export to Asian markets.

In addition to oil trade, another area where Canada is highly dependent on the United States is in auto manufacturing. Behind oil exports, motor vehicles account for the largest share of Canadian exports to the United States, resulting in exports valued at $50.76 billion (C$72.7 billion Canadian dollars) in 2024. With 25 percent tariffs on all Canadian goods, the automotive industry is expected to take a hit, especially as components cross the border six to eight times before final assembly.

Figure 1

The United States invoked the International Emergency Economic Powers Act to impose tariffs on Canada with the stated objective to curb fentanyl flows to the United States. The measure has plunged US-Canada relations into chaos and could result in a trade war between the two long-standing allies. In response, Canada might reroute oil shipments to China through existing pipelines and increase trade with China in general. Further economic integration with China would increase Canada’s exposure to economic threats emanating from China, including trade weaponization and anti-competitive practices.

Because of US tariffs, Canada could also face challenges in strengthening the resilience of its nuclear fuel and critical mineral supply chains. In the 2024 Fall Economic Statement, Canada outlined key measures for its economic security that heavily incorporated US cooperation. This included plans to strengthen nuclear fuel supply chain resiliency away from Russian influence, with up to $500 million set aside for enriched nuclear fuel purchase contracts from the United States. Canada also aims to strengthen supply chains for responsibly produced critical minerals, following a $3.8 billion investment in its Critical Minerals Strategy, which relies on the United States as a key partner. Given the tariffs, Canada will need to diversify its partners and supply sources quickly if it wishes to maintain these economic security goals.

Could the US-Canada trade war upend defense cooperation?

Recent tariff escalation between the United States and Canada has raised questions about the future of military cooperation between the two countries. Apart from being members of the North Atlantic Treasury Organization (NATO), the United States and Canada form a unique binational command called North American Aerospace Defense Command (NORAD). NORAD’s mission is to defend North American aerospace by monitoring all aerial and maritime threats. NORAD is headquartered at Peterson Space Force Base in Colorado, has a US Commander and Canadian Deputy Commander, and has staff from both countries working side by side.

NORAD’s funding has been historically split between the United States (60 percent) and Canada (40 percent). However, the Department of Defense (DoD) does not allocate specific funding to NORAD and does not procure weapons or technology for NORAD, although NORAD uses DoD military systems once fielded. The US Congress recognized the need to allocate funding to modernize NORAD’s surveillance systems after the Chinese spy balloon incident in February 2023. While US fighter jets shot down the Chinese surveillance balloon after it was tracked above a US nuclear weapons site in Montana, the incident exposed weaknesses in NORAD’s capabilities. After the incident, former NORAD Commander Vice Admiral Mike Dumont stated that NORAD’s radar network is essentially 1970s technology and needs to be modernized.

A year before the incident, the Canadian government had committed to invest $3.6 billion in NORAD over six years from 2022 to 2028, and $28.4 billion over twenty years (2022-2042) to modernize surveillance and air weapons systems. However, Canada has fallen short on delivering on these commitments.

In March 2025, Canada’s Prime Minister Mark Carney announced that Canada made a $4.2 billion deal with Australia to develop a cutting-edge radar to detect threats to the Arctic. The radar is expected to be delivered by 2029 and will be deployed under NORAD. Canadian military officials have stated that the US military has supported the deal, signaling that the deterioration of economic relations has not (yet) had spillover effects for the defense cooperation.

However, Prime Minister Carney has also ordered the review of F-35 fighter jet purchases from US defense company Lockheed Martin, citing security overreliance on the United States. Under the $13.29 billion contract with Lockheed Martin, Canada was set to buy 88 fighter jets from the US company. While Canada’s defense ministry will purchase the first sixteen jets to meet the contract’s legal requirements, Canada is actively looking for alternative suppliers.

As the trade war continues, Canada will likely enhance defense cooperation with the European and other like-minded states, possibly to the detriment of the US defense industry and the US-Canada defense cooperation.

Figure 2: US-Canada overlapping memberships in security organizations and alliances

Source: Atlantic Council’s Economic Statecraft Initiative research

Lack of economic power consolidation by Canada’s federal government

Canada has a range of economic tools and sources of economic power to respond to emerging economic threats and mitigate vulnerabilities; however, it currently lacks economic power consolidation. Unlike the United States, where the federal government can regulate nearly all economic activity, Canada’s Constitution Act of 1867 grants provinces control over their “property and civil rights,” including natural resources. Section 92A, which was added to the constitution in 1982, further reinforced the provinces’ control over their natural resources. Meanwhile, the federal government has control over matters of international trade including trade controls. However, when international trade issues concern the natural resources of provinces, tensions and disagreements often arise between provinces and the federal government, and the lack of economic power consolidation by the federal government becomes obvious.

This issue manifested when the United States announced 25 percent tariffs on Canada in March 2025 as Canada’s federal government and the Alberta province had different reactions. Canada’s main leverage over the United States is oil exports. Refineries in the United States, particularly those in the Midwest, run exclusively on Canadian crude oil, having tailored their refineries to primarily process the heavy Canadian crude. Since 2010, Canadian oil accounted for virtually 100 percent of the oil imported by the Midwest. Threatening to hike levies on crude oil exports could have been Canada’s way of leveraging energy interdependence to respond to US tariffs. However, Alberta Premier Danielle Smith stated that Alberta, which is Canada’s largest oil producer and top exporter of crude oil to the United States, would not hike levies on oil and gas exports to the United States. Being unable to speak in one voice as a country even during a crisis is a direct consequence of Canada’s regional factionalism, characterized by each province looking out for their own interests.

The United States-Mexico-Canada (USMCA) trade agreement, which entered into force during the first Trump administration in July 2020, may have also contributed to diminishing the economic power of Canada’s federal government. Article 32.10 of USMCA requires each member of the agreement to notify other countries if it plans to negotiate a free trade agreement (FTA) with a nonmarket economy. Thus, if Canada were to sign an FTA with China, the United States and Mexico could review the agreement and withdraw from USMCA with six months’ notice. After the USMCA was signed, Canadian scholars wrote that this clause would effectively turn Canada into a vassal state of the United States, with the authority to make decisions on internal affairs but having to rely on the larger power for foreign and security policy decisions. Five years later, it looks like the USMCA has put Canada in a difficult position, being targeted by US tariffs and not having advanced trading relations with other countries.

Figure 3: US-Canada overlapping memberships in economic organizations and alliances

Source: Atlantic Council’s Economic Statecraft Initiative Research

Mapping Canada’s economic statecraft systems

To secure Canada’s critical infrastructure and leverage its natural resources to shape favorable foreign policy outcomes, Canada’s federal government has a range of economic tools and the ability to design new ones when appropriate. Canada’s economic statecraft tool kit is similar to those of the United States and the European Union and includes sanctions, export controls, tariffs, and investment screening. Canada has imposed financial sanctions and export controls against Russia along with its Group of Seven (G7) allies. It has levied tariffs on Chinese electric vehicles, in line with US policy, and recently created investment screening authorities to address concerns about adversarial capital.

Financial sanctions

Similar to the United States, Canada maintains sanctions programs covering specific countries such as Russia and Iran, as well as thematic sanctions regimes such as terrorism. Global Affairs Canada (GAC), which is Canada’s Ministry of Foreign Affairs, administers sanctions and maintains the Consolidated Canadian Autonomous Sanctions List. Canada’s Finance Ministry, the Department of Finance, is not involved in sanctions designations, implementation, or enforcement, unlike in the United States, where the Department of the Treasury is the primary administrator of sanctions.

The Parliament of Canada has enacted legislation authorizing the imposition of sanctions through three acts: the United Nations Act; the Special Economic Measures Act (SEMA); and the Justice for Victims of Corrupt Foreign Officials Act (JVCFOA).

The United Nations Act enables GAC to implement sanctions against entities or individuals sanctioned by the UN Security Council. When an act of aggression or a grave breach of international peace occurs and the UN Security Council is unable to pass a resolution, Canada implements autonomous sanctions under SEMA; this act is Canada’s primary law for imposing autonomous sanctions and includes country-based sanctions programs. It is also used to align Canada’s sanctions with those of allies. For example, GAC derived its powers from SEMA to designate Russian entities and individuals in alignment with Canada’s Western allies in 2022. Meanwhile, the JVCFOA allows GAC to impose sanctions against individuals responsible for human rights violations and significant acts of corruption, similar to the Global Magnitsky Human Rights Accountability Act in the United States, with sanctions administered by the Office of Foreign Assets Control.

Once GAC adds entities and individuals to the lists of sanctions, Canadian financial institutions comply by freezing the designated party’s assets and suspending transactions. GAC coordinates with several government agencies to enforce and enable private-sector compliance with sanctions:

FINTRAC: Canada’s financial intelligence unit (FIU)—Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)—is responsible for monitoring suspicious financial activities and collecting reporting from financial institutions on transactions that may be linked to sanctions evasion. FINTRAC is an independent agency that reports to the Minister of Finance. FINTRAC works closely with the US financial intelligence unit—Financial Crimes Enforcement Network (FinCEN)—on illicit finance investigations and when sanctions evasion includes the US financial system. For example, FinCEN and FINTRAC both monitor and share financial information related to Russian sanctions evasion and publish advisories and red flags for the financial sector in coordination with other like-minded partner FIUs.

OSFI: The Office of the Superintendent of Financial Institutions (OSFI) is a banking regulator that issues directives to financial institutions regarding compliance and instructs banks to freeze assets belonging to sanctioned individuals and entities. FINTRAC also shares financial intelligence with OSFI on sanctions evasion activity under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). OSFI shares intelligence with Royal Canadian Mounted Police (RCMP), the national police service of Canada, if there is evidence of sanctions evasion or other financial crimes.

RCMP: Once OSFI notifies RCMP about suspicious activity, RCMP investigates whether the funds are linked to sanctions evasion or other financial crimes. If it finds evidence of a violation of sanctions or criminal activity, RCMP obtains a court order to seize assets under the Criminal Code and the PCMLTFA.

CBSA: Canada Border Services Agency (CBSA) is responsible for blocking sanctioned individuals from entering Canada. CBSA also notifies OSFI if sanctioned individuals attempt to move cash or gold through border crossings.

All four agencies work with GAC and with one another on sanctions enforcement. GAC sets sanctions policy, FINTRAC analyzes financial intelligence and shares suspicious activity reports to inform law enforcement investigations, OSFI enforces compliance in banks, RCMP investigates crimes and seizes assets, and CBSA prevents sanctioned individuals from entering Canada and moving assets across borders.

While financial sanctions are part of Canada’s economic statecraft tool kit, Canadian sanctions power does not have the same reach as US sanctions. The preeminence of the US dollar and the omnipresence of major US banks allows the United States to effectively cut off sanctioned individuals and entities from the global financial system. Canadian sanctions are limited to Canadian jurisdiction and affect individuals and entities with financial ties to Canada, but they do not have the same reach as US financial sanctions.

Nevertheless, Canadian authorities have been able to leverage financial sanctions to support the G7 allies in sanctioning Russia. For example, in December 2022, under SEMA, Canadian authorities ordered Citco Bank Canada, a subsidiary of a global hedge fund headquartered in the Cayman Islands, to freeze $26 million owned directly or indirectly by Russian billionaire Roman Abramovich, who has been sanctioned by Canada and other G7 allies. In June 2023, Canadian authorities seized a Russian cargo jet at Toronto’s Pearson Airport pursuant to SEMA.

Figure 4

Export controls

Canada participates in several multilateral export control regimes, including the Wassenaar Arrangement, Nuclear Suppliers Group, Missile Technology Control Regime, and Australia Group. When multilateral regimes fall short in addressing Canada’s foreign policy needs, Canada leverages its autonomous export control list, which is administered by GAC under the Export and Import Permits Act. The Trade Controls Bureau under GAC is responsible for issuing permits and certificates for the items included on the Export Control List (ECL).

Canada Border Services Agency plays a crucial role in the enforcement of export controls. CBSA verifies that shipments match the export permit issued by GAC. It can seize or refuse exports that violate GAC export permits through ports, airports, and land borders. CBSA refers cases to the Royal Canada Mounted Police (CRMP) for prosecution if exporters attempt to bypass regulations.

Separately, FINTRAC monitors financial transactions that might be connected to the exports of controlled goods and technologies. If FINTRAC detects suspicious transactions, it shares intelligence with GAC and other relevant authorities. Canada’s method of leveraging financial intelligence for enforcing export controls is similar to that of the United States, where FinCEN has teamed up with the Commerce Department’s Bureau of Industry and Security to detect export control evasion through financial transactions.

While in the United States the export controls authority lies within the Commerce Department, Canada’s equivalent, Innovation, Science and Economic Development Canada (ISED), does not participate in administering export controls. That responsibility is fully absorbed by GAC.

While Canada has mainly used its export control authority in the context of sensitive technologies, Canadian politiciansand experts have recently been calling on the federal government to impose restrictions on mineral exports to the United States in response to US tariffs. The United States highly depends on Canada’s minerals, including uranium, aluminum, and nickel. Canada was the United States’ top supplier of metals and minerals in 2023 ($46.97 billion in US imports), followed by China ($28.32 billion) and Mexico ($28.18 billion). Notably, President Trump’s recent executive order called Unleashing American Energy instructed the director of the US Geological Survey to add uranium to the critical minerals list. Canada provides 25 percent of uranium to the United States. If Canada were to impose export controls on uranium, the US objective of building a resilient enriched uranium supply chain would be jeopardized.

However, Canada could not impose export controls on the United States without experiencing significant blowback. Export control is a powerful tool. While US tariffs would increase the price of imported Canadian goods by at least 25 percent, Canada’s export controls would completely cut off the flow of certain Canadian goods to the United States. It would be destructive for both economies, so Canada will likely reserve this tool as a last resort and perhaps work on finding alternative export destinations before pulling such a trigger.

Canada employs restrictive economic measures against Russia

In response to Russia’s unjust invasion of Ukraine in 2022, Canada imposed financial sanctions and export controls against Russia in coordination with G7 allies. To date, Global Affairs Canada has added more than 3,000 entities and individuals to its Russia and Belarus sanctions lists under SEMA. Assets of designated individuals have been frozen and Canadian persons are prohibited from dealing with them. Apart from financial sanctions, Canada imposed export controls on technology and import restrictions on Russian oil and gold. Canada also joined the G7 in capping the price of Russian crude oil at $60 per barrel and barred Russian vessels from using Canadian ports.

To enforce financial sanctions against Russia, FINTRAC joined the financial intelligence units (FIUs) of Australia, France, Germany, Italy, Japan, the Netherlands, New Zealand, the United Kingdom, and the United States to create an FIU Working Group with the mission of enhancing intelligence sharing on sanctions evasion by Russian entities and individuals. Separately, Canada Border Services Agency’s export controls enforcement efforts included the review of more than 1,500 shipments bound to Russia (as of February 2024), resulting in six seizures and fourteen fines against exporters. CBSA continues to work closely with the Five Eyes intelligence alliance to share information about export control evasion.

To disrupt the operation of Russia’s shadow fleet, Canada proposed the creation of a task force to tackle the shadow fleet in March 2025. Such a task force could be useful in addressing the various environmental problems and enforcement challenges the shadow fleet has created for the sanctioning coalition. However, the United States vetoed Canada’s proposal.

Figure 5

Tariffs

Canada’s approach to tariffs is governed primarily by the Customs Act, which outlines the procedures for assessing and collecting tariffs on imported goods, as well as the Customs Tariff legislation that sets the duty rates for specific imports (generally based on the “Harmonized System,” an internationally standardized system for classifying traded products). The Canada Border Services Agency is responsible for administering these tariffs. Additionally, the Special Import Measures Act enables Canada to protect industries from harm caused by unfair trade practices like dumping or subsidizing of imported goods, with the Canadian International Trade Tribunal determining injury and the CBSA imposing necessary duties. The minister of finance, in consultation with the minister of foreign affairs, plays a key role in proposing tariff changes or retaliatory tariffs, ensuring Canada’s trade policies align with its broader economic and diplomatic objectives.

Canada has frequently aligned with its allies on tariff issues, as demonstrated in 2024 when, following the US and EU tariffs, it imposed a 100 percent tariff on Chinese electric vehicles to protect domestic industries. However, Canada has also been proactive in responding to US tariffs, employing a combination of diplomatic negotiations, retaliatory tariffs, and reliance on dispute resolution mechanisms such as the World Trade Organization and USMCA. In the past Canada was also quick to align itself with allies such as the EU and Mexico, seeking a coordinated international response, as was the case in 2018 when the United States imposed a broad tariff on steel and aluminum.

Similar to the United States, Canada offers remission allowances to help businesses adjust to tariffs by granting relief under specific circumstances, such as the inability to source goods from nontariffed countries or preexisting contractual obligations. The Department of Finance regularly seeks input from stakeholders before introducing new tariffs. In 2024, a thirty-day consultation was launched about possible tariffs on Chinese batteries, battery parts, semiconductors, critical minerals, metals, and solar panels, though it has yet to result in any new tariffs.

Canada’s primary weakness regarding tariffs is its lack of trade diversification. The United States accounts for half of Canada’s imports and 76 percent of its exports. This dependency severely limits Canada’s ability to impose tariffs on the United States without facing significant economic repercussions. Canada’s relatively limited economic leverage on the global stage also complicates efforts to coordinate multilateral tariff responses or to negotiate favorable trade agreements. Furthermore, Canada’s lengthy public consultations and regulatory processes for implementing tariffs hinder its ability to leverage tariffs as a swift response to changing geopolitical or economic circumstances.

Figure 6

Investment screening

Canada’s investment screening is governed by the Investment Canada Act (ICA), which ensures that foreign investments do not harm national security while promoting economic prosperity. The ICA includes net benefit reviews for large investments and national security reviews for any foreign investments which pose potential security risks, such as foreign control over critical sectors like technology or infrastructure.

The review process is administered by ISED, with the minister of innovation, science, and industry overseeing the reviews in consultation with Public Safety Canada. For national security concerns, multiple agencies assess potential risks, and the Governor-in-Council (GIC) has the authority to block investments or demand divestitures.

Criticism of the ICA includes lack of transparency and consistency, particularly in national security reviews, where decisions may be influenced by political or diplomatic considerations. To better mitigate risks to security, critical infrastructure, and the transfer of sensitive technologies, experts have argued that the ICA should more effectively target malicious foreign investments by incorporating into the review process the perspectives of Canadian companies on emerging national security threats. In response to these concerns, Bill C-34 introduced key updates in 2024, including preclosing filing requirements for sensitive sectors, the possibility of interim conditions during national security reviews, broader scope covering state-owned enterprises and asset sales, consideration for intellectual property and personal data protection, and increased penalties for noncompliance. In March 2025, further amendments were made to the ICA, expanding its scope to review “opportunistic or predatory” foreign investments. These changes were introduced in response to the United States’ imposition of blanket tariffs on Canadian goods.

Figure 7

Positive economic statecraft

Apart from coercive/protective tools, Canada maintains positive economic statecraft (PES) tools such as development assistance to build economic alliances beyond North America. For example, Canada is one of the largest providers of international development assistance to African countries. After Ukraine, Nigeria, Ethiopia, Tanzania, and the Democratic Republic of the Congo were the top recipients of Canada’s international assistance. Canada’s PES tools lay the ground for the federal governments to have productive cooperation when needs arise. Canadian authorities should leverage PES tools to enhance the country’s international standing and increase economic connectivity with other regions of the world. This is especially important amid the US pause on nearly all US foreign assistance. Canada could step up to help fill the vacuum in the developing world created by the Trump administration’s radical departure from a long-standing US role in foreign aid.

Canadian authorities have already taken steps in this direction. On March 9, Canadian Minister of International Development Ahmed Hussen announced that Canada would be providing $272.1 million for foreign aid projects in Bangladesh and the Indo-Pacific region. The projects will focus on climate adaptation, empowering women in the nursing sector, advancing decent work and inclusive education and training. Earlier, on March 6, Global Affairs Canada launched its first Global Africa Strategy with the goal of deepening trade and investment relations with Africa, partnering on peace and security challenges, and advancing shared priorities on the international stage including climate change. Through this partnership, Canada plans to strengthen economic and national security by enhancing supply chain resilience and maintaining corridors for critical goods.

Conclusion

Canada’s federal government maintains a range of economic statecraft tools and authorities to address economic and national security threats. While regional factionalism and provincial equities can hinder the federal government’s ability to leverage the full force of Canada’s economic power, threats to Canada’s economic security, including tariffs from the United States, may prove to further unite and align the provinces. The federal government and provincial premiers should work together to meet this challenging moment, consolidating Canada’s sources of economic power and moving forward with a cohesive economic statecraft strategy to protect the country’s national security and economic security interests.

Canada’s leadership and engagement in international fora including the G7, NATO, Wassenaar Agreement, among others, as well as its bilateral relationships, make it well-placed to coordinate and collaborate with Western partners on economic statecraft. Information sharing, joint investigations, multilateral sanctions, and multilateral development and investment can extend the reach of Canada’s economic power while strengthening Western efforts to leverage economic statecraft to advance global security objectives and ensure the integrity of the global financial system. Canada also has a solid foundation for building economic partnerships beyond the West through development assistance and other positive economic statecraft tools.

About the authors

Staff

Kimberly Donovan

Associate Director, Economic Statecraft Initiative

Digital Currencies Economic Sanctions

Staff

Maia Nikoladze

Program Assistant, Economic Statecraft Initiative

Digital Currencies Eastern Europe

Staff

Lize de Kruijf

Dutch Economic Sanctions

The authors would like to thank Nazima Tursun, a young global professional at the Atlantic Council’s Economic Statecraft Initiative, for research support.

The report is part of a year-long series on economic statecraft across the G7 and China supported in part by a grant from MITRE.

Explore the program

The post Canada needs an economic statecraft strategy to address its vulnerabilities appeared first on Atlantic Council.

If Trump wants peace in Ukraine, he must increase the pressure on Putin

Doug Klain — Thu, 27 Mar 2025 01:52:25 +0000

For months, US President Donald Trump and allies such as Senator Lindsey Graham have stated that if Russian President Vladimir Putin rejects peace efforts, the United States will impose new sanctions to bring Russia to the negotiating table. So far, however, the Kremlin has refused to join Ukraine in accepting a US-proposed ceasefire. Instead, Putin has this week demanded sanctions relief in exchange for a limited maritime ceasefire that favors Russia. It may now be time to consider putting more pressure on Moscow.

Putin certainly does not appear to be very interested in ending the war. Since agreeing to a pause on energy infrastructure attacks during a March 18 call with Trump, he has launched multiple large-scale drone and missile bombardments of Ukrainian civilian and energy targets.

If the US uses sanctions alone to pressure Putin, the impact will not be felt immediately. In order to get the Russian leader’s attention, new sanctions must be paired with tougher enforcement of existing sanctions and expanded military assistance to put Ukraine in a better position on the battlefield. More than anything else, the military reality on the ground in Ukraine is the deciding factor in efforts to end the war. Luckily, this is the area where Trump has the greatest ability to shape perceptions.

Republicans in Congress have shown an interest in expanding sanctions against Russia, particularly in going after Moscow’s energy revenues while boosting US energy exports to cut into Putin’s war chest. Any legislation to make good on these objectives should also include new appropriations for the Presidential Drawdown Authority so that Trump can send armored vehicles, long-range fires, air defenses, and more to Ukraine, while also backfilling US stocks with new replacements.

Legislative steps could also include funding for the Ukraine Security Assistance Initiative. This would allow the president to issue contracts for new weapons that will benefit Ukraine, while creating jobs for US manufacturers and revitalizing the domestic defense industrial base.

Stay updated

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

Passing new military assistance would send a much-needed signal of resolve after two months of softball tactics from the Trump administration toward Russia. A record high number of Americans currently think Trump is doing too little to help Ukraine and believe he is siding with Russia. Trump’s Special Envoy Steve Witkoff recently added to these concerns by uncritically repeating a series of false narratives used by the Kremlin to justify the invasion of Ukraine during an interview with Tucker Carlson.

Members of Trump’s team have already outlined arguments in favor of more military aid to Ukraine. Last April, Special Envoy for Ukraine Keith Kellogg wrote that if Kyiv wouldn’t come to the table for talks, the US should withhold military assistance, while if Russia refused to negotiate, aid to Ukraine should be increased. Trump has since followed through on cutting aid to Ukraine, but resumed deliveries after Kyiv declared it was ready to accept Trump’s proposal for an unconditional ceasefire.

With Ukraine now backing Trump’s ceasefire proposal while Putin keeps finding new reasons to delay, it is difficult to avoid the conclusion that Russia is the main obstacle to peace. The recently announced ceasefire in the Black Sea is far from Trump’s original proposal, with the Russians requiring sanctions relief before implementing it. Putin has sought to introduce his own ceasefire conditions, while also demanding “the complete cessation of foreign military aid and the provision of intelligence information to Kyiv.” This would leave Ukraine isolated and disarmed in exchange for a pause in the fighting.

Trump should respond to Putin’s stalling tactics by following the recommendations of his own secretary of state, who said back in January that Ukraine needed greater leverage over Russia. That means changing Putin’s calculus on the battlefield and stopping the Russian military’s grinding advances.

Eurasia Center events

John Herbst: Coddling Russia only encourages Putin to continue his war

Drones, defense, and diplomacy: Negotiations and the battlefield in Ukraine

Conflict Defense Technologies Europe & Eurasia Politics & Diplomacy

Strengthening Ukraine’s position on the battlefield could be politically advantageous for Trump. Former US President Joe Biden was long criticized for his flawed approach to providing Ukraine with military assistance. As a result of Biden’s cautious policies, Ukraine received enough to survive but not to win.

Trump could now correct Biden’s mistake by making an historic presidential drawdown and surging military assistance to Ukraine in order to bring Russia to the table. He could also use the REPO Act to make Russia’s own frozen assets pay for any new aid, an idea Speaker Mike Johnson has previously called “pure poetry.”

Russia is not yet ready to enter into serious peace talks, but Putin is in a vulnerable position. He is sacrificing huge numbers of soldiers for modest gains in Ukraine, and is struggling to replace the large quantities of military equipment being lost in costly frontal offensives. Domestically, the Russian economy is showing signs of strain, with high inflation and a shortage of workers.

Despite this deteriorating outlook, Putin is still betting that he can outlast the West in Ukraine. With continued US support for Ukraine in question and deep divisions emerging within the transatlantic alliance, he now has less reason than ever to compromise.

In Trump’s book, The Art of the Deal, he argues that the best way to negotiate is to “just keep pushing and pushing and pushing to get what I want.” So far, we’ve seen the president exert massive pressure on Ukraine by pausing aid, siding with Moscow at the UN, and even calling Zelenskyy a dictator. We’ve yet to see similar pressure on Russia.

Putin’s approach to negotiations currently resembles The Art of the Deal far more than Trump’s. The Russian dictator is pushing and pushing for further concessions, while offering very little in return. If Trump wants to achieve a genuine peace, he will need to put far more pressure on Moscow. Increased sanctions are a necessary step, but giving Ukraine the weapons it needs to push Russia back on the battlefield will likely prove far more effective.

Doug Klain is a nonresident fellow at the Atlantic Council’s Eurasia Center and a policy analyst for Razom for Ukraine, a US-based nonprofit humanitarian aid and advocacy organization.

There’s a right way to lift sanctions on Russia. Follow these Dos and Don’ts.

Daniel Fried, Kimberly Donovan — Wed, 26 Mar 2025 20:22:01 +0000

The United States has a long history of leveraging economic power and restrictive economic measures to advance its national security objectives. It also has a history of offering sanctions relief as a bargaining tool in negotiations to achieve its desired end states. Sanctions and the economic pain they inflict can effectively bring an adversary to the negotiating table, and sanctions relief can often get the adversary to agree to a deal.

After three years of increasingly restrictive sanctions targeting Russia over its unlawful invasion of Ukraine, Russia is feeling the pain. Its economic growth is minimal, and it has retracted into a “wartime economy” that is driven by military spending and government support. Annual inflation remains high, holding at 10 percent as of February. For comparison, a healthy inflation rate is generally between 2 percent and 3 percent per year. The Central Bank of the Russian Federation held interest rates at an all-time-high 21 percent in February. Russia is having trouble selling its oil as a result of sanctions and the expiration of General License 8L earlier this month, which makes it even more difficult to buy Russian oil without risking exposure to secondary sanctions.

The sanctions are working, and Russia’s economy is in a downturn. Moreover, despite Russian success in driving Ukrainian forces out of most of Russia’s Kursk region, Ukraine is holding off Russian advances and inflicting serious casualties. In short, the United States, its Group of Seven (G7) partners, and Ukraine have the upper hand in negotiations to end the war. They should use it.

As the Trump administration pursues a deal with Russian President Vladimir Putin, US President Donald Trump must determine which US sanctions should be eased or lifted and when that sanctions relief should come as part of a negotiated peace settlement. To ensure Trump can negotiate peace from a position of strength and to hold Putin accountable to his end of the deal, we offer the following do’s and don’ts of lifting US sanctions on Russia.

Don’t give something for nothing

Do not lift or offer to lift sanctions to generate “goodwill.” Russia will pocket concessions and consider them a sign of weakness, emboldening Moscow to make further demands. Don’t lift any sanctions in advance of full and verified Russian adherence to the terms of a cease-fire. Russian attacks on Kyiv with Iranian-made drones this past weekend and ahead of cease-fire talks in Riyadh further demonstrate why sanctions should stay in place.

Do suggest that lifting sanctions would be part of a settlement

Teasing and offering in general can be useful. But see above.

Do intensify sanctions

The United States should ramp up some sanctions, especially against the Russian oil tanker “ghost fleet,” if Russia continues to slow-walk negotiations—for example, by resisting a cease-fire or adding unacceptable conditions to it.

Don’t lift all sanctions until Russia is out of Ukraine altogether

Some sanctions, including those related to sensitive technology and energy, should remain in place as long as Russia is illegally occupying Ukrainian territory.

Do ease sanctions on individuals

Lifting individual sanctions can be a high-profile but substantively less impactful early move. Continued vigilance on Russian oligarchs, disguised Russian investment, and hidden assets is important. A corollary to this: do not weaken financial transparency and anti-money laundering rules or let oligarchs use US cutouts for their holdings.

Do develop a plan for gradually easing financial restrictions and Russia’s reentry into SWIFT and the global financial system

Include measurable and verifiable benchmarks connected to cease-fire terms. At a minimum, this includes returning Ukrainian children to their Ukrainian families, releasing prisoners of war, halting overt or covert attacks against Ukraine and its allies, and establishing benchmarks to disconnect Russian payment systems and channels from sanctioned regimes such as Iran, North Korea, Venezuela, Cuba, and China.

As we have discussed in our analysis of the Axis of Evasion, Russia is working with China, Iran, North Korea, and other US adversaries to generate revenue, move funds across borders, and develop alternative payment systems. If Russia is to fully reengage in the US-led global financial system, then it must financially detach itself from these alternative payment systems and regimes sanctioned by the United States. Easing restrictions on access to Western financial systems, investment, and lending is a high-impact concession that should be left until late in the process, only after Russia has demonstrated its commitments to the outlined terms.

Reconnecting Russia with the Society for Worldwide Interbank Financial Telecommunication, known as SWIFT, will require the removal of European Union (EU) sanctions on Russian banks. SWIFT is headquartered in Brussels, within EU jurisdiction, and it must comply with EU laws and sanctions. For the United States to gradually ease financial restrictions, and for Russia to reenter SWIFT and reestablish corresponding banking relationships, the EU will need to be involved in coordination and synchronization.

Do go slow on lifting energy sanctions, and don’t lift all of them

Trump has long appreciated the danger of reliance on Russian energy and Nord Stream 2. The Europeans and even the Germans finally agree. The United States and its allies should retain restrictions on Russian energy exports sufficient to:

keep the pressure on Russia to adhere to all elements of a Ukraine deal;
after that, maintain Europe’s hard-won energy independence from Russia, and
allow the United States to replace Russia, especially as a supplier of liquefied natural gas (LNG).

The United States should retain European markets, and Russia should chase lower-value Asian markets with more expensive transportation legs. The United States should maintain sanctions on the Russian oil and LNG sectors, including oil field services and refining technology, until late in the process. US negotiators determining when to lift energy-related sanctions on Russia should consider Trump’s strategy to advance US energy dominance. Russia is an energy competitor to the United States. The White House lifting restrictions on Russian oil too early or by too much could work against US plans for advancing energy dominance.

Do make the easing of sanctions reversible

The Trump administration should put in place “snap-back” provisions and avoid dependence on Russian supplies or inputs, including enriched uranium. Snap-back provisions can be used to hold Russia accountable should it break a cease-fire agreement or peace deal.

Don’t lift high-tech export controls

Do not ease Russia’s ability to upgrade military equipment, energy, artificial intelligence (AI), or any other technology. Maintain technology advantages. As a result of sanctions, Russia relies heavily on China and India to procure the sensitive technology that it needs on the battlefield and to support its economy. The United States, through sanctions, export controls, diplomacy, and enforcement actions has put pressure on China and India for their support of Russia. Easing restrictions on technology will embolden China and runs the risk of creating additional export controls enforcement challenges should Russia provide sensitive Western technology to Beijing. Determinations on lifting technology sanctions on Russia must consider the United States’ technology and innovation equities as well as US dominance in AI.

Do engage with the US private sector

A divergence in sanctions toward Russia between the United States and the G7 sanctioning coalition partners will create significant compliance challenges for many US-owned and controlled multinational corporations, financial institutions, and investors. The private sector is the pointy end of the spear in economic statecraft, and the administration should seek its input. The United States changing its sanctions policies toward Russia will have significant impacts on the financial, energy, and technology sectors.

Further, the administration should engage with the private sector to better understand the challenges businesses faced when they vacated Russia or wound down their operations there. Many companies faced heavy fines, lawsuits, harassment of their employees, and other forms of retribution. The private sector’s concerns and equities should be accounted for when considering lifting sanctions.

Do hold the immobilized Russian assets as surety for Ukraine’s reconstruction

After Russia’s full-scale invasion of Ukraine in 2022, G7 partners immobilized nearly $300 billion worth of Russian sovereign assets held across multiple jurisdictions. These assets should not be returned to Russia. The best option would be for Washington and its allies to confiscate the assets for Ukraine’s reconstruction and further military support for Ukraine. At a minimum, G7 countries should retain control over the assets as surety for a Russian contribution to Ukrainian reconstruction and adherence to the terms of a cease-fire. The majority of the immobilized funds are held in Europe and therefore the United States must continue to coordinate with Europe on this issue. The interest generated by the immobilized assets is currently providing the income stream repaying the fifty-billion-dollar loan that the United States and Western allies provided to Ukraine in late 2024. The United States and its Western allies would be exposed to liability for the fifty billion dollars should the immobilized funds be released and the principal given to Russia.

The economic pressure and restrictive measures the United States and its partners placed on Russia have given them the upper hand. If Russia is ready to negotiate and make a deal that secures Ukraine’s future and safety, they should strategically play their hand and consider the dos and don’ts of lifting sanctions. The stakes are too high to fall for Putin’s bluff and fold.

Daniel Fried is the Weiser Family distinguished fellow at the Atlantic Council. He is also on the board of directors of the National Endowment for Democracy and a visiting professor at Warsaw University. Fried served for forty years in the US Foreign Service. He is a former US ambassador to Poland, assistant secretary of state for Europe, and coordinator of sanctions policy. Follow him on X @AmbDanFried.

The post There’s a right way to lift sanctions on Russia. Follow these Dos and Don’ts. appeared first on Atlantic Council.

Experts react: What to know about the US-led Black Sea cease-fire deal with Russia and Ukraine

Atlantic Council experts — Tue, 25 Mar 2025 22:49:38 +0000

A sea change? On Tuesday, the White House announced that Russia and Ukraine have agreed to a cease-fire on the Black Sea and to hammer out the details of a pause on attacking each other’s energy infrastructure. This deal marks the next step in US President Donald Trump’s fast-moving efforts to bring an end to Russia’s war in Ukraine, following his call with Russian President Vladimir Putin on March 18. However, notable differences between the US and Russian readouts of the talks—especially with Russia saying the cease-fire will not begin until certain US sanctions are lifted—may indicate choppy waters ahead. Below, Atlantic Council experts navigate us through what to know about the deal and what’s on the horizon.

Click to jump to an expert analysis:

Matthew Kroenig: Trump’s efforts are pushing forward down the road to peace

Kimberly Donovan: To lift sanctions on Russia, the US must not leave its G7 partners out in the cold

Michael Bociurkiw: Ukraine’s coast feels first-hand the threat of Russian missiles and drones

Daniel Fried: The US risks falling down a rabbit hole of concessions to Russia

Maia Nikoladze: Real security on the Black Sea requires addressing Russia’s shadow fleet

Kimberly Talley: Stability in the Black Sea is good for the world, but will this deal deliver it?

Arnold Dupuy: The US has a stronger hand in talks with Russia if it works with its European allies

Coddling Russia only encourages Putin to continue his war

The results from several days of US shuttle diplomacy in Riyadh are in and they are meager. The United States was hoping to nail down an agreement for a cease-fire between Ukraine and Russia at sea. This would be a useful step, but not a major one, because the Black Sea has not seen major kinetic activity for nearly two years as Ukraine won the battle at sea when its naval drones chased the Russian Black Sea Fleet out of Crimea and into the eastern Black Sea. But the Trump administration sought this deal because the Kremlin has made clear that it would not agree to the general cease-fire that Kyiv accepted two weeks ago. Putin’s objective is to string out the negotiations because he wants to conquer more Ukrainian territory.

Unfortunately, the Trump team, in its effort to persuade the Kremlin to accept the naval cease-fire, offered more concessions. These include, according to the White House, US help to “restore Russia’s access to the world market for agricultural and fertilizer exports, lower maritime insurance costs, and enhance access to ports and payment systems for such transactions.” These are major concessions for what should be low-hanging fruit to the aggressor who refused Trump’s proposal for a general cease-fire.

The official Russian statement clearly conditioned the implementation of the cease-fire on the lifting of multiple sanctions. The problem is that major sanctions relief would be a shot in the arm for the stumbling Russian economy—making it easier for Putin to continue the land war he refuses to end. I think Trump still wants an early cease-fire to establish a durable peace. To do that, he needs to change tactics and do what he promised in the first week of his new term: bring the hammer down on the Kremlin.

—John E. Herbst is the senior director of the Atlantic Council’s Eurasia Center and a former US ambassador to Ukraine.

Trump’s efforts are pushing forward down the road to peace

Many question Trump’s tactics, but there is no denying the results. Europe was more peaceful and secure during Trump’s first term than before and after. The Trump administration is now working hard to bring the largest war in Europe since World War II to a close. Many foreign policy experts say they would be doing it differently, but the proof is in the pudding. If the war in Ukraine can be wound down in the coming months—a possible if not likely outcome—this will be a major foreign policy achievement. In that context, today’s announcement is a step toward circumscribing the conflict on the road to eventual peace.

—Matthew Kroenig is vice president and senior director of the Atlantic Council’s Scowcroft Center for Strategy and Security.

To lift sanctions on Russia, the US must not leave its G7 partners out in the cold

There is a critical distinction between the US and Russian versions of the “Outcomes of the US and Russia Experts Groups on the Black Sea.” Notably, the Russian version outlines that Moscow’s adherence to the terms is contingent on lifting sanctions on certain financial institutions, re-connecting those institutions to the Society for Worldwide Interbank Financial Telecommunication (SWIFT) messaging service and opening correspondent accounts, and removing restrictions on trade finance, among other requirements. These contingencies are not included in the statement released by the White House.

Clearly, lifting sanctions was discussed in the meetings in Riyadh. However, lifting sanctions on Russian financial institutions and reconnecting Russian banks to SWIFT is not that easy and will require the agreement of foreign partners. The European Union (EU), the United Kingdom, Japan, Canada, Switzerland, Australia, and others in the Group of Seven (G7) sanctioning coalition maintain sanctions on Russian banks. This includes Rosselkhozbank (Russian Agricultural Bank), which is one of the banks Russia demands sanctions be removed from as part of the agreement. If the United States unilaterally lifts sanctions on Russian financial institutions, then it will create massive compliance challenges for the global financial system and US banks that operate around the world. Further, SWIFT disconnected a select number of Russian banks because they were designated by the EU. SWIFT is headquartered in Belgium, within the EU’s jurisdiction, and it has to follow EU law and sanctions compliance measures.

If the terms that were agreed to are dependent on the lifting of sanctions, the United States needs to coordinate with its G7 coalition partners and seek their agreement on the collective way forward.

Ukraine’s coast feels first-hand the threat of Russian missiles and drones

ODESA—The devil is in the details of the deal. Now it appears that, in true Russian style, harsh preconditions have been demanded before the Black Sea “deal” can be implemented—the most important of which for Moscow is to reconnect the state-owned Russian Agricultural Bank to SWIFT and for the free flow of Russian fertilizer and agricultural products to world markets.

An Odesa port worker is sitting in front of me as I write this. As he explained, an important aim for Ukraine is to lift the threat of Russian missile and drone attacks on foreign-flagged vessels and local port infrastructure. At least three ships have been hit in recent weeks—most recently a Barbados-flagged bulk carrier was struck, resulting in the death of four foreign seafarers. He showed me photos of significant damage to port cranes.

On the back of that conversation, there’s also a need for Ukraine’s closest partners—namely Poland and Turkey—to give the war-torn country a break. Turkey should allow direct passage of commercial ships from Ukraine without trying to fleece operators from their voyages. And Poland, supposedly a best friend of Ukraine but one of the largest European purchasers of Russian fertilizer, should aim to diversify its sources to avoid funding the Russian war machine.

—Michael Bociurkiw is a nonresident senior fellow at the Atlantic Council’s Eurasia Center.

The US risks falling down a rabbit hole of concessions to Russia

The parallel talks in Riyadh between the United States and Russia on one hand, and the United States and Ukraine on the other, produced little of use to Ukraine but something of use to Russia: agreement that the United States will lift restrictions on Russian agricultural exports, including by lifting certain sanctions. Russia’s statement on the talks makes clear that US action to lift certain sanctions is a precondition for the Black Sea cease-fire that the United States has touted as an achievement.

It is not clear how much the US concessions that Russia seems to have obtained will mean in practice. Sanctions on Russian agricultural exports have not been a US priority, for good reason. But the one-sided advantage to Russia does little to advance the thirty-day comprehensive cease-fire the Trump administration had sought. Instead, Russia appears to be stalling, blunting the former US threats of pressure on Russia to stop the fighting. The United States risks being sucked down a rabbit hole of concessions, easing pressure on Russia while Russian forces continue to attack Ukrainian cities and civilians. Today’s deal is no peace through strength.

—Daniel Fried is the Weiser Family distinguished fellow at the Atlantic Council and a former US ambassador to Poland.

Real security on the Black Sea requires addressing Russia’s shadow fleet

As the United States continues to engage with Russia on energy and maritime agreements, the future of Russia’s shadow fleet should be a key aspect of negotiations. Russia’s shadow fleet, which includes about 1,300 aging and poorly maintained vessels, was responsible for the shipping of 78 percent of Russia’s seaborne crude oil in 2024. Apart from facilitating Russia’s sanctions evasion, the shadow fleet poses a grave environmental danger to the Black Sea and international waters, and it is disrupting the global maritime and shipping industry.

In December 2024, two Russian oil tankers collided off the coast of Russia-annexed Crimea, spilling more than nine thousand tons of heavy toxic fuel oil and leading to a state of emergency in Crimea. The shipping industry raised concerns about the risk of collisions with Russia’s shadow fleet tankers in open sea lanes. Some European authorities have moved on to confiscating Russia’s shadow fleet vessels floating near their coastlines. On March 21, Germany confiscated the oil tanker Eventin along with some $43.3 million worth of oil on it. While Moscow denied connection with the tanker, it is believed to be a part of Russia’s shadow fleet.

As the United States engages with Russia over a cease-fire and peace deal, it should also support its allies’ efforts in countering Russia’s shadow fleet. As part of this effort, the United States should support Canada’s proposal in the G7 to create an international task force to tackle Russia’s shadow fleet.

—Maia Nikoladze is an associate director within the GeoEconomics Center.

Stability in the Black Sea is good for the world, but will this deal deliver it?

A Black Sea deal is, in theory, for the global good. Instability in the Black Sea region threatens the security of every Black Sea littoral state and the Euro-Atlantic region more broadly, with shockwaves reverberating across issues such as food security, economic stability, and the energy sector. As a maritime conduit, the Black Sea transported up to 90 percent of Ukraine’s pre-war agricultural exports to Europe, Asia, and Africa. And while the Turkey-brokered Black Sea Grain Initiative was in effect between July 2022 and July 2023, 65 percent of wheat exports targeted developing countries. The Turkish Straits, connecting the Black Sea with the Mediterranean Sea, are a major chokepoint for world oil. Black Sea ports are one of the primary export routes for crude oil and oil products from Russia, Azerbaijan, and Kazakhstan. As such, the Black Sea region represents a critical geostrategic crossroads between Europe, Eurasia, and the Middle East.

However, not every deal will stand the test of time, and longevity is of critical concern for this one. A critical difference between the two sides comes in clause 2 of the Kremlin’s statement, which directly calls for sanctions relief via the restoration of Russia’s access to the world market—an assertion notably absent from the statement from the White House. Further, while Ukrainian President Volodymyr Zelenskyy said on Tuesday that Ukraine had agreed for the agreement to take effect immediately, the Kremlin’s statement hinges the cessation of Black Sea hostilities on the removal of sanctions. These discrepancies are front and center for all to see via public statements and call into question what other differences may still prove barriers to peace behind closed doors.

—Kimberly Talley is an assistant director with the Transatlantic Security Initiative (TSI) at the Atlantic Council’s Scowcroft Center for Strategy and Security.

The US has a stronger hand in talks with Russia if it works with its European allies

For a Ukraine cease-fire to succeed, the United States and the European Union (EU) must work together, a potentially difficult ask in the current transatlantic environment.

There are many unanswered questions. For instance, the Kremlin’s demands for a cease-fire in Ukraine include lifting some sanctions and getting Russian banks reinstated to SWIFT. However, the EU was not a party to the negotiations in Saudi Arabia, and there’s no indication that it is willing to lift its own sanctions on Russia. Considering the European attitude toward the Trump administration these days, getting Brussels to go along may be a challenge.

We should anticipate additional details in the days to come, to include more definition on Western security guaranties to Ukraine, a general plan for its reconstruction, and assurances to the other Black Sea states. All of this will require collaboration between the United States and Europe, which are experiencing a period of increasing tensions.

Russia is negotiating from a position of relative strength. It has no strong incentive to engage in a cease-fire, and it will likely drag out negotiations while undermining Ukrainian security. The Kremlin has a poor record of honoring its previous agreements with Ukraine, so it’s difficult to be optimistic. The hope is that the Trump administration has a mechanism to pressure Russia in the likely event of renewed hostilities.

—Arnold C. Dupuy is a nonresident senior fellow at the Atlantic Council IN TURKEY.

The post Experts react: What to know about the US-led Black Sea cease-fire deal with Russia and Ukraine appeared first on Atlantic Council.

Donovan interviewed for the Public Key Podcast on the role of cryptocurrencies in global sanctions

irosales — Tue, 25 Mar 2025 01:29:34 +0000

Listen to the full podcast here

The post Donovan interviewed for the Public Key Podcast on the role of cryptocurrencies in global sanctions appeared first on Atlantic Council.

O’Toole interviewed by the Institute for Financial Integrity for a podcast on the convergence of sanctions and financial crimes

irosales — Tue, 25 Mar 2025 01:28:27 +0000

Listen to the full podcast here

The post O’Toole interviewed by the Institute for Financial Integrity for a podcast on the convergence of sanctions and financial crimes appeared first on Atlantic Council.

Donovan and Nikoladze cited by Modern Diplomacy on US sanctions on Iranian oil

irosales — Tue, 25 Mar 2025 01:28:03 +0000

The post Donovan and Nikoladze cited by Modern Diplomacy on US sanctions on Iranian oil appeared first on Atlantic Council.

Tabaqchali in London School of Economics: the empire strikes back: Trump 2.0 and Iraq’s dollar accounts at the federal reserve

Atlantic Council — Tue, 18 Mar 2025 15:43:25 +0000

The post Tabaqchali in London School of Economics: the empire strikes back: Trump 2.0 and Iraq’s dollar accounts at the federal reserve appeared first on Atlantic Council.

Enough carrots for Putin. For better negotiations, serve ‘maximum pressure’ instead.

Benjamin L. Schmitt, Richard L. Morningstar, and Daniel Fried — Mon, 17 Mar 2025 22:18:00 +0000

The United States, Ukraine, the European Union, and the Russian Federation have been riding a diplomatic rollercoaster for the past month, with the announced March 18 call between US President Donald Trump and Russian President Vladimir Putin the next turn ahead. Amid the furious pace, chances for a sustainable peace in Ukraine remain very much in question. In particular, the past few weeks have witnessed a flurry of shuttle diplomacy by the Trump administration, with Secretary of State Marco Rubio and National Security Advisor Mike Waltz securing an agreement for an immediate thirty-day cease-fire from top Ukrainian government officials in meetings held in Riyadh. The next step is up to the Kremlin. And so far, Putin seems content to allow progress to slow to a glacial pace.

Putin has effectively—though not yet formally—rejected the US and Ukrainian offer of an immediate thirty-day cease-fire. He is raising conditions untenable for the Ukrainian side and inimical to a sustained settlement while he attempts to claim to be an adherent of “peace.” Far from preparing to halt his unprovoked aggression toward his democratic neighbor, Putin has returned to calls to address the “root causes of the crisis,” by which he appears to mean Ukraine’s independence from Moscow. At the same time, he is publicly lobbying the United States and Europe to abandon Ukraine.

Trump may yet convince Putin to agree to an immediate, unconditional cease-fire. If he does not, the United States should increase pressure to force Putin to the negotiating table and accept terms essential to a sustainable peace, including Ukraine’s long-term security. To start with, the administration should turn up the pressure on the Kremlin via comprehensive sanctions and technology export controls that target Russia’s main economic lifeline: energy exports.

The United States ought to be seeking to replace Russia on world energy markets, not allowing Russia to come back.

The Trump administration should deploy a “maximum pressure” approach, especially on energy, since Russia’s oil and gas revenues continue to play an outsized role in Moscow’s ability to fund its military aggression in Ukraine. Given the domestic cashflow challenges already plaguing Moscow, a broader swath of energy sanctions and controls on oil field service technologies, if aggressively and comprehensively enforced, could help create the level of pressure required. And the administration has options.

The Trump White House has a wide menu available to continue to mount energy sanctions and restrictions on Putin’s Kremlin, and it appears to have taken the first step toward such a strategy in the past few days. On March 12, the US Department of the Treasury Office of Foreign Assets Control (OFAC) allowed the expiration of a temporary general license that had been provided by the Biden administration for firms to continue to process transactions related to energy purchases with a set of Russian financial institutions. This loophole has been open in various forms since just after Russia’s full-scale invasion began in February 2022, and it is finally (and mercifully) now closed, restricting a key conduit for Russia to financially benefit from its energy exports.

First and foremost, the Kremlin-backed Nord Stream 1 and Nord Stream 2 natural gas pipelines must be a priority for the White House. Headlines related to their possible revival continue to appear, but the Trump administration should work to prevent their reestablishment. One way to do this would be for the White House to issue an executive order levying permanent blocking sanctions against Russian energy export pipelines, such as the pair of Nord Stream and TurkStream projects. These sanctions could also apply to the Yamal-Europe pipeline and other similar Kremlin-backed schemes, as well as Russian liquefied natural gas export terminals and vessels. The United States ought to be seeking to replace Russia on world energy markets, not allowing Russia to come back.

The administration, led by OFAC and the US intelligence community, should also intensify efforts to track, identify, and designate all vessels that are shown to be a part of Russia’s so-called “shadow fleet” of underinsured, sanctions-and-price-cap-busting oil tankers. The push to sanction Putin’s shadow fleet has been underway for some time, but due to the scale of the fleet, enforcement has consistently been behind the curve.

The United States (as well as the European Union and United Kingdom) should impose sanctions on all additional vessels from the shadow fleet that it can identify—and deploy secondary sanctions against ports that receive them. For Russia to replace its sanctioned tankers with new “shadow fleet” tankers through secondary-market purchases would likely take time and resources. Moscow is unlikely to put that much capital at risk, especially if it believes the United States might quickly add those tankers to the OFAC target list as well.

But it’s not enough to go after just the shadow fleet. Should shadow-fleet-tanker listings force Russia to become more reliant on mainstream tankers, Moscow may attempt to defraud those vessels into carrying cargoes priced above the sixty-dollars-per-barrel price cap by continuing to provide fraudulent price attestations. Under the price cap, mainstream tanker owners in the Russia trade are required to receive a price attestation from a trader handling the trade, but not the underlying contracts, which many trading counterparties would refuse to divulge.

To reduce the risk of attestation fraud, OFAC could develop a “white list” of well-established oil traders with high levels of exposure to and legal accountability in the United States. OFAC would then require that mainstream tankers only lift Russian oil if a white-listed trader is handling the sale and providing the price attestation. This would put additional pressure on Russia to sell its oil through white-listed traders when using mainstream vessels.

As another maximum pressure option, the United States could borrow an idea from the sanctions regime on Iran. One of its most aggressive features was the demand, originally in legislation, that Iran’s oil customers reduce their purchases every six months, backed up by the threat of severe financial sanctions, including against the purchasing country’s central banks. The United States could introduce a similar regime against Russian oil sales, keeping in mind the need not to risk a spike in global oil prices by forcing too much Russian oil off the market and, hopefully, in coordination with other oil producers, such as Saudi Arabia.

These energy sanctions could be coupled with additional financial sanctions. The United States and Europe acted gradually to impose financial sanctions on Russia’s big state banks and some private banks, along with sectoral sanctions on technology and some Russian companies. This creates a complex sanctions regime in which some trade and finance is banned but much remains allowed, with gray areas and loopholes. The United States, acting with Europe, should consider a general financial embargo and even a trade embargo on Russia, with specified categories of permitted trade and related finance, such as medicine, limited energy, food, and other transactions. In addition, sanctions on high-tech energy and other technologies—especially those that could be repurposed to support Russian military supply chains—should be deepened to the greatest extent possible, backed up with the threat of secondary sanctions.

To help with all this, the Trump administration should significantly scale up executive branch staffing on sanctions monitoring, targeting, and enforcement through a reallocation of existing personnel or external hires. Additionally, the administration should foster public-private partnerships with commercial satellite imaging companies to allow the United States’ academic and expert communities to build on US government capacity to track and identify Russia’s shadow fleet. Moreover, these vessels should be designated under existing sanctions authorities.

The White House need not act alone here—statutorily mandated sanctions always send a stronger message than executive orders. Therefore, the US Senate Foreign Relations Committee and Banking Committee can play a big role in showing an all-of-government pressure campaign is in the offing against the Kremlin. Senator Lindsey Graham’s proposed “bone-breaking” Russia sanctions package is one of many strong signals that demonstrate that Congress is willing to strengthen the US push for a sustainable peace in Ukraine. Furthermore, the White House should capitalize on some European leaders’ warming attitude toward increasing Russia sanctions as well as seizing and using frozen Russian central bank assets to support Ukraine’s ability, even after a cease-fire, to rebuild and rearm in the face of what is likely to be sustained Russian pressure regardless of an agreement to halt fighting in Ukraine.

In other words, by wielding the sanctions sticks the White House, Congress, and European allies already hold, the Trump administration can bolster Ukrainian military resolve and its own policy of seeking an end to the war on favorable terms.

Otherwise, Putin will simply push to have his carrot cake and eat it too.

Benjamin L. Schmitt, PhD, is a senior fellow at the Department of Physics and Astronomy, the Kleinman Center for Energy Policy and Perry World House at the University of Pennsylvania, a senior fellow for democratic resilience at the Center for European Policy Analysis, and an associate of the Harvard-Ukrainian Research Institute. Schmitt is also a co-founder of the Duke University Space Diplomacy Lab, and a term member of the Council on Foreign Relations. Follow him on X @BLSchmitt.

Richard L. Morningstar is the founding chairman of the Atlantic Council’s Global Energy Center. He has previously served as US ambassador to the European Union, US ambassador to the Republic of Azerbaijan, and as US special envoy for Eurasian energy affairs.

The post Enough carrots for Putin. For better negotiations, serve ‘maximum pressure’ instead. appeared first on Atlantic Council.

Pressure is now on Putin as Ukraine agrees to Trump’s ceasefire proposal

Peter Dickinson — Tue, 11 Mar 2025 22:19:23 +0000

Ukraine has agreed to a United States proposal for a thirty-day ceasefire with Russia, representing a potentially significant breakthrough in US-led diplomatic efforts to end the largest European conflict since World War II. The agreement on a potential ceasefire came following eight hours of negotiations between high-level US and Ukrainian delegations in Saudi Arabia.

In a joint statement issued following the talks in Jeddah, Ukraine expressed its readiness to accept the United States proposal to enact an immediate, interim thirty-day ceasefire, subject to acceptance and concurrent implementation by the Russian Federation. The United States will now communicate to the Kremlin that Russia’s readiness to accept the ceasefire proposal is the key to achieving peace. “We’ll take this offer to the Russians. We hope the Russians will reciprocate,” US Secretary of State Marco Rubio commented.

Stay updated

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

There was more positive news for Ukraine from Saudi Arabia, with the US delegation announcing the immediate lifting of a freeze on military assistance and intelligence sharing. This decision to renew US support reflects a thaw in bilateral ties following weeks of increased tension including a disastrous Oval Office meeting in late February that saw US President Donald Trump and Vice President JD Vance clash publicly with Ukrainian President Volodymyr Zelenskyy.

Trump responded to his White House confrontation with Zelenskyy by claiming that the Ukrainian leader was “not ready for peace.” The change in tone from US officials following today’s meeting was palpable. “The Ukrainian delegation today made something very clear, that they share President Trump’s vision for peace, they share his determination to end the fighting, to end the killing, to end the tragic meat grinder of people,” commented White House national security adviser Michael Waltz.

With Ukraine now clearly backing the US peace initiative, the world will be watching closely to see Russia’s reaction. Trump has stated that he may speak directly with Russian President Vladimir Putin later this week. If Putin decides not to support the push for a temporary ceasefire, it will dramatically alter the optics of the war and position Russia as the main obstacle to peace.

Eurasia Center events

Drones, defense, and diplomacy: Negotiations and the battlefield in Ukraine

Conflict Defense Technologies Europe & Eurasia Politics & Diplomacy

Developments in the coming few days will reveal much about Trump’s personal relationship with Putin. The US leader has long claimed to be on good terms with the Russian dictator and has talked up the progress being made during initial negotiations with the Kremlin over a potential peace deal to end the war in Ukraine. If his efforts are now rebuffed, Trump will face mounting pressure to adopt a far tougher stance toward Moscow.

This places Putin in something of a quandary. Despite suffering heavy battlefield losses, his armies continue to advance slowly but steadily in Ukraine. Meanwhile, dramatic recent changes in US foreign policy have increased his sense of confidence that the international coalition supporting the Ukrainian war effort is finally fracturing. Putin will therefore be understandably reluctant to embrace US calls for an immediate ceasefire. At the same time, he knows that if he rejects Trump’s peace overtures, this will likely derail the broad reset in US-Russian relations that the new United States administration has been signaling since January.

The United States has been pushing for a ceasefire as the first step toward comprehensive negotiations between Ukraine and Russia to reach a peace agreement. While a peace deal is still a long way off, this initial step from the Ukrainian side could create much-needed momentum. If Russia chooses not to reciprocate, calls will grow for the United States and Europe to strengthen Ukraine’s position militarily while increasing sanctions pressure on Russia.

Peter Dickinson is editor of the Atlantic Council’s UkraineAlert service.

Watch more on the ceasefire

US peace initiative can help bring Ukraine’s abducted children home

By Kristina Hook, Iuliia Hoban

Securing the return of the thousands of Ukrainian children abducted by Russia since 2022 must play a part in the peace efforts recently initiated by US President Donald Trump, write Kristina Hook and Iuliia Hoban.

Civil Society Conflict

UkraineAlert Mar 4, 2025

Europe has the resources to defend itself and back Ukraine against Russia

By Agnia Grigas

By leveraging its economic strength, demographic advantage, and military potential, Europe can confidently counter Putin’s imperial ambitions and provide Ukraine with the support it needs to resist Russia’s invasion, writes Agnia Grigas.

Conflict Defense Industry

UkraineAlert Feb 25, 2025

US sides with Russia against Ukraine and Europe at the United Nations

By Shelby Magid

A diplomatic clash at the UN has illustrated the dramatic divide that has emerged between the United States and Europe since the inauguration of US President Donald Trump just over one month ago, writes Shelby Magid.

Conflict Freedom and Prosperity

The views expressed in UkraineAlert are solely those of the authors and do not necessarily reflect the views of the Atlantic Council, its staff, or its supporters.

Klamberg quoted in Deutsche Welle on Trump’s executive order and its consequences on the ICC

Atlantic Council — Tue, 11 Mar 2025 17:40:49 +0000

The post Klamberg quoted in Deutsche Welle on Trump’s executive order and its consequences on the ICC appeared first on Atlantic Council.

Prospect of peace talks sparks fresh debate over Russia’s frozen assets

Ivan Horodyskyy — Wed, 05 Mar 2025 23:40:34 +0000

It was always likely that the fate of the $300 billion in frozen reserves of Russia’s Central Bank would become a key issue in negotiations over Ukraine’s future. With the new White House administration initiating fresh diplomatic efforts, these assets have now emerged as a potential bargaining chip in the broader push for a settlement.

Although the details of the negotiation process that began recently in Riyadh remain opaque, reports are already circulating about various potential formulas for using these funds. According to insiders, one proposal suggests allocating a portion of the reserves to support reconstruction in the approximately one-fifth of Ukrainian territory currently occupied by Russian forces. In practice, that would mean the return of the frozen assets to Russia.

Kyiv would strongly oppose any such move, as it would be seen as contradicting both Ukraine’s national interests and the interests of the victims of Russian aggression. This underlines the high stakes as negotiations evolve and the opposing sides debate the fate of Russia’s frozen assets.

Since February 24, 2022, reserves of the Russian Central Bank have represented the largest frozen pool of Russian sovereign assets. Kyiv has consistently called for their full transfer to fund the Ukrainian war effort and compensate for war damage inflicted by Russia. G7 countries have repeatedly reaffirmed their stance that the frozen assets will remain immobilized until Russia pays for the damage it has caused in Ukraine.

This position has effectively placed responsibility on Ukraine and Russia to negotiate a political settlement including war reparations. Over the past three years, significant work has been undertaken to elaborate legal grounds for the confiscation of the frozen Russian assets in Ukraine’s favor, but no decisive action has been taken to seize them outright.

Instead, as a temporary measure, Ukraine has received interest accrued on these funds, which were placed in deposit accounts in 2024. Additionally, G7 leaders agreed to provide a $50 billion loan to be repaid in the coming years using proceeds from the frozen reserves. This arrangement represents a substantial achievement. It has also fueled speculation that the Russian assets will remain untouched until the loan is fully repaid, which could take 10 to 15 years.

Stay updated

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

The start of peace talks in Saudi Arabia, spearheaded by the United States, has shifted the political calculus surrounding the use of the frozen Russian funds. Potential proposals to channel them into Ukraine’s reconstruction, including reconstruction projects in Russian-occupied territories, would mark a striking departure from previous policy. While this would no doubt be framed as a pragmatic step toward resolving the conflict, many would see it as a major concession to Moscow.

At first glance, this approach may appear designed to set a balance between competing interests. In reality, it risks undermining the very principles on which the international response to Russia’s aggression has been built.

Since 2022, there has been broad consensus that Russia, as the aggressor state, bears full responsibility for the consequences of the war, including the obligation to compensate for all damages, irrespective of the circumstances under which they occurred. This has been reaffirmed in a UN General Assembly resolution, one of Ukraine’s key diplomatic achievements at the United Nations.

Any compromise that allows Russia access to its frozen reserves, even indirectly, would set a dangerous precedent for the division of responsibility over war-related damages. While some might argue that the money ultimately belongs to Russia and that partial access does not amount to a strategic loss for Ukraine, this perspective ignores a fundamental reality: These frozen assets were supposed to serve as leverage to compel Russia to accept its legal obligations, including reparations. Allowing Moscow to regain control over even a fraction of the frozen assets would weaken that leverage and allow the aggressor to benefit at the expense of its victims.

Eurasia Center events

Drones, defense, and diplomacy: Negotiations and the battlefield in Ukraine

Conflict Defense Technologies Europe & Eurasia Politics & Diplomacy

The core issue remains clear. Any model for unlocking Russian sovereign assets must prioritize justice for Ukraine and the victims of Russian aggression. Allocating these funds to be used by the aggressor state without a formal reparations agreement would contradict the principles of accountability.

Since May 2022, Ukraine has consistently advocated for the creation of an international compensation mechanism based on the vision that victims of aggression must be the primary beneficiaries. The fate of the frozen Russian $300 billion has always been at the center of this process, as these funds were considered the main source for financing reparations. Under a framework led by the Council of Europe and supported by a coalition of international partners including the United States, a Compensation Fund could serve as the primary instrument for distributing these assets to those who have suffered direct harm from Russia’s aggression.

While the mechanism requires further refinement, supporters believe this format is the best path toward ensuring meaningful redress. The recently established Register of Damage for Ukraine, which is tasked with registering all eligible claims to be paid out through a Compensation Fund, is an initial step in this direction, demonstrating a tangible commitment to prioritizing victim compensation.

Transferring Russia’s frozen reserves to a future Compensation Fund appears the most logical and legally sound course of action. Moreover, the European Union, which administers $210 billion of the $300 billion in frozen Russian Central Bank reserves, reportedly backs the move. Without this transfer of assets, the entire idea of a reparations mechanism for Ukraine would be undermined.

While the operational details of any future decisions can be refined through multilateral negotiations with the participation of Ukraine and the EU, the guiding principles appear clear. These should include the use of frozen Russian assets to serve the interests of Ukraine as the victim of aggression. The primary purpose of these funds should be direct compensation for war damages suffered by Ukrainian individuals, businesses, and institutions. Meanwhile, any decision on their use must be grounded in principles of justice, ensuring that responsibility for war-related damages is not shifted onto Ukraine, and that a victim-centered approach remains at the core of the process.

Ivan Horodyskyy is a nonresident senior fellow with the Atlantic Council’s Strategic Litigation Project and director of the Dnistryanskyi Center for Politics and Law.

Venezuela sanctions tracker: Who is the international community sanctioning in Venezuela?

Lucie Kneip, Geoff Ramsey — Mon, 03 Mar 2025 17:25:12 +0000

After Nicolás Maduro took power in Venezuela following the death of Hugo Chavez in 2013, he began to accelerate the consolidation of power and erosion of democratic institutions begun by his predecessor. In response to Venezuela’s authoritarian slide, the international community has imposed sanctions on individuals responsible for acts of corruption, human rights violations, and the breakdown of democratic rule.

The United States, Canada, and the European Union (EU) have led the way on these sanctions, and between them have created an extensive list of individuals who have seen their assets frozen, been denied visas, and been shut out of the financial order in these countries. This tracker provides an interactive tool to search the list by sanctioning country or individual, with the aim of highlighting gaps in sanctions between countries and visualizing the progression and composition of country-specific sanctions regimes.

Scroll to explore more

Venezuela individual sanctions tracker

Explore the tracker below to see which individuals are sanctioned by which countries. Select the column titles to sort alphabetically or by country.

Coordinating sanctions with allies

This graph does not include sanctions issued by all three countries in January 2025 in response to Nicolás Maduro’s illegitimate re-inauguration.

The United States, with its current list of 202 designees, sanctions the most individuals linked to Venezuela’s political crisis. Canada currently sanctions 123, and the EU sanctions sixty-nine. Of the 202 US-sanctioned individuals, Canada sanctions eighty-seven of the same individuals, while the EU sanctions fifty-eight. Forty-eight individuals are currently sanctioned by all three countries. Most of these were sanctioned by the United States months or years before they were sanctioned by Canada and the EU. 

During 2023 and 2024, there was almost no activity in adding individuals to their sanctions lists. This changed in late 2024 following the stolen presidential election.

Closing gaps in Venezuela sanctions

In January 2025, the United States, Canada, and the EU announced new individual sanctions on Venezuelans involved in undermining democracy. The release of the sanctions coincided with Nicolás Maduro's re-inauguration for a third illegitimate term.

These recent sanctions additions by all three countries are notable in demonstrating a coordinated opposition to Maduro's continued consolidation of power. Aside from five individuals sanctioned in December 2024, Canada had not added any individuals since 2019, and the EU had not added any individuals since 2021.

Almost all the sanctions announced by Canada and the EU were on individuals that the United States had previously sanctioned, adding to the cohesion of the Venezuela sanctions regimes. Greater consistency in sanctioning individuals creates a more potent sanctions network with a more tangible impact on those sanctioned.

US sanctions timeline: Major milestones

This graph does not include sanctions issued by the United States on January 10, the date of Nicolás Maduro’s illegitimate re-inauguration.

The Obama administration sanctioned seventeen individuals in the early years of Venezuela’s crisis, the first Trump administration sanctioned 135, and the Biden administration sanctioned 50. So far, the second Trump administration has not sanctioned any individuals linked to Venezuela’s crisis.

Classifications are based on the primary affiliation of the individual for the activities related to their designation on the SDN list. Political elites include officials currently or formerly holding formal offices, as well as individuals who have benefitted from political proximity, such as Maduro's stepsons. Economic elites include those who have engaged in corrupt financial dealings without holding formal office. Security and intelligence personnel include those currently or previously affiliated with various security and intelligence branches, including the DGCIM (military counterintelligence branch), SEBIN (intelligence branch), FANB (national armed forces), GNB (national guard), and PNB (national police).

Who's on the US list?

The ‘other’ category includes individuals such as Colombian guerilla affiliates or Hezbollah-linked affiliates that do not fit our classifications as political or economic elites or former military and security personnel.

About the authors

Lucie Kneip is a program assistant at the Adrienne Arsht Latin America Center.

Geoff Ramsey is a senior fellow at the Adrienne Arsht Latin America Center.

Created in partnership with the Atlantic Council's Economic Statecraft Initiative.

Explore the programs

The Adrienne Arsht Latin America Center broadens understanding of regional transformations and delivers constructive, results-oriented solutions to inform how the public and private sectors can advance hemispheric prosperity.

The Global Sanctions Dashboard provides a global overview of various sanctions regimes and lists. Each month you will find an update on the most recent listings and delistings and insights into the motivations behind them.

Explore more

The post Venezuela sanctions tracker: Who is the international community sanctioning in Venezuela? appeared first on Atlantic Council.

Could the EU “blocking statute” protect the ICC from US sanctions?

Lize de Kruijf — Thu, 27 Feb 2025 20:31:41 +0000

On February 6th, 2025, President Donald Trump signed an executive order, “Imposing Sanctions on the International Criminal Court (ICC)”, escalating the United States’ ongoing opposition to the Court’s activities. The sanctions come in response to the ICC’s investigation into alleged crimes involving US personnel and certain allies, including Israel, which the administration claims have been undertaken “without a legitimate basis”. This move has sparked global dissent, with over 80 countries joining together in a statement reaffirming their “continued and unwavering support for the independence, impartiality and integrity of the ICC.” For the Netherlands, the ICC’s host country, the sanctions present a particular challenge.

As the host country, the Netherlands is responsible for ensuring the operational independence of the Court. Under the “Headquarters Agreement” between the ICC and the Netherlands, the country must cooperate with the ICC and ensure its business continuity. However, the new US sanctions targeting ICC personnel could severely disrupt the Court’s operations—particularly if Dutch banks suspend financial services to the ICC out of fear of violating US sanctions.

In response, the Dutch government has engaged in discussions with Dutch banks to explore under what conditions they would continue processing transactions for the ICC under these new sanctions. Reports indicate that the banks are seeking substantial guarantees to maintain their business with the Court.

One proposed solution is invoking the European Union (EU)’s “blocking statute”, which prevents EU-based businesses from complying with US sanctions that have extraterritorial reach. This statute allows EU companies to resist US laws that conflict with European legal protections and provide a framework for seeking compensation if harmed by US sanctions. The blocking statute was notably used in 2018 when the EU sought to bypass US sanctions on Iran following the US withdrawal from the Iran Nuclear Deal. However, applying this legislation to protect the ICC would be an unprecedented use of this tool and likely come with unique challenges.

Nevertheless, various parties have expressed an ardent desire for the EU to invoke the blocking statute. The President of the ICC, Judge Tomoko Akane, has stressed that the EU blocking statute is one of the Court’s most essential tools for surviving any sanctions, urging, “to preserve the Court you must act now.” Dutch Justice Minister, David van Weel, also noted that “the Netherlands is too small” to protect banks on its own and that this issue needs to be addressed at a European level. In response, the Dutch Cabinet, following direction from Parliament, has agreed to advocate for the statute’s activation at the European level.

Given the EU’s longstanding support for the ICC, it is reasonable to assume that the EU will seek to protect the ICC in some form. There are a few less “nuclear” alternatives it may encourage first. Dutch banks could minimize their exposure to the ICC by restricting their services to a minimum—only holding cash and processing basic transactions for the ICC—or ICC servicing could be consolidated with one smaller bank. However, if the situation escalates, the EU may be forced to invoke the blocking statute, particularly if the US Senate revisits the previously blocked “Illegitimate Court Counter Act.” This bill sought to expand sanctions on the ICC to include not just those who “directly engaged in” unfavorable investigations but also those who “otherwise aided” the Court. While this bill was narrowly blocked due to concerns over its potential negative impact on American businesses, Democratic Minority Leader Senator Chuck Schumer indicated that a revised bipartisan version could be “very possible”.

It is therefore worth exploring what the blocking statute scenario would look like, because while it offers a strong legal defense, it may not be a panacea. Even if invoked, it could prove difficult to fully block all US sanctions, particularly when third-party countries and multinational companies with operations in both the US and the EU are involved.

The Netherlands, with its robust financial sector, faces a unique challenge, as several Dutch banks —such as ING, Rabobank, and ABN AMRO—are deeply integrated into the US financial system. While the blocking statute would shield Dutch banks operating within the EU from US sanctions, those with operations in the US remain subject to US law. This creates a dual compliance challenge: Dutch banks must balance their operations in the EU (protected by the statute) with their US operations (still subject to US sanctions).

Whichever way they turn, these banks will face unpleasant consequences. Complying with US sanctions could undermine the ICC’s financial operations, potentially halting essential payments to the Court. Additionally, compliance with US sanctions could expose these banks to long-term reputational risks, as they may be seen as aligning with US policy against the ICC, an institution widely supported by the international community. On the other hand, refusing to comply could lead to penalties or the loss of access to the US financial system. Dutch banks will need to navigate this conflict carefully, weighing the risks of becoming entangled in a geopolitical standoff.

As this situation unfolds, much remains uncertain. However, one thing is clear: US sanctions on the ICC have the potential to create significant diplomatic and economic tensions within the longstanding US-EU alliance, with the Netherlands caught in the middle. How the EU, the Netherlands, and Dutch banks respond will likely shape the future of the ICC and may have lasting implications for international diplomacy and the future of international law.

Lize de Kruijf is a project assistant with the Atlantic Council’s Economic Statecraft Initiative.

Economic Statecraft Initiative

The post Could the EU “blocking statute” protect the ICC from US sanctions? appeared first on Atlantic Council.

Why the US should not lift sanctions against Russia

Charles Lichfield — Wed, 26 Feb 2025 18:43:14 +0000

Today marks the third anniversary of the unprecedented package of Group of Seven (G7) sanctions deployed against Russia following the launch of its full-scale invasion of Ukraine. To the surprise of many, the anniversary coincides with musings by the new Trump administration on “normalizing” relations with Moscow. This normalization would come with “future cooperation . . . on historic economic and investment opportunities,” which would supposedly require the lifting of sanctions.

It’s true that the power of sanctions was oversold by some Western commentators and officials at the beginning of the war, particularly when it was hoped that they might force Moscow to change course.

In reality, once it became clear that the shock of bold measures like the immobilization of Russia’s reserves weren’t going to cause a domestic financial crisis, the aim of the sanctions shifted. Since then, the sanctions have been part of a long-term effort to erode Russia’s ability to sustain its war economy by depriving it of income through import bans and the oil price cap—which has had mediocre results since it was implemented in in December 2022—and depriving it of technology and resources through export controls.

While Moscow has found ways to mitigate the impact of these measures, growing deficits, unsustainable subsidies, and the rising cost of debt servicing show that economic pressure is still working. Removing restrictions without significant concessions risks emboldening not only Russia but also other states contemplating economic and military aggression.

The argument now for strategic patience—for keeping sanctions on Russia in place—is not just a convenient excuse for the lack of immediate results. It reflects a deeper reality about how economic pressure works over time.

Russia’s economy has grown each year since its full-scale invasion. But since 2023, this has mainly been because of increased government spending, which is changing the structure of Russia’s economy and making entire sectors more reliant on the war. Once French auto producer Renault left Russia in the aftermath of the full-scale invasion, the plants of firms it partnered with in the country were requisitioned.

Moscow has had several levers at its disposal to manage the fiscal effects of an economy increasingly propped up by the government. Special quarterly and annual taxes on oil-and-gas and non-oil-and-gas income have allowed the Kremlin to capture additional revenue as prices have fluctuated (mainly upwards). War spending has shrunk the share of oil and gas in Russia’s gross domestic product (GDP) and the share of oil-and-gas taxation in the overall tax take. The latter has moved from 35.8 percent before the war to 41.6 percent in the bumper year of 2022, when prices spiked in response to the war, to a predicted 27 percent in 2025. The government still makes regular deposits into Russia’s National Wealth Fund, but these no longer follow a predictable rule with a cutoff oil price above which the income delta is saved. The fund has little visibility into its own future and can merely try to slow the pace of the exhaustion of its holdings.

Growing deficits still represent a risk. Russia is cut off from international lending and can therefore only reach into its rainy-day fund or issue more domestic bonds. As the chart below shows, the government’s withdrawals from the National Wealth Fund do not cover annual deficits entirely. But every year since the full-scale invasion started, Moscow has been forced to withdraw more than the budget law it tends to publish just a few weeks earlier suggests it will. The bills for many Russian public agencies and subsidies accumulate in December, just as economic activity slows down for the holiday season.

In dollar terms, the liquid part of the National Wealth Fund, which was estimated to be worth $112.7 billion out of a total $200 billion before the war, is running out. For most of 2023 and 2024, the weak ruble slowed the fund’s decline because non-ruble assets could be converted more favorably. But the ruble’s recent appreciation on the back of market sentiment around a “deal” means the withdrawals will hit the fund’s dollar value faster. If the 2024 rate of withdrawal from the fund’s current dollar value is used, and if one assumes few liquid assets have been sold so far, then the government can only rely on its liquid savings for another one to two years.

It’s important to note that Russia’s nonliquid assets aren’t all immobilized and can still be sold. This might include its shares in state banks or the national airline, Aeroflot, which needed an emergency capital injection from the fund in 2022. And while they aren’t meant to be used for government spending, the reserves that the Central Bank of Russia still has access to could also be used to plug future deficits. This would be interpreted as a very negative signal for price stability, however, and could result in already high inflation expectations climbing further.

What stands out in early 2025 is that, after a predictably costly December, the Russian government’s spending in January was also markedly above trend, at half a trillion rubles ($5.77 billion) for that month alone. This is the sort of result sanctions policymakers are happy to present, but it is important to look beyond one bad month. In spring 2023, for example, Russia’s year-to-date deficit was already 17 percent above the deficit planned for the whole year. But the government still managed to pull in more oil and gas income later and finish the year with a more manageable deficit, which measured below 2 percent of GDP.

In January, historian Craig Kennedy’s much-publicized research showed that Moscow was also relying heavily on concessionary loans to the military-industrial complex. This allows more funds to be channeled to the war effort without appearing as defense or “classified” items in the state budget—which both increased greatly in 2022. The explosion of credit in the Russian economy, despite a high interest rate environment, is indeed striking, and it is clear that this credit is disproportionately being directed to firms that are supporting the war effort.

However, it is more challenging to identify when the centrally planned credit boom will come back to haunt the government. Since the beginning of the full-scale invasion, the credit market has seen a major shift from short-term loans in favor of long-term loans lasting more than a year. Were the loans not being kicked into the long grass, the low rate of nonperforming loans might already be increasing.

With the limited information available to observers outside Russia, the country’s banks appear well capitalized for now and high interest rates are helping convince Russians to keep their cash in the financial system. But even without deep insight into the liabilities taken on by Russian banks, one can see that the aggressive loan policy is already hampering efforts to cut inflation and even pushing up the deficit.

Why? Since high interest rates are a deterrent from taking on more debt, the government has had to increase its subsidies to help banks keep lending at preferential rates. Russian banks are lending first to households, but heavy industry represents the second, growing category at the expense of farming. These are costing the government more every year and becoming another deficit-driving liability, like inflation. These liabilities not only force the government to increase salaries, pensions, and other social payments, but also pressure the Central Bank to keep interest rates—and therefore government borrowing costs—high.

In 2025, Russia’s planned federal budget expenditures on debt servicing will amount to 3.2 trillion rubles ($37 billion), which is nearly 40 percent higher than the plan for 2024, and 2.1 times higher than in 2023. Despite this, the actual government debt itself is growing at a much slower pace, with an expected increase of 38 percent by the end of 2025 compared to 2023.

Sanctions are having an unmistakable effect, albeit below the inflated expectations of many in the West in early 2022. Lifting sanctions now would provide relief to a system that is showing clear signs of stress. It would also be a signal to third countries currently on the fence about selling to Russia that they can get away with what they’ve stopped short of doing so far. Since the sanctions were put in place, China has not lent money to the Russian state, and Chinese banks are reticent to enter the Russian market for fear of US secondary sanctions. Will they be so reticent now?

Rather than lifting sanctions prematurely, policymakers should focus on closing loopholes, tightening enforcement, and maintaining coordination among allies. A premature retreat would weaken US leverage and embolden the axis of authoritarian regimes that are already helping each other circumvent Western policies, as my colleague Kim Donovan detailed in her testimony last week before the US-China Economic and Security Review Commission.

The question is not whether sanctions worked instantly, but whether the world can afford the long-term consequences of abandoning them too soon.

Charles Lichfield is the deputy director and C. Boyden Gray senior fellow of the Atlantic Council’s GeoEconomics Center.

The post Why the US should not lift sanctions against Russia appeared first on Atlantic Council.

Horodyskyy in European Pravda: Protection from Orbán: how Trump “suspended” the future of Russian assets and what the EU plans to do

itorre — Tue, 25 Feb 2025 18:15:25 +0000

The post Horodyskyy in European Pravda: Protection from Orbán: how Trump “suspended” the future of Russian assets and what the EU plans to do appeared first on Atlantic Council.

Will a new Russia reset prove more successful than earlier attempts?

Leah Nodvin — Tue, 25 Feb 2025 16:32:49 +0000

The Trump administration is seeking to reset relations with Russia as part of a comprehensive shift in US foreign policy. While advocates say this reflects changing geopolitical realities, past experience suggests a successful reset may be easier said than done.

Since the end of the Cold War, successive United States governments have sought Russia resets. Perhaps the most famous example came in 2009, when US President Barack Obama and Secretary of State Hillary Clinton initiated a highly-publicized effort to develop a new Russia strategy. Their administration envisaged renewed cooperation with Russia on a range of issues such as counter-terrorism, non-proliferation, and the illicit trafficking of goods and people.

The challenges of communicating with the Kremlin were evident from the very outset. In a moment of poetic irony, Secretary Clinton and Russia’s Foreign Minister Sergei Lavrov staged a photo-op pressing a big red button that was meant to say “reset” in Russian. However, the label had been mistranslated and actually read “overload.” This was to prove prophetic, with bilateral relations soon trending toward confrontation rather than cooperation.

Stay updated

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

In addition to often conflicting foreign policy agendas, the leaders of the United States and Russia also operate in very different political realities. When US presidents are elected to office and their party controls Congress, they only have two surefire years to forge new policy, positively impact American lives, and set the course for their re-election. During that short time frame, US policymakers often face difficult decisions under extreme pressure from their constituents. Unfortunately, success through innovation requires a willingness to fail.

In comparison, Russian politicians do not compete against the clock in the same manner. They seldom face hard deadlines or constraints from public opinion when implementing their policies. Just as most Soviet leaders ruled until death, today’s Russian leaders like Vladimir Putin and Sergei Lavrov have remained in their roles for decades. Russia’s security apparatus, the true source of political power in the country, has been loyal to Putin since the very beginning of his reign.

Developing a holistic strategy toward Putin’s Russia has been more complicated than dealing with other regions because traditional playbooks do not apply. The United States has not been willing to pursue a Cold War-style policy of containment, as Russia is now a global power with an internationally integrated economy. Washington has also been reluctant to pursue strategic security cooperation as it did in the 1990s because Russia has proven to be an unreliable partner, has violated the international rules-based order, and has placed American lives directly at risk.

Eurasia Center events

Director, Economic Statecraft Initiative

Drones, defense, and diplomacy: Negotiations and the battlefield in Ukraine

Conflict Defense Technologies Europe & Eurasia Politics & Diplomacy

Despite the need to address the security challenges posed by Russia, a coordinated United States strategy to deal with the Kremlin remains elusive. Successive attempts to reset relations have failed and bilateral ties have deteriorated. It is true that the US has had a policy on Ukraine and a policy on Russia as it relates to Ukraine. However, a strategic plan to counter Russian actions globally through traditional soft and hard power tools has become politically toxic for successive US administrations.

This applies throughout US politics. While Congress maintains country-specific caucuses like the Ukraine Caucus or the Friends of Democratic Belarus Caucus, it has long been considered politically impossible to create a Friends of Democratic Russia Caucus. Until recently, no member of Congress has wanted to appear as though they were extending even a metaphorical hand toward Russia. However, that may now be changing.

Why is there such an apparent sense of urgency? Like US presidents before him, Trump is working against time. He ran for the presidency on a campaign of ending foreign wars. He also has an ambitious domestic agenda to both cut the federal workforce and drastically increase its output. Crucially, Congress must pass a budget by March 14 or the federal government will shut down, a scenario that would create explosive pressure on the Trump administration.

Trump needs a deal with Russia more than he fears the political fallout that a Russia reset could bring to his presidency. In an era where having a Russia policy has long been politically elusive, now may be the time for a dramatic shift in US-Russia relations. As the Trump administration reviews the US approach to international aid and diplomacy, all eyes will be on how they navigate relations with America’s long-time geopolitical rival and the potential consequences for the future of Ukraine.

Leah Nodvin is a national security specialist with extensive experience covering issues related to foreign affairs, defense, trade, and geopolitical risk.

My testimony draws from a body of research my team and I have conducted at the Atlantic Council measuring the effectiveness of economic statecraft tools targeting Russia and our assessment that China is enabling Russia as well as Iran to circumvent and evade Western sanctions. We have coined this network “the axis of evasion.”

My testimony also draws on my prior experience as a career civil servant in the US federal government for fifteen years in the Intelligence Community, the Department of the Treasury, the National Security Council, and most recently serving as head of intelligence at Treasury’s Financial Crimes Enforcement Network (FinCEN). I spent my career in national security “following the money” of illicit actors, terrorists, and rogue states to safeguard the US financial system from abuse and protect the American public from harm. My experience has informed my understanding of sophisticated money laundering techniques and my perspectives on how US adversaries work together to take advantage of the global financial system and evade US sanctions.

The United States and many of its Western partners have levied significant sanctions on Russia, Iran, and North Korea. Being sanctioned by the West is one of the few things these rogue states have in common. Sanctions severely restrict these countries’ access to the US-led global financial system, limit their ability to trade in commodities, generate revenue, and import sophisticated technology. Many Chinese individuals and entities are also sanctioned by the United States and its allies. When the United States closed the proverbial front door to the global financial system, China opened the backdoor for these countries to transact and conduct trade often outside the reach of US sanctions and monitoring authorities. Against this backdrop, my testimony focuses on three key areas:

China, Russia, Iran, and North Korea have constructed elaborate systems to evade US sanctions;
Third country procurement networks enable these sanction evasion systems; and
These systems have limitations that may present opportunities for US action, and I will conclude my remarks with a set of policy recommendations for consideration.

First, I’d like to briefly discuss the elements that create the systems for sanctions evasion used by China, Russia, Iran, and North Korea.

Starting with the shadow fleet, which is a key tool for sanctions evasion. Russia, Iran, and North Korea use a network of old and poorly maintained tankers to transport sanctioned oil and goods while evading sanctions and maritime regulations. These ships frequently change flag registrations and obscure their ownership, allowing billions in illicit trade.

Alternative currencies and payment systems provide another mechanism for sanctions evasion. China’s opaque financial system provides Iran and Russia the opportunity to launder the proceeds of oil exports by facilitating payments in renminbi (RMB) and bypassing the US dollar and financial system. Further, Russia has been working to integrate its SPFS (Sistema Peredachi Finansovykh Soobcheniy) payment system with China’s CIPS (Cross-Border Interbank Payment System) to facilitate cross-border payments, while Iran and North Korea use Chinese money laundering networks and witting or unwitting Chinese banks to access global markets.

Meanwhile, complex money laundering networks facilitate Iran’s movement of oil revenue through front companies, financial facilitators based in Hong Kong and the United Arab Emirates (UAE), and opaque banking channels to convert RMB into more usable currency. Separately, North Korea uses Chinese and UAE-based intermediaries to launder its ill-gotten gains from cybercrime.

We are also seeing Hong Kong increasingly become a hub for sanctions evasion. China’s influence over Hong Kong and the region’s financial opacity allows shell companies and Chinese bank subsidiaries to provide access to the global financial system for sanctioned Russian, Iranian, and North Korean actors, potentially leveraging offshore interbank US dollar clearing systems.

Finally, barter trade among sanctioned regimes allows Russia, Iran, and North Korea to bypass financial restrictions by exchanging goods and weapons directly. Russia allegedly trades food and oil for North Korean weapons, while Iran and China engage in barter transactions involving oil, food, and manufactured goods.

The second point I’d like to discuss is the involvement of third country procurement networks. While China plays a key role in sustaining these sanctioned economies, third countries help them stay afloat. India, Malaysia, and the UAE, as examples, facilitate sanctions evasion by serving as transshipment hubs and financial facilitators for Russia, Iran, and North Korea. For instance, Russia’s rupee surplus from oil sales to India created the environment for India to emerge as a primary transshipment hub and the second largest provider of sensitive technology to Russia after China.

Finally, while these countries have developed complex sanction evasion mechanisms, they are not without limitations. China’s reliance on US dollar markets for now, make it vulnerable to secondary sanctions and financial pressure, limiting its ability to support sanctioned states indefinitely. Further, complex money laundering schemes are costly and susceptible to disruptions and enforcement actions. While shadow fleet operations pose environmental and legal risks that could justify broader international enforcement actions.

To conclude my remarks, I would like to offer the following recommendations to address the challenges I described:

Congress should direct the Administration to develop a comprehensive national security strategy and economic statecraft approach that accounts for the economic and financial ties between China, Russia, Iran, and North Korea and considers these states as a network of actors. The strategy should include both punitive as well as positive measures to drive a wedge between these rogue states and the third countries that enable their activity.
To inform this strategy, Congress should fully resource the departments and agencies responsible for collecting and analyzing financial intelligence to assess the financial connectivity among these states and those responsible for sanctions enforcement and investigations.
Congress should direct the Administration to strengthen multilateral coordination on China’s involvement in sanctions evasion by enhancing information sharing and encouraging joint investigations with foreign partners into money laundering and illicit trade networks operating in China and target vulnerabilities to disrupt and deter sanctions evasion.
Congress should request the Secretary of the Department of the Treasury, in coordination with the Federal Reserve, and other competent authorities, to assess offshore interbank US dollar clearing systems to determine if they are being used to circumvent US sanctions and offer recommendations to the Federal Reserve to increase transparency of these systems and ultimately security of US dollar settlements and payment rails.
Congress should direct funding towards anti-money laundering and countering the financing of terrorism capacity building within the United States and abroad to strengthen the resilience of the global financial system. This includes working with India, the UAE, and Malaysia to reduce their role in facilitating sanctions evasion and encouraging Chinese authorities to identify and weed out illicit financial schemes within its financial system, or risk secondary sanctions as they relate to Russia and Iran.
Congress should request the Executive Branch to assess the environmental risk and piracy risk associated with the shadow fleet and offer recommendations to leverage international and maritime law and safety regulations, in coordination with European allies, to justify seizing high-risk vessels linked to sanctioned oil trade. Congress should also request the Executive Branch collaborate with European allies to identify the true beneficial owners of the shadow fleet tankers to hold them accountable through restrictive economic measures or civil or criminal legal proceedings.

By combining financial, economic, legal, intelligence, and diplomatic tools, the United States can increase the cost and risk for China’s participation in sanctions evasion while disrupting the financial lifelines Russia, Iran, and North Korea have come to rely on.

Thank you for the opportunity to speak with you today. I look forward to your questions.

Staff

Kimberly Donovan

Digital Currencies Economic Sanctions

Economic Statecraft Initiative

The post Kimberly Donovan testifies to the US-China Economic and Security Review Commission on the Axis of Autocracy appeared first on Atlantic Council.

Trump and Putin seek economic reset but businesses may not rush back to Russia

Edward Verona — Thu, 20 Feb 2025 22:19:02 +0000

As the Trump administration seeks to reset relations with Russia as part of a peace process to end the war in Ukraine, Moscow is pushing the idea of increased economic cooperation. During landmark bilateral talks in Saudi Arabia earlier this week, the Russian delegation included the Kremlin’s top investment manager, Kirill Dmitriev, who heads Russia’s sovereign wealth fund. Dmitriev explained that US companies had lost more than $300 billion since 2022 due to withdrawing from the Russian market. Meanwhile, Russian Foreign Minister Sergei Lavrov reported “great interest” among participants “in removing artificial barriers to the development of mutually beneficial economic cooperation.”

This approach seems tailored to appeal to US President Donald Trump, who has since spoken favorably about the potential economic upside of a thaw with Russia. However, it remains to be seen whether foreign companies will be eager to return to Russia, given the experience of the past three years. Since Russia’s full-scale invasion of Ukraine began in February 2022, more than a thousand international companies have exited the Russian market. Others have had their assets seized. Companies mulling renewed operations in Russia will have to weigh up the potential profits again a lack of property rights and other risks that could end up costing shareholders.

Stay updated

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

With few exceptions, international companies that left Russia in the aftermath of the full-scale invasion walked away from subsidiaries worth millions or billions of dollars. It is safe to assume that the majority had to write down most, if not all, of the value of their investments in Russia. Some companies managed to sell assets, often to Kremlin cronies at knock-down prices. A few retained an equity interest in the hopes of an eventual rebound in the market. Virtually nobody emerged unscathed.

Companies left Russia in the aftermath of the invasion for a variety of motives. To their credit, some simply found it morally indefensible to remain there while Russia’s tanks rolled across international borders and its troops committed war crimes in Ukraine. Many businesses were less concerned about the morality of continuing to operate in Russia, but were nevertheless sensitive to guilt by association and possible damage to their reputation. Others weighed the benefits of staying in Russia against the cost of complying with international sanctions.

The companies that left Russia for moral reasons are unlikely to go back in the foreseeable future. This is also the case for companies seeking to safeguard their brand reputations. However, when the pickings seem rich, some may jump at the opportunity or bottom fish for low-priced assets. If another reset in US-Russian relations comes about, the United States government might provide inducements for a resumption of bilateral business ties, such as export credit guarantees, political risk insurance, and official backing for equity participation in major projects.

Taking another chance on Russia might seem appealing to some. After all, memories can be short in the business world. It is easy to imagine a new wave of corporate titans overlooking the lessons that a previous generation of expat CEOs learned during the last period of enthusiasm for expansion into Russia. Before proceeding, however, they would be well advised to study the current realities. Today’s Russia is not the country of Boris Yeltsin, who saw the West as a partner. It is not even the Russia of the early 2000s, before Vladimir Putin had fully consolidated his grip on power and completed the transition from fledgling democracy to authoritarian regime. After twenty-five years of Putin’s rule, the Kremlin now dominates all aspects of Russian life, including the country’s business climate.

Eurasia Center events

Drones, defense, and diplomacy: Negotiations and the battlefield in Ukraine

Conflict Defense Technologies Europe & Eurasia Politics & Diplomacy

As a diplomat and business executive in Moscow in the 1990s and 2000s, and later as head of the US-Russia Business Council, I had a front row seat to the evolution of Russia from a centralized, state-controlled economy into a free market with a vibrant private sector, followed by its devolution into an oligarch-controlled system that more closely resembled a organized crime syndicate than a developed economy. During this period, I encountered a wide range of investors seeking advice or support in coping with the predatory conduct of Russian business partners or the Russian state.

Back then, there was a tendency to attribute most of the problems facing international companies in Russia to the growing pains of an economy emerging from communism. However, the signs of institutionalized corruption gradually became undeniable, including the imprisonment of business leaders and the seizure of companies by state-linked groups. These issues have not gone away; in many cases, the challenges have become even greater.

If a peace agreement is forthcoming, senior executives in Europe and North America will have to assess whether the potential profits from renewing operations in Russia are worth the many risks this would involve. Will major international oil and gas companies that previously invested in Russia want to return to a country where the state must hold a majority stake in any project, and where they are required to sell their gas to a state monopoly? Will any investor want to be at the mercy of the Russian judicial system?

The non-Russian staff of international companies may also not be entirely safe living and working in Putin’s Russia. In recent years, the Kremlin has been accused of arresting numerous foreign nationals on dubious charges in order to use them as bargaining chips in negotiations for the release of Russian criminals and spies being held in Europe and the United States. Any businesses that choose to send staff to Russia will be well aware that they cannot count on the rule of law if their employees become pawns in Moscow’s geopolitical games.

The Kremlin’s efforts to entice Trump with the prospect of mutually beneficial business cooperation make sense. Russia certainly has much to offer, including a vast domestic market and access to unrivaled natural resource wealth. However, it would be naive to expect individual companies to immediately rush back to Russia in light of the very real concerns that exist over the rule of law and the overbearing influence of the Kremlin on the country’s business environment.

Edward Verona is a nonresident senior fellow at the Atlantic Council’s Eurasia Center covering Russia, Ukraine, and Eastern Europe.

cwheelock — Fri, 14 Feb 2025 16:01:32 +0000

The post Global Sanctions Dashboard cited by RUSI on Wagner’s business model in Syria and Africa appeared first on Atlantic Council.

Tannebaum in The Kyiv Independent on the potential for economic statecraft measures in the Russia-Ukraine war

Daniel Tannebaum — Thu, 13 Feb 2025 17:09:52 +0000

The post Tannebaum in The Kyiv Independent on the potential for economic statecraft measures in the Russia-Ukraine war appeared first on Atlantic Council.

Securing energy independence: The US path to resilient enriched uranium supply chain

Mikael Pir-Budagyan — Tue, 11 Feb 2025 20:48:44 +0000

Western partners have leveraged significant economic pressure against Russia in response to its invasion of Ukraine. While energy-related sanctions are in place, energy security concerns have restricted how far Western governments, including the United States, are willing and able to go. On January 20, President Trump declared a national energy emergency, stressing the need for a “reliable, diversified, and affordable supply of energy to drive [US] manufacturing, transportation, agriculture, and defense industries.”

One critical challenge for the United States in the energy security space is the sourcing of enriched uranium that fuels nuclear reactors across the country, vital for the energy transition away from fossil fuels. The United States has consistently depended on Russia for enrichment services. At the same time, the US enrichment capacity, once thriving, has dwindled, giving way to foreign imports. Nearly seventy-three percent of enriched uranium in 2023 originated abroad. Such reliance on a handful of foreign sources, and especially adversarial countries, introduces severe supply vulnerabilities. With the global demand for enriched uranium expected to rise, the United States should regain its status as a large uranium enricher capable of satisfying its domestic demand.

Russia has a consistent track record of weaponizing energy dependence to coerce other countries. Approximately twenty-seven percent of the enriched uranium used in the United States comes from Russia, which is responsible for around forty-four percent of global enrichment capacity. Although the Biden administration banned Russian uranium imports by signing the H.R.1042, Prohibiting Russian Uranium Imports Act into law, effective August 2024, the Act permits US firms to procure nuclear fuel from Russia’s state-run nuclear energy firm, Rosatom, under a waiver program until alternative suppliers are secured. These waivers, however, can only be granted until 2028 and are designed to give US energy providers sufficient time to adjust to the new conditions.

In response, in November 2024, Moscow announced “tit-for-tat” restrictions on uranium exports to the United States. According to the new rules, exemptions might be made under one-off licenses issued by the Russian Federal Service for Technical and Export Control. While it is unclear whether such licenses will be granted, this move yet again showcases the risks of relying on external fuel sources.

The pursuit of indigenous enrichment capacity is not motivated by market dynamics or elevated prices. The current price of enrichment services (measured in separative work units) is significantly lower than at any point between 2006 and 2019. Instead, the drive stems from vulnerabilities associated with overreliance on a handful of suppliers. Such concentration of supply may become vulnerable to disruptions caused by malign actors or market shocks.

Building resilient enriched uranium supply chains is a critical policy to prevent future weaponization and disruptions by malign actors. It requires more than simply halting imports from Russia. The United States should pursue a strategic policy to meet its own nuclear fuel needs while helping establish resilient and transparent supply chains to other nations. The Sapporo 5—a coalition of like-minded countries comprising Canada, Japan, France, the United Kingdom, and the United States—has pledged to collaborate on securing a reliable nuclear fuel supply chain. Achieving this objective will require a sustained increase in allied financing across all stages of the fuel cycle, including uranium enrichment.

A growing bipartisan consensus in the United States supports strengthening domestic uranium enrichment programs, even if allies and partners temporarily fill the gaps. Until recently, the United States lacked domestically owned uranium enrichment facilities. To address this, around $3.4 billion has been mobilized to jumpstart domestic enrichment efforts. These funds will benefit domestic enrichers and support firms at other fuel cycle stages, including mining.

The goal of building domestic uranium enrichment capacity to safeguard from disruptions should remain a priority. Despite the optimistic outlook, the jury is still out on whether these efforts are sustained in the long run. Such investments cannot have immediate results and require a strategic vision. Additionally, the nuclear fuel cycle, by design, is hard to sustain competitively without close public-private collaboration. Public-private partnerships and long-term demand signals to service providers are essential to building a resilient enriched uranium supply chain.

Mikael Pir-Budagyan was a Young Global Professional with the Economic Statecraft Initiative of the Atlantic Council’s GeoEconomics Center.

Economic Statecraft Initiative

The post Securing energy independence: The US path to resilient enriched uranium supply chain appeared first on Atlantic Council.

Global China Hub nonresident fellow Hanna Dohmen in South China Morning Post

Hanna Dohmen — Tue, 11 Feb 2025 20:13:27 +0000

Original source

On February 7th, 2025, South China Morning Post published an article referencing Global China Hub nonresident fellow Hanna Dohmen’s testimony for the US-China Economic and Security Review Commission on the effectiveness of export controls in slowing China’s AI advances.

The post Global China Hub nonresident fellow Hanna Dohmen in South China Morning Post appeared first on Atlantic Council.

Ukraine can play a key role in Europe’s future energy architecture

Nataliya Katser-Buchkovska — Thu, 06 Feb 2025 21:15:31 +0000

For the past three years, the full-scale Russian invasion of Ukraine has served to highlight the impact of energy exports and infrastructure on geopolitics. While Europe has responded to the invasion by seeking to radically reduce its energy dependence on Russia, Moscow remains a significant supplier and continues to demonstrate a readiness to leverage this status for political gain.

Russia’s invasion has highlighted the need for Europe to pursue greater energy flexibility and connectivity. With sufficient support from the country’s European partners, Ukraine can potentially make an important contribution toward achieving these goals, especially using the three Three Seas Initiative, a political, infrastructural, and commercially driven platform for improving connectivity between the Baltic, Adriatic, and Black seas.

Stay updated

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

Europe’s energy ecosystem is currently undergoing major changes. At the start of 2025, decades of Russian gas transit through Ukraine came to an end after Kyiv chose not to renew an expiring five-year agreement with the Kremlin’s flagship energy company Gazprom. The loss of gas transit via Ukraine has had a negative impact on the Russian economy at a time when Moscow’s gas export volumes were already far below pre-war levels.

So far, the ending of gas deliveries through Ukraine’s pipeline system has not led to dramatic rises in gas prices for European consumers. Nevertheless, Kyiv’s decision to end transit has caused considerable tension with some of the country’s neighbours.

Slovakia and Hungary rely heavily on Russia for gas supplies and have voiced their displeasure over Ukraine’s stance. Both countries were given ample warning of the impending end of transit deliveries but chose not to act. In contrast, Austrian energy giant OMV used the past two years to prepare for potential supply disruptions and has therefore proved far more resilient, despite being even more dependent on Russian gas at the start of the invasion.

Since 2022, Ukraine’s efforts to limit Russian influence in the energy sphere have continued despite wartime conditions in the country. This has included decoupling the national power grid from the Russian system and joining Europe’s ENTSO-E network.

This historic move has given Ukraine more options in the energy sector and has helped the country to address the challenges created by frequent Russian attacks on the Ukrainian power grid. Ukraine has benefited from enhanced connectivity to the European network, making it possible to import more electricity from the country’s EU neighbours, while also exporting in the opposite direction during periods of power surpluses.

Kyiv has also succeeded in accessing new sources of energy. Following an intensive Russian bombing campaign targeting Ukrainian power stations in spring 2024, Ukraine was able to receive LNG from the United States for the first time via Greece. A number of European countries including Greece, Bulgaria, Romania, Hungary, Moldova, Slovakia, and Ukraine are now looking to develop a vertical gas corridor to facilitate bidirectional gas flows between Greece’s LNG terminal and Ukraine.

Eurasia Center events

Drones, defense, and diplomacy: Negotiations and the battlefield in Ukraine

Conflict Defense Technologies Europe & Eurasia Politics & Diplomacy

While there are positive signs that Europe is responding constructively to recent developments in the energy sector, it is clear that more infrastructure innovations, flexibility, and connectivity are needed in order to prepare for possible future crises and address the rise of new energy sources. For example, the advance of green energy requires the right mix of baseload supply options to avoid imbalances and blackouts. This will require a more integrated approach to European energy security and efficiency.

In the coming years, Ukraine can play a key role in efforts to improve European energy security and connectivity. The country is thought to have the second highest gas reserves in Europe. It also has the continent’s largest gas storage facilities and an extensive pipeline system for oil and gas transit. In order to make the most of this potential, Ukraine should look to establish multifunctional energy production and transportation hubs capable of integrating with global LNG, hydrogen, and green ammonia infrastructure.

Improving the connectivity between Ukraine’s energy infrastructure and the European Union, United Kingdom, and United States would strengthen overall energy security and make the European energy system considerably more robust. Needless to say, this requires security and an end to hostilities in Ukraine. Many of the advantages a more integrated Ukraine can offer would depend on the secure passage of ships to the country’s Black Sea ports, for example, while Russia has repeatedly targeted Ukrainian gas storage facilities in the west of the country.

For now, the ongoing Russian invasion places severe limitations on Ukraine’s ability to contribute to improved European energy flexibility and connectivity. However, the country’s huge potential should be taken into consideration as European leaders prepare for the postwar period and explore options to strengthen the continent’s long-term energy resilience.

Nataliya Katser-Buchkovska is the founder of the Green Resilience Facility and a former member of the Ukrainian Parliament (2014-19).

The world order Putin hopes to usher in would be governed by the laws of the geopolitical jungle and defined by insecurity and aggression. Armed conflicts would proliferate around the world as previously accepted rules of international relations were replaced by the overriding principle that “might is right.” The unprecedented global economic prosperity of the past three decades would also be threatened amid mounting barriers to trade and record levels of defense spending. The only obvious beneficiaries would be nations like Russia that seek to embrace revisionist or expansionist agendas.

Stay updated

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

The international security situation is now so grave and has escalated to such a level that it can no longer be resolved by appeasing Russia or seeking some kind of compromise peace. Instead, Russia must lose in Ukraine, and must be seen to lose.

At present, that is not the case. On the contrary, Putin is more confident than ever of victory and sees no reason to end the war. He is projecting strength around the world and is successfully building a coalition of fellow authoritarian powers including China, Iran, and North Korea, who all provide support for the war in Ukraine and share Moscow’s objective of overthrowing the current world order.

On the home front, Putin has succeeded in shifting the Russian economy onto a wartime footing, and has found new partners to compensate for the collapse in ties with the West. He is openly preparing for a long war and is counting on a lack of Western resolve to confront him.

In order to stop the war, Putin must be persuaded that continuing the invasion of Ukraine will lead to disaster for Russia. This requires a range of measures designed to weaken Russia’s position both economically and militarily.

Russia’s economic outlook is already worsening as a result of the war and could become far more serious if Western leaders take the necessary steps. There is an obvious need for greater coordination between the United States, UK, EU, and other countries engaged in sanctioning the Russian war effort. Implementation of existing sanctions remains inadequate, while tougher measures are needed to target intermediaries.

Eurasia Center events

Drones, defense, and diplomacy: Negotiations and the battlefield in Ukraine

Conflict Defense Technologies Europe & Eurasia Politics & Diplomacy

Economic hardships alone will not bring Putin to the negotiating table. He must also be forced to confront the prospect of military defeat. This will require a major shift in thinking among Ukraine’s partners. At present, Ukraine finds itself forced to fight a defensive war of attrition with the aim of inflicting unacceptable losses on the invading Russians. However, Putin clearly has a very high tolerance for losses, and can also call upon huge untapped reserves of manpower to replenish the depleted ranks of his army. If the current war of attrition continues, Russia will eventually and inevitably win.

Instead, Ukraine must be equipped to defeat Russia on the battlefield. The Ukrainian military has repeatedly demonstrated its ability to beat Russia, but currently lacks the military capabilities to turn local victories into a war-winning position. This needs to change.

Western fears of escalation mean Kyiv is still being denied a wide range of weapons and faces restrictions on its ability to defend itself. As a result of this overly cautious approach, the Kremlin is able to wage a total war against Ukraine with little fear of major counterattacks inside Russia. Putin also enjoys overwhelming advantages in firepower, including a far larger and more advanced air force. No NATO member state would even consider fighting a war without adequate air power, but that is exactly what Ukraine is currently being expected to do.

So far, the West has been arming Ukraine to survive. Putin will not end the invasion until he becomes convinced that Western leaders are determined to arm Ukraine for victory. Ukraine’s military requirements are well known. All that is missing is the requisite political will to act. This means providing fighter jets, long-range missiles, armor, and artillery in large quantities along with dramatically enhanced drone and electronic warfare capabilities.

By supplying Ukraine with sufficient military aid, the West could finally oblige Putin to rethink the current war while also creating a powerful deterrence force capable of preventing further Russian aggression. Anything less will merely create a pause in hostilities that Putin will use to rearm and prepare for the next phase of his war against the West. The price of stopping Russia in Ukraine is high, but it will be dwarfed by the costs of a new authoritarian world order if Putin’s invasion is allowed to succeed.

Andriy Zagorodnyuk is chairman of the Center for Defence Strategies and an advisor to the Ukrainian Government. He previously served as Ukraine’s minister of defense (2019–2020).

irosales — Mon, 03 Feb 2025 17:40:59 +0000

The post Sultoon quoted by the New York Times on why prior administrations refrained from designating cartels as terrorist organizations appeared first on Atlantic Council.

Mexican cartels as foreign terrorist organizations: Impact on US businesses

Samantha Sultoon — Fri, 31 Jan 2025 22:30:45 +0000

On inauguration day, President Trump wasted little time exercising his authority on a range of foreign policy issues. Among the plethora of actions issued just that day, he signed an executive order (EO), “Designating Cartels and Other Organizations as Foreign Terrorist Organizations and Specially Designated Global Terrorists.” This EO directs the secretary of state, in consultation with the secretaries of the Treasury and Homeland Security, the attorney general, and the director of national intelligence—some of whom have not yet been confirmed by the Senate—to make a recommendation regarding the Foreign Terrorist Organization (FTO) and/or Specially Designated Global Terrorist designation of any cartel or other organization under this umbrella within fourteen days. The EO also directs the attorney general and secretary of Homeland Security to take steps as necessary to expedite the removal of those who may be designated pursuant to this EO.

Should the Trump administration choose to use the FTO designation on major Mexican cartels, it may have impacts that have not been fully evaluated. For example, US companies operating in Mexico will need to determine whether their operations may provide “material support or resources” to the cartels—a broadly defined criterion that substantially expands the scope of penalties for violations. Similarly, insurance companies providing services to those US businesses with a presence in Mexico may reconsider their premiums—and whether they wish to further provide services at all. Mexican asylees could assert they are fleeing terrorism if they feel threatened by the cartels. Absent clear guidance from the Trump administration, financial institutions may also be put in a bind as they seek to evaluate whether financial activity involving Mexico may run afoul of the material support clause. The breadth of what may be encompassed under material support, from lodging, to guns, to “expert advice or assistance” renders compliance challenging, particularly as there’s no blacklist or other mechanism against which US companies may screen to evaluate if their funds or services involve cartel members. As such, the reverberations from an FTO designation of major Mexican cartels may be broader than intended.

While the notion of using the FTO authority to designate cartels has been explored previously—by both the executive and legislative branches—prior considerations have not resulted in action pursuant to the FTO authority due to the anticipated knock-on impacts. Instead, for example, the Biden administration issued EO 14059, “Imposing Sanctions on Foreign Persons Involved in the Global Illicit Drug Trade,” which has been used to impose sanctions on over four hundred individuals and entities involved in the global illicit drug trade. Relying on this sanctions authority and other financial, health, and enforcement tools may have contributed to the decrease in fentanyl and other opioid-related overdoses and deaths.

Countering the international drug trade is a goal with which the Trump and Biden administrations seemingly align, though their methods of pursuing this objective clearly differ. Given the scope of the problem and the impact illicit drugs have on American communities, creative approaches are certainly warranted. However, new strategies—and their broader impacts—should be thoroughly evaluated prior to deployment.

Samantha Sultoon is a nonresident senior fellow with the Atlantic Council’s Economic Statecraft Initiative.

Economic Statecraft Initiative

The post Mexican cartels as foreign terrorist organizations: Impact on US businesses appeared first on Atlantic Council.

The foreign aid freeze poses risks to US interests in Syria

Diana Rayes — Fri, 31 Jan 2025 22:15:27 +0000

Days into the second Trump administration, the US State Department and US Agency for International Development (USAID) have paused—with few exceptions and waivers—all US foreign aid assistance as the administration undertakes a policy review. According to a State Department press release announcing the aid freeze, the pause is meant to ensure foreign assistance is “efficient and consistent with US foreign policy under the America First agenda.”

This comes at a critical time for Syria following the collapse of the Assad regime late last year and the establishment of a new interim government led by Ahmed al-Shara, who headed the rebel group Hayat Tahrir al-Sham. Syria—and US regional and European partners—are relying on the United States to lead the way in sanctions relief efforts to allow trade and investment to flow into the country and bolster the state-building process. While limited sanctions relief was granted in the final weeks of the Biden administration, likely prompting the European Union (EU) to also recently ease economic restrictions, the Trump administration’s foreign assistance freeze has the potential to jeopardize Syria’s fragile recovery.

In his confirmation hearing in January, US Secretary of State Marco Rubio previewed his priorities for an outcome in Syria that is favorable to US interests and, more importantly, for the people of Syria. Rubio described an endgame in which Syria is not a land bridge for Iranian proxies, a chessboard for foreign interventions, or an exporter of drugs and terrorism. On several fronts, the Trump administration should pick up where the Biden administration left off in helping Syrians to rebuild their country.

The United States should also use this critical opportunity in Syria to learn from the challenges of the past three administrations. While the strategic importance of Syria’s stability for the Middle East, European allies, and US adversaries has long been a point of bipartisan understanding, strategic outcomes in Syria have been ill-defined. US policy levers, from humanitarian aid and sanctions to military presence on the ground, were misaligned with US goals. Going forward, US humanitarian and economic assistance to the country should be better aligned with clearly identifiable goals that help the Syrian people while furthering US interests in a stable and peaceful Syria.

Reliance on foreign aid assistance in Syria

Humanitarian needs in Syria are at an all-time high—in 2024, 16.7 million people were estimated to require assistance, the largest number since the beginning of the civil war in 2011. Foreign assistance, particularly from the United States, has played a significant, lifesaving role in Syria in the last decade and a half. Despite this, the United Nations Office for the Coordination of Humanitarian Affairs recently reported ongoing and severe underfunding for the Syria Humanitarian Response Plan—with only 34.5 percent of its $4.1 billion funding requirements fulfilled as of the beginning of this year.

The United States is the largest foreign aid provider to Syria, contributing more than $18 billion in humanitarian assistance since 2011, including $1.2 billion in 2024. Most of last year’s funding supported humanitarian and emergency response efforts, with $76.8 million for refugee and conflict victim support, $34.7 million for humanitarian aid like food and nutrition, and $20.2 million for emergency food assistance and related services.

SIGN UP FOR THIS WEEK IN THE MIDEAST NEWSLETTER

US funding has been crucial in supporting humanitarian efforts on the ground in Syria. The White Helmets, an internationally-supported Syrian civil rescue organization, has received US support for critical operations across the country, including search and rescue missions, as well as health and protection programming. In the weeks since Bashar al-Assad’s fall, their critical work has included the clearing of unexploded ordnance across the country, which pose a severe threat to civilians, especially children, and have resulted in hundreds of deaths and injuries. The White Helmets have also prioritized securing and recovering chemical weapons stockpiles left by the Assad regime, activities which have since been halted by the recent pause, raising concerns over the ability to prevent the spread of chemical weapons in Syria and neighboring countries.

US aid has also played a critical role in managing Al-Hol and Al-Roj camps in northeast Syria, which house over 46,000 displaced individuals—primarily women and children—from former Islamic State of Islamic State of Iraq and al-Sham (ISIS) territories. Essential water and sanitation services managed by US-funded humanitarian staff were suddenly suspended, placing camp residents at greater risk of lack of access to safe drinking water, as well as water and vector-borne disease spread. Also alarming was the effect of the sudden pause on funding that contributes to the security and administrative management of major detention facilities holding close to ten thousand ISIS fighters in these areas, which raised concerns among counterterrorism officials about mass prison breaks and a potential ISIS resurgence. State Department officials quickly responded by granting exceptions for foreign aid cuts related to the management of these facilities. However, other sudden moves to withdraw aid in Syria or downsize the US military presence in the country could pose significant counterterrorism risks for the United States and its partners. It is in the United States’ broader interest to ensure security needs in Syria are met in order to prevent violent extremists from exploiting political vacuums.

What does the “stop-work” order mean for Syria?

The recent “stop-work” order has introduced significant uncertainty for ongoing aid and economic recovery efforts in Syria—and as a result poses risks to US interests in the region. While the order originally included a carve-out for emergency food aid, the exact scope and implementation of these exceptions remain unclear for Syria, raising concerns from the United Nations and aid groups about disruptions to critical forms of assistance globally. In response to this pressure, Rubio has since issued a waiver for “life-saving assistance,” which includes medical services, food, shelter, and subsistence assistance. Aid organizations, like the White Helmets and even US-based contractors and small businesses supporting US-funded programs abroad, are still navigating an unpredictable funding environment, making it difficult to plan for long-term relief and stabilization efforts.

This development comes in the context of previous US measures aimed at mitigating the impact of sanctions on humanitarian aid in Syria. The Biden administration had previously granted select sanctions relief to Syria for six months through the US Treasury Department to facilitate the provision of public services and humanitarian assistance. This relief applied to sanctions related to transactions with Syria’s government and the processing of personal remittances to the country through the Syrian Central Bank. This was followed promptly by a waiver to the Foreign Assistance Act relating to Syria’s designation as a state sponsor of terror for Bahrain, Iraq, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Turkey, the United Arab Emirates, and Ukraine. Not without its flaws, the move aimed to enable critical aid and development assistance in sectors ranging from energy and agriculture to technology and healthcare. Other countries, as well as the EU, are using a “step-by-step” approach to the lifting of sanctions on Syria as leverage to ensure the new government is meeting key indicators of a successful and sustainable political transition.

With the stop-work order now in effect, the future of US-backed humanitarian operations in Syria is now in question. The recent waiver issued by the State Department for this order notably does not include stabilization assistance—of which the United States has collectively contributed more than $1.3 billion since the start of the Syrian civil war in 2011—and is defined as multi-sectoral support to “local governance, essential services, and livelihoods and economic recovery.” Experts have noted that these efforts to promote stability in Syria in the coming months is contingent on indicators to the Syrian people that the economic conditions in the country are on the mend under the new government. It is therefore in the United States’ and its partners’ national security interests to aid postwar recovery in Syria to begin the process of improving US-Syria relations, facilitate the return of refugees and displaced Syrians around the globe, and ensure regional stability.

The Trump administration has also issued a series of executive orders on personnel at the State Department and USAID. The administration has placed senior career civil servants on administrative leave, fired institutional contractors, and pressured employees to resign. These include officials who have worked on Syria for over a decade and possess critical institutional knowledge on conflict stabilization, humanitarian assistance, and development in fragile economies.

Aid groups and policymakers are closely monitoring whether additional exemptions or funding adjustments will be made to prevent further disruptions to essential services. The potential consequences of prolonged aid suspensions could exacerbate existing humanitarian crises and create new security risks in a region already facing instability.

Ensuring a stable Syria

Syria is at a critical juncture in its history, and the next few months are essential for the country’s interim authorities to ensure national and regional stability. As Sinan Hatahet highlights in a piece for the Atlantic Council, the United States has an especially vital role to play in Syria’s recovery efforts as this “post-Assad honeymoon” phase fades.

As other post-conflict contexts have demonstrated, foreign aid and stabilization programming—led out of the US State Department and USAID—will be instrumental in determining Syria’s trajectory. To facilitate a stable postwar recovery in Syria, the United States must ensure that US leadership in aid development is not in question. In addition to resuming existing aid programs, there are several steps the administration can take to improve its aid to Syria and better align it with US objectives.

Evaluate how local programs fit into broader US policy and Syria’s evolving political situation.
Ensure aid is aligned with local systems and development priorities as programs are renewed or new ones are developed.
If unwilling for political reasons to increase US aid to Syria, continue Biden administration steps, including taking further actions to permanently roll back sanctions in Syria and to remove barriers for allies and partners to do so.

Postwar Syria faces a precarious economic and security situation and the United States’ assistance—or lack thereof—will play an outsize role in its outcome. For the sake of both the Syrian people and the United States’ interest in a stable and peaceful Syria that does not become a terrorist threat, it is imperative that US aid to Syria continue.

Diana Rayes, PhD, is a nonresident fellow for the Syria Project in the Atlantic Council’s Middle East Programs.

Note: Some Atlantic Council work funded by the US government has been paused as a result of the Trump administration’s Stop Work Orders issued under the Executive Order “Reevaluating and Realigning US Foreign Aid.”

The post The foreign aid freeze poses risks to US interests in Syria appeared first on Atlantic Council.

Donovan, Tannebaum, and Fishman quoted in the Washington Post on US economic coercion and the impact on the dollar

ntursun — Thu, 30 Jan 2025 18:58:09 +0000

Can increased energy sector sanctions pressure Putin into peace talks?

Aura Sabadus — Wed, 29 Jan 2025 20:20:24 +0000

US President Donald Trump has warned Russia that he will impose economic measures including taxes, tariffs, and sanctions unless Russian President Vladimir Putin agrees to end the war in Ukraine. While it is far from clear whether economic pressure alone can bring Putin to the negotiating table, Russia’s oil and gas industry looks to be the most vulnerable sector of his wartime economy.

United States sanctions on Russia’s energy industry have already been tightened in the first weeks of 2025. Just before leaving the White House, outgoing US President Joe Biden fired a parting salvo of comprehensive new sanctions on Russian oil producers, intermediaries, tankers, traders, and ports handling both oil and liquefied natural gas (LNG).

This package was widely seen as one of the most aggressive since the start of Russia’s full-scale invasion. The impact is already being felt globally. Some banks in India, which currently takes around 40 percent of all Russian oil supplied to international markets, are reportedly blocking payments for Russian oil imports. Meanwhile, fleet capacity to service Russian crude exports is expected to shrink significantly due to the latest restrictions.

With oil sanctions also targeting major producers such as Surgutneftegaz and Gazprom Neft as well as more than 180 vessels in the Russian oil fleet, some observers are now predicting that the Kremlin could lose up to $24 billion during the coming year. This would be equal to around one percent of the country’s projected GDP.

These latest sanctions come as Moscow is already adjusting to the end of gas transit through Ukraine, after Kyiv refused to extend a five-year deal that expired at the start of the current year. With the termination of this gas transit agreement, Russia has lost another sizable chunk of the European market.

Stay updated

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

Trump vowed during his January 20 inaugural address to “drill, baby, drill.” Since then, initial steps in support of the United States fossil fuels sector have included lifting the Biden administration’s freeze on export permits for LNG projects.

Many now expect to see more LNG being exported from the United States to Europe, potentially replacing remaining Russian gas deliveries. Increasing US exports at a time when the Russian gas industry is already facing growing obstacles would place Trump in a strong position ahead of negotiations over a possible settlement of the war in Ukraine.

Trump could potentially increase the pressure on Putin by urging the Ukrainian authorities to ban the transit of Russian crude via Ukraine to Hungary. There is currently a bill in the Ukrainian parliament calling on the government to stop oil transit and deprive the Kremlin of up to $6 billion in sales to European buyers. Additional options include a lower price cap, further sanctions on remaining shipments, and expanded secondary sanctions.

The United States may have fewer options in terms of gas-related sanctions. With demand from key LNG importers such as China and India projected to recover in 2025, US exports may be diverted to Asia, leaving Europe more reliant on Russian LNG and pipeline gas. Additional LNG production from Canada’s western coast could create greater supply options later this year, but that may not be enough to satisfy European consumers or address concerns over rising energy bills.

Eurasia Center events

Drones, defense, and diplomacy: Negotiations and the battlefield in Ukraine

Conflict Defense Technologies Europe & Eurasia Politics & Diplomacy

While Trump’s efforts to undermine Russia economically will face a range of practical challenges, there is no question that Putin’s energy empire is looking increasingly fragile.

Russia’s Gazprom in particular appears to be in a difficult position. The Kremlin’s flagship energy company has reported multi-billion dollar losses in the past two years, with this trend likely to worsen in 2025 due to the end of Ukrainian gas transit. The outlook for Gazprom is currently so troubled that the company is reportedly seeking to increase domestic gas prices.

The new United States administration has been quick to signal that it sees the Russian economy as the Putin regime’s most vulnerable point. Trump clearly aims to exploit this weakness in order to end the war in Ukraine. US efforts are likely to focus on the energy industry, which serves as the engine of the Russian war machine.

Ideally, the United States will work closely with the EU and UK in the coming months to expand current sanctions on the Russian energy sector while also working to tighten up the implementation of existing measures. This would send an unambiguous message to Moscow that Russia’s current economic woes will only worsen if Putin rejects a negotiated settlement and refuses to end the invasion of Ukraine.

Dr. Aura Sabadus is a senior energy journalist who writes about Eastern Europe, Turkey, and Ukraine for Independent Commodity Intelligence Services (ICIS), a London-based global energy and petrochemicals news and market data provider. Her views are her own.

European Parliament and United States condemn ‘sham’ Belarus vote

Mercedes Sapuppo — Thu, 23 Jan 2025 18:24:04 +0000

The European Parliament has condemned this weekend’s presidential election in Belarus as a “sham” designed to keep the country’s long-serving dictator Alyaksandr Lukashenka in power. In a resolution adopted ahead of the January 26 vote, MEPs noted the absence of any credible opposition candidates and called for the strengthening of sanctions against Belarus.

Days earlier, the United States said the vote could not be free or fair due to the “repressive environment” in the country. “The United States joins many of our European allies in assessing that elections cannot be credible in an environment where censorship is ubiquitous and independent media outlets no longer exist,” commented US Secretary of State Antony Blinken.

This international condemnation comes as no surprise. Since the early 1990s, seventy year old Lukashenka has been steadily concentrating power in his own hands. For more than three decades, he has fostered an authoritarian political culture in Belarus that closely echoes the Soviet past.

The political climate became particularly oppressive following Belarus’s last presidential election in 2020, which saw opposition candidate Sviatlana Tsikhanouskaya emerge from obscurity to mobilize a grassroots movement demanding change. When the authorities then rigged the vote in favor of Lukashenka, weeks of nationwide protests erupted that threatened to topple the regime.

Lukashenka was ultimately able to cling onto power in 2020 thanks to support from the Kremlin. In the wake of the protests, he launched a ruthless crackdown on all opposition, leading to thousands of arrests and reports of grave human rights abuses. Targets included civil society and the country’s last remaining independent media outlets. Hundreds of thousands fled Belarus to avoid possible persecution.

Stay updated

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

The Belarusian dictator is clearly in no mood to repeat the mistakes of 2020, when his decision to allow a wildcard outsider onto the ballot backfired so disastrously. Ahead of Sunday’s vote, only the tamest of regime-approved opponents have been permitted to participate.

Lukashenka was so fearful of the upcoming election that he “completely cleansed the political field, leaving no room for alternative candidates,” commented Hanna Liubakova, a journalist from Belarus who has been forced to remain in exile since the 2020 protests. “The trauma of 2020 and deep distrust remain high,” she noted.

Tsikhanouskaya, the rival candidate in 2020 who now leads the Belarusian democratic opposition from exile, was similarly critical of the forthcoming vote. “The Belarus dictator’s so-called ‘election’ is nothing more than a sham,” she commented. “We won’t be fooled. All political prisoners must be freed and repressions must end.”

With Lukashenka guaranteed to win Sunday’s vote, the only remaining question is the margin of victory he chooses on this occasion. In 2020, he was officially credited with 81 percent, despite widespread claims that Tsikhanouskaya had actually garnered more votes. “The last intriguing moment in this sham election is how many votes Lukashenka will claim for himself,” commented Liubakova.

Eurasia Center events

Former Assistant Director

Drones, defense, and diplomacy: Negotiations and the battlefield in Ukraine

Conflict Defense Technologies Europe & Eurasia Politics & Diplomacy

Lukashenka’s deepening dictatorship is not only a threat to domestic human rights and democratic values in Belarus itself. The country is also a key ally of the Kremlin and a junior partner in the emerging axis of autocratic regimes that includes Russia, China, Iran, and North Korea.

Minsk and Moscow have enjoyed close relations for decades and are bound together in a broad but vague Union State agreement dating back to the 1990s. Despite this apparent intimacy, Lukashenka has spent much of his reign attempting to maintain a degree of independence by balancing between Russia and the West. However, this strategy collapsed in the wake of the 2020 uprising, which left the Belarus dictator shunned by Western leaders and heavily reliant on Putin for his continued political survival.

Since 2020, Lukashenka has permitted the dramatic expansion of Russian influence over Belarus in a process some have likened to a creeping annexation of the country. He allowed tens of thousands of Russian troops to use Belarus as a base for the February 2022 invasion of Ukraine, and has since begun hosting limited quantities of Russian nuclear weapons. Lukashenka has also been linked to alleged Russian war crimes including the forced deportation of Ukrainian children.

Meanwhile, Belarus is facing accusations of attempting to undermine the European Union through weaponized migration on the country’s western border. According to a recent POLITICO report, Belarus is helping large numbers of migrants enter the EU illegally as part of Lukashenka’s “revenge” for the imposition of sanctions. In response, Poland is beefing up security at the Belarusian border and calling for the EU to take tougher action.

Sunday’s sham election is a timely reminder of the ongoing struggle for basic freedoms against a brutal dictatorship in the geographical heart of Europe. Western governments can play a meaningful role in this struggle by supporting independent Belarusian media, backing human rights defenders, imposing further sanctions, and highlighting the plight of the country’s many political prisoners. While international attention is rightly focused on Russia’s ongoing invasion of Ukraine, Western leaders must not forget that neighboring Belarus also remains a critical front in the fight against resurgent authoritarianism.

Mercedes Sapuppo is an assistant director at the Atlantic Council’s Eurasia Center.

‘Maximum pressure’ sanctions on Venezuela help US adversaries, hurt Venezuelans

William Tobin — Thu, 23 Jan 2025 14:33:08 +0000

DOWNLOAD PDF

The “maximum pressure” strategy employed from 2018 to 2022 against the illegitimate Nicolás Maduro regime in Venezuela did not serve US interests. Stringent oil sanctions imposed on Venezuela forced the retreat of Western oil firms from the country, principally benefitting adversaries. During the maximum pressure campaign, Venezuela’s oil production was rerouted to China at discounted prices, Iran supplied the diluent Venezuela required for oil production, and Russian investors became more critical amid a dearth on Western investment.

A democratic transition remained elusive while repression and human rights violations continued. Venezuelans suffered, US adversaries expanded their influence, and Maduro remained.

The current system of issuing specific licenses for Western oil producers to operate in Venezuela has yielded superior results. The benefits of this policy have been the following:

Venezuelan oil exports have been diverted to friendly nations.
Treasury has increased visibility on all oil-related transactions, decreasing the clandestine shipment of oil through shadow tanker fleets operated by the Chinese defense establishment, Iran, or PDVSA.
Compensation to the regime is limited to taxes and royalties, which are required by Venezuelan law.
The system has enabled the return or reemployment of qualified engineers and technicians to restore production from degraded oilfield infrastructure.

The incoming US administration should prioritize inflicting more harm on the regime and its enablers than the Venezuelan people—or US interests.

To do so, sanctions must be linked to clear objectives. An uncalibrated reapplication of maximum pressure would cede influence to China, Russia, and Iran, while doing little to loosen the regime’s grip on power. Instead, the existing system of specific licenses should be maintained and expanded. To punish Maduro, the administration should continue to target individuals who enable his illegitimate rule, adding to the 180 individuals already sanctioned by the Treasury. A targeted sanctions policy—not maximum pressure—is the only way to ensure that US actions to confront the Maduro regime impose their desired effect, and do not play into the hands of Beijing, Moscow, or Tehran.

AUTHORS

Former staff

William Tobin

Global Energy Center

Africa China

stay connected

Keep up with the latest from the Global Energy Center!

OUR WORK

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

learn more

The post ‘Maximum pressure’ sanctions on Venezuela help US adversaries, hurt Venezuelans appeared first on Atlantic Council.

Daleep Singh outlines five principles to guide—and constrain—the use of economic statecraft tools

Atlantic Council — Thu, 16 Jan 2025 17:58:10 +0000

Watch the full event

Public Event Thu, January 16, 2025 • 10:00 am ET

The future of economic statecraft with Daleep Singh

A conversation on the future of economic statecraft with Deputy National Security Advisor Daleep Singh

Economic Sanctions Economy & Business United States and Canada

Speaker

Daleep Singh
White House Deputy National Security Advisor for International Economics

Moderator

Kimberly Donovan
Director, Economic Statecraft Initiative, Atlantic Council

Introductory remarks and presentation

Josh Lipsky
Senior Director, GeoEconomics Center, Atlantic Council

Alisha Chhangani
Assistant Director, GeoEconomics Center, Atlantic Council

Mrugank Bhusari
Associate Director, GeoEconomics Center, Atlantic Council

Event transcript

Uncorrected transcript: Check against delivery

JOSH LIPSKY: Good morning, and welcome to the Atlantic Council.

I’m Josh Lipsky, senior director of the Atlantic Council’s GeoEconomics Center, and it is my honor to open today’s special event on the future of economic statecraft with White House Deputy National Security Advisor Daleep Singh.

Today is a special day for us here at the Council. It marks the four-year anniversary of the creation of the GeoEconomics Center and the three-year anniversary of the launch of the Economic Statecraft Initiative.

When we began this project in 2020 many people asked us what is geoeconomics and we explained that it is the fusion of national security, economics, and finance. We built a team and produced cutting-edge research on digital currencies, China’s economy, sanctions, the future of the Bretton Woods system, and more.

And then in 2022 Russia invaded Ukraine. The G7 responded to Putin by deploying the tools of statecraft in a unified and unprecedented way. Suddenly we did not need to explain what geoeconomics was anymore because the world was seeing it on full display every day. And here in the United States we were reminded that geoeconomics was not a new idea, but an old idea that the West had the luxury of forgetting in the post-Cold-War era.

But our guest today didn’t need any reminding. He is a geoeconomist at heart. His career in public service and the private sector is a model for the kind of multidisciplinary expertise that is required to confront today’s challenges. In the Obama administration, he served at the Treasury Department as acting assistant secretary for Financial Markets. During the outbreak of COVID-19, he was executive vice president and head of the markets group at the New York Fed. That’s not a position many people leave, by the way. But when President Biden asked him to become deputy national security advisor and deputy director of the National Economic Council, a role that also required him to become both G7 and G20 sherpa, Daleep did not hesitate.

Over the past four years he has served two tours in the White House and in between held senior roles in the private sector. And what a four years it has been. Daleep has been at the center of some of the most challenging international economic questions of our time. What happens when a G20 country’s sovereign reserves are blocked? How can supply chains built over decades be reshaped in a matter of months? How does the US confront the practices of a country like China without destabilizing the global economy?

He has helped answer these questions in a way that demonstrates a type of creative economic thinking that would make Keynes proud. He is not bound by what has happened before and can enable those around him—both within his own government and in allied governments around the world—to see solutions others have missed.

It is fitting, then, that after four years of hosting senior Biden administration officials for key speeches, from Brian Deese announcing the vision for US industrial policy to Secretary Yellen announcing the friend-shoring policy, our final guest of the Biden administration is Daleep Singh.

Following Daleep’s speech, my colleague, Kim Donovan, director of the Economic Statecraft Initiative, will interview Daleep, and then our team will—in true GeoEconomics Center fashion—launch all-new research on the status of the dollar as a global reserve currency.

But first, Daleep, the Atlantic Council floor is yours.

DALEEP SINGH: During this century, major powers have deployed economic sanctions and other restrictive tools of economic statecraft to an unprecedented degree. The number of sanctioned individuals and entities across the world has increased by an order of magnitude since 2000. Tariffs and other trade restrictions have tripled over the past five years. The percentage of OECD countries screening investments in sensitive sectors has risen over the past decade from less than a third to more than 80 percent, while the number of countries with sophisticated export controls has quadrupled since their inception during the Cold War.

These trends are global, and while precise data are difficult to source in many jurisdictions, the growth of restrictive economic measures is accelerating both from the United States and our strategic rivals. China, despite having issued the lowest cumulative number of explicit sanctions among major economies, increased its designation activity by almost 100 percent last year—the highest rate of growth within this peer group—on top of its existing array of informal and extralegal barriers such as consumer boycotts, tourism restrictions, phytosanitary standards, and corporate pressure. Russia, for its part, now applies its own sanctions regime at scale and is routinely weaponizing its commodity exports—including nickel, tin, titanium, refined uranium, and, of course, oil and gas—to coerce trading partners and adversaries.

In my judgment, the trendlines are set to extend, for three main reasons.

First, sanctions and other restrictive measures are symptomatic of new and durable geopolitical realities. As Josh just mentioned, we’re no longer in the post-Cold War, unipolar order that underpinned the so-called “great moderation” of the global economy. Instead, we’ve returned to the “old normal” that prevailed for much of modern history, in which divergent forms of national governance and political ideology lead to intense geopolitical competition, less opportunity for cross-border cooperation, and greater risk of cross-border conflict. Since most of today’s “great powers” are also nuclear powers, barring catastrophic miscalculation, the logic of mutually assured destruction suggests that direct competition is likely to continue playing out mostly in the theaters of economics, energy, and technology, rather than in kinetic conflict on the battlefield. Set against this backdrop, the range of potential outcomes—the promise and peril for major powers to rise and fall—has widened, ushering in an era of more active use of economic tools to shape the course of events.

Second, these trends reflect opportunity. Though we’ve left the era of hyperglobalization, the world economy is still nearly as connected as ever—which provides scope for economic powers to break existing linkages, or threaten to do so, in exchange for geopolitical leverage. The ratio of global trade to global GDP has plateaued not far from the peak reached earlier this century. Worldwide foreign direct investment declined sharply after the pandemic but is rebounding and still exceeds the long-term historical average at well over a trillion dollars per year. Technological diffusion across borders remains largely unabated for all but the most sensitive items, in part because US restrictions on technology remain narrow and targeted.

Third, the succession of cross-border shocks this century—most prominently the COVID pandemic, but also financial crises, climate change, mass migration, and acute episodes of energy and food insecurity—have all punctuated the sense among policymakers that the singular pursuit of maximal efficiency and minimal cost will leave critical supply chains insufficiently resilient against a more volatile and uncertain global backdrop. Here in the United States, the Biden administration centered its geoeconomic strategy on making long overdue public investments at home and building partnerships abroad to strengthen and scale our productive capacity, but we also imposed targeted tariffs in strategic sectors to level the playing field against competitors playing by a different set of rules. Under the same rationale, many other leading economies have also implemented a similar mix of policies—including tariffs—to “de-risk” their supply chains from disruption and distortion.

Indeed, there is a growing policy reflex across the world to navigate a more uncertain and turbulent world by applying a sanction, a tariff, an export control, or an investment restriction. As President Biden reminded us, however, these measures are never costless. In each instance, they weaken or sever economic bonds that took decades to build, with immediate and sometimes unintended costs for households and businesses. And though in our administration we’ve deployed restrictive measures in service of a higher geopolitical objective—not as an end to themselves—their repeated use can invite skepticism about American stewardship of the global economy.

To the extent that our use of restrictive tools is perceived as arbitrary or illegitimate, the incentive to “hedge” against perceived dependency on the United States will rise. China and Russia are making every effort to increase their and others’ capacity to do so in finance, technology, and other domains in which the United States has a dominant position.

Take, for instance, China’s longstanding effort to build a cross-border payment architecture without any nexus to the US financial system—and therefore outside the reach of US sanctions authorities. Several nonaligned G20 economies have already signed up for this platform, and while the volumes transacted are far from reaching a threshold of macroeconomic significance, they have already surpassed a threshold of geopolitical consequence, with a run rate large enough to intermediate a significant portion of Russia’s procurement of dual-use items from China that are finding their way to the battlefield in Ukraine.

In addition to strengthening the incentives to hedge against the sources of American economic power, the unconstrained use of restrictive economic statecraft also invites efforts by adversaries to deploy these same tools to target our own and our allies’ vulnerabilities.

This isn’t conjecture, but rather a description of reality. The PRC is by far the world’s largest supplier of manufactured goods, accounting for almost a third of global manufacturing in value-added terms—equivalent to the combined production capacity of the United States, India, Japan, Germany, and South Korea. From this position of strength, China has already weaponized its economic leverage in its attempts to coax geopolitical concessions from smaller trading partners such as Lithuania, Australia, Japan, and South Korea. It also has untapped potential to exploit chokepoints in a wide range of supply chains in which it has dominant market share and where the current productive capacity of the United States and our allies is limited for now, including medical equipment, ship-to-shore cranes, solar panels, EV batteries, pharmaceutical ingredients, lagging-edge semiconductors, and so on. Russia restricted its export of enriched uranium last November, creating the risk of disruption to our and allied nuclear power production, and for years has attempted to coerce Europe by modulating its supply of natural gas. Iran and its proxy forces have repeatedly exploited their control over the [Strait] of Hormuz and Red Sea shipping lanes to pressure the United States and its allies.

Against this backdrop, we have an urgent need to implement a set of principles that guide and constrain why, how, when, and to what extent we deploy restrictive economic tools. I believe this effort should have three overarching goals: first, to sustain the credibility and the potency of America’s economic statecraft toolkit for when we need it most; second, to prevent an escalatory tit-for-tat in the use of restrictive tools that could make the United States and the world worse off; and third, to update the rules of the international economic order we’ve worked to build and sustain for over seventy-plus years.

I suggest we seek to embed five principles in the practice of restrictive economic statecraft, first in our own conduct, and then among allies, nonaligned countries, and eventually our adversaries.

First, economic and financial sanctions should be used sparingly and in service of clearly defined and achievable geopolitical objectives.

Sanctions are a tool, and often a force multiplier, but never a standalone strategy. They should be designed and deployed in service of a geopolitical objective that policymakers outline prior to implementation and assess periodically afterward.

Prior to articulating the objective, policymakers would be well served to analyze and explain—at least internally—how they expect an economic measure to influence the decision-making calculus of the target, how they are expected to reinforce other levers of foreign policy—military, diplomatic, humanitarian—and the degree to which a multilateral coalition is necessary for their success.

These objectives could be pursued before an adverse “trigger” event occurs, either to deter a target’s malign behavior, degrade its capabilities, or both. Alternatively, or additionally, these measures can be imposed after a trigger event to impose costs, change the calculus of the target, or create leverage for an eventual diplomatic settlement.

In every instance, the objective should be achievable. Efforts to engineer regime change through maximalist sanctions, for example, predictably fail to persuade the target, often an autocrat, that the benefits of sanctions relief outweigh the costs of giving up power—which is typically jail, or worse.

Relatedly, the individuals or entities being sanctioned need to know why and for what behavior they are being penalized, so that the consequences of an action—whether it’s support for a terrorist organization, a serious human rights abuse, or the prosecution of an illegal war—are understood, such that the key actors can ultimately seek the reversal of these sanctions through a change in behavior.

Second, the force of restrictive actions should be responsibly calibrated to their expected impact, spillovers, and associated uncertainties.

As the leading economic and geopolitical force in the world, restrictive measures imposed by the United States are capable of imposing great and lasting harm, producing ripple effects that are impossible to identify fully in advance. The force of our restrictive actions must be calibrated in proportion to their expected impact, their spillover costs, and the uncertainties involved.

This requires the US government to continue building the analytical muscle to conduct rigorous, data-driven analyses on historical and imagined scenarios in which restrictive measures could be implemented—whether unilaterally or multilaterally, alone or in tandem with military and diplomatic levers, before or after a trigger event.

Assessments should highlight the degree to which the range of outcomes depends on the breadth of the implementing coalition, the target’s potential to mitigate the impact—for example, by substituting the good or service with domestic supply or import from third countries—and our own vulnerabilities and potential for risk mitigation in an extended and escalatory conflict.

Third, policymakers must consider explicitly and upfront the efficacy of restrictive measures on the decision-making calculus of the target.

The design of restrictive measures is typically prepared by those with expertise on how to impose costs on the macroeconomy and the financial system of the target while minimizing spillovers to the US and the global economy. While this is a vital and necessary contribution, the ultimate success of restrictive measures depends on how these costs are likely to influence the decisions of key actors in the target country or entity. It also depends on the extent to which these actors are influenced by their economic, political, social, and humanitarian impact on political elites and the civilian population of the target. Meeting the analytical test of sufficiency requires the upfront and explicit integration of economic analysis with political intelligence.

Fourth, restrictive measures should be maximally coordinated, both with domestic stakeholders and international partners.

Unity with partners multiplies the impact of restrictive measures—due to the higher impact it delivers on the target, the reduced opportunity for evasion, and the perceived legitimacy of the action. This last point on legitimacy is critical: It makes clear that our purpose is not the unilateral exercise of brute economic force, but rather the collective defense of shared principles that underpin peace and security around the world.

It’s also critical that restrictive measures are explained to the range of stakeholders that transmit the force of these measures to the real world—including private sector, the regulatory community, and central banks. Private sector actors, in particular, are often the “front lines” of implementing financial sanctions and export controls, and we depend on their cooperation and their sense of civic duty to spot and counter circumvention. In exchange, we owe them clarity and coordination.

Finally, restrictive measures must be flexible and adjust to unintended consequences, evolving economic and financial conditions, and the reaction of the target.

Even after exhaustive analysis and careful design, restrictive measures are blunt tools that are typically implemented under conditions of high uncertainty—often with little or no precedent from which to make confident projections about their likely effects.

It should surprise no one when the impact delivered, or spillovers caused, are materially different than expected. Humility requires us to admit when we’re mistaken in our judgments and to course correct as needed.

Separately, the context in which restrictive measures are applied inevitably evolves. The coalition that implements sanctions may grow or decline. Economic and financial conditions may change for the better or worse, both in the target country and within the implementing coalition. Political and power dynamics within the target may harden or soften, along with the behavior we seek to influence.

All of these are reasons why we must have timely and demonstrated pathways to ratchet higher or lower the scale and scope of restrictive measures, to adjust the channels through which we deliver impact, and to stand ready for mitigation of unanticipated risks or costs.

Under the leadership of President Biden and National Security Advisor Jake Sullivan, we’ve made important strides in putting these limiting principles into practice—not in a formalistic sense, but in real-time as events unfolded—and often in ways that have never been made public. Each of the principles I’ve just described animated the design and the execution of the sanctions program against Russia; the intuition of the oil “price cap” coalition; the logic of the “small yard and high fence” for our export controls and our investment restrictions; and the targeted nature of the tariffs we deployed against China in strategic sectors.

I’d like to close my remarks, and my time in government, with three recommendations on how to institutionalize these practices. Of course, it’s not going to be for me or us who are still in the Biden Administration to decide whether and how these get implemented, but I believe emphatically they would each serve to advance our shared bipartisan interests to safeguard America’s national security while enhancing our economic prosperity.

First, much as we restructured our national security apparatus amid rising tensions in the aftermath of the Second World War, this is a moment to evaluate whether the US government’s organizational design for conducting economic statecraft is fit for purpose. Too many of our tools and too many of our subject matter experts are spread across too many agencies without a unifying set of incentives, objectives, and metrics for strategic success. Japan pioneered the elevation of economic security to a cabinet level in 2021, and we would be wise to consider following suit in this new era of geoeconomic competition—particularly so that we could strike a deliberate balance between restrictive tools that impose economic pain and positive tools that offer the prospect of mutual economic gain.

Second, we have to continue to upgrade what I call the “analytical infrastructure” of economic statecraft—the personnel, the technology, the data, and connectivity to continually assess the efficacy, limitations, and tradeoffs of using our restrictive tools; to “stress test” and wargame their use against historical and simulated scenarios; to anticipate where and how evasion is likely to occur and build readiness for countermeasures that could be deployed in real time; to build surveillance capabilities that provide early warnings on developing economic security threats; and to maintain the capacity to execute at pace, even if multiple conflicts emerge at once. While these and other demands on the practitioners of economic statecraft have grown exponentially, their available resources have increased only at a linear rate, and often much less.

Finally, we should begin a series of conversations that aim to forge a common vision on the rules of engagement for why, when, how, and to what extent restrictive measures are used across the world. We should start with our allies and then seek to build consensus with nonaligned or multi-aligned countries. Ultimately, in the same spirit of the Geneva Conventions, we must include our adversaries in a good faith effort to avoid creating a fractured economic system that damages lives and livelihoods across the world and brings us closer to the hot conflicts that economic statecraft seeks to avoid. Thank you.

KIMBERLY DONOVAN: Great. Hi, Daleep. Thank you so much for joining us today, for your remarks and discussion about the future of economic statecraft. And thank you to all of you joining us in the audience. If you have questions for the deputy national security advisor, please go to AskAC.org.

So, Daleep, in your remarks you really reminded me of comments that former Treasury Secretary Jack Lew made back in 2016, where he warned of the risk of sanctions overuse and overreach, and even stated that we must be strategic and judicious in how we apply sanctions to challenges around the world. So, considering that we’re nearly ten years after Jack Lew made these remarks, and you offer a similar diagnosis and recommendations on how to address these issues, it’s just interesting to me that we continue to raise the alarm on the potential overuse and overreach of sanctions, in particular, yet we continue to increasingly use them. So I was wondering, I mean, why are policymakers continuing down this path, considering the risks at stake?

DALEEP SINGH: It’s a great question. I have, I mean, of course, unending respect and admiration for Jack Lew. He was spot on in 2016. His words have aged well. I would say the context has changed. All else isn’t equal. You know, the demand signal for sanctions and for restrictive economic statecraft, it’s just flashing in neon lights now. You know, and the supply of sanctions and economic statecraft, the bureaucratic capacity to do so and respond to the demand signal, it’s increased. So if you want to think about sanctions as having a clearing level, as any other market instrument would, the equilibrium level has risen. And I would say it’s probably going to stay high because it’s symptomatic of durable structural forces, all of which reinforce each other.

And I’ll just tick off a few. First, and most obviously, geopolitical competition has intensified. So, what does that mean for sanctions? Well, the risk of cross-border conflict is higher, the scope for cross-border cooperation is lower. And, you know, because today’s great powers are nuclear powers, barring catastrophic miscalculation, the logic of mutually assured destruction suggests the path of least resistance when conflict emerges is for that conflict to play out in the theater of economics more often than it does in terms of a kinetic conflict on the battlefield. And that’s one demand signal for sanctions.

But I would say, you know, just as we’re competing more intensely across countries, as we have in at least thirty years, many countries, including democracies, are also being pulled apart from within due to domestic political polarization. And that’s relevant to sanctions because it feeds—it feeds the geopolitical competition I just referenced. And it also makes it more likely that sanctions and restrictive statecraft get used. If there’s less weight in the political center, there’s probably, in my judgment, more willingness to subordinate positive-sum economic thinking for zero-sum geopolitical flexing.

And then think about technology. You know, the pace of change is dizzying. I mean, Jason Matheny uses the term, that I think a lot of policymakers think is about right, we’re all apocaloptimists now. You know, you could be wildly optimistic about technology, as long as it doesn’t make us extinct. But, you know, when you think about AI, or leading-edge semiconductors, or biotech, or quantum, each of these technologies has the potential to reorder the league tables of military preeminence. And so it’s not surprising that we’re seeing less technology diffusion across borders for commercial purposes and more controls to safeguard national security.

Take energy, another structural force. I hope all of us in the room still think it’s urgent and necessary that we make a transition from fossil fuels to clean energy. But it’s very unlikely the transition is orderly. Even under the most optimistic estimates, clean energy sources are not likely to fully substitute for fossil fuel energy in at least several decades. And meanwhile, the investments in fossil fuel production have plummeted. Well, that means we’re going to have periodic imbalances between energy supply and energy demand. And that creates opportunity for producers of energy to weaponize, whether it’s fossil fuels or clean energy supply, for geopolitical leverage.

And the last force I would just mention is—it’s not as much of a force—but the residue of the succession of shocks we’ve had this century, most obviously the pandemic but also Russia’s invasion of Ukraine. It’s left a psychological scar. And I would say it’s changed the psychological balance of risks for how policymakers and private sector leaders think about managing supply chains. So I think there’s a—there’s just a durable shift away from global supply chains that have a singular focus on efficiency and minimal costs. And they’re now going to be more geared around geopolitical alliances that have more regard for resilience.

I think those are the structural forces that are driving up the demand for sanctions. It’s not that the world hasn’t paid close attention to the words of Jack Lew, or what I’ve been saying. We’re just in a different environment. It’s even more reason why we have to lay down a set of principles and a rule—and a set of rules that avoid a global race to the bottom in the use of these tools.

KIMBERLY DONOVAN: I 100 percent agree. And I really appreciate the context for this. And actually wanted to pick up on your point of setting these principles, because I think that really is a very strong case for how we go forward with the use of economic statecraft tools. And you’ve laid out very sound recommendations that would ultimately, I think, strengthen our economic statecraft toolkit. And I was just wondering, from your experience, I mean, why have these concepts, at least appeared from the outside, to be difficult to really implement and enforce within the US government?

DALEEP SINGH: Yeah, I think about this a lot. I don’t know the answer. Let me give you four possibilities. One is policy is just—it’s all about tradeoffs. You know, when there’s a conflict that emerges, leaders want options. Often the least-worst option is to impose a sanction, or some related restrictive measure. And sanctions now fill the policy space between going to war—too risky, too costly—and merely issuing words of disapproval—you know, too meek, too soft. I think there’s also a time consistency issue. You know, the most profound costs of using restrictive economic statecraft are felt over the long term. The political economy benefits of doing something, you feel those immediately.

Third it’s—I mean, I kind of hinted at this before—it’s the path of least bureaucratic resistance, because when we implement sanctions or restrictive measures we use executive authority. It’s considered an extension of foreign policy under the Constitution. We get to decide. By contrast, if you use a positive tool of statecraft—you know, public investments, infrastructure finance, debt relief—those involve taxpayer dollars, and therefore Congress. It’s not surprising that there’s an imbalance between restrictive and affirmative tools.

And the last—I mean, the last factor that I would—I would pose for consideration is that this is a collective action problem. You know, if a major power decides unilaterally to constrain its use of restrictive measures according to a set of limiting principles but no other major powers do so, that country is putting itself at a strategic disadvantage. If you want to think about it in geoeconomic terms, you’re bringing—you’re bringing a plastic knife to a gunfight.

You know, so there is—there is a collective action problem. The only way to solve that problem is if a leading economic power like the United States decides to lead, and tries to coordinate and build trust towards something that can do an economic disarmament.

KIMBERLY DONOVAN: Thank you. And I’m really glad that you raised the affirmative economic statecraft tools because we’ve been doing a lot of research over the past couple years on what we’ve called positive economic statecraft—so the inducements such as development or investment tools that the US in particular can leverage to advance, you know, different foreign policy and national security objectives. Do you see positive economic statecraft tools, like, playing a significant role in the future of economic statecraft? And I mean, how do we kind of get around some of the challenges that you raised on, you know, executive versus legislative authorities?

DALEEP SINGH: Gosh, they have to. It would be one of the—one of the biggest strategic mistakes we’ve made in recent history not to place emphasis on building out the affirmative toolkit, because, again, let’s just step back. We’re in this intense geopolitical competition. Russia and China are both—they have both expressed and revealed a desire to disrupt the US-led order. We and our allies are pushing back. But there are a large number of non-aligned countries that are increasingly hedging their bets, right: India, Indonesia, Saudi, UAE, South Africa, Turkey, Brazil, Argentina, Mexico. It’s a long list, right? And our use of restrictive economic tools, they are necessary and they need to be principled, but they’re not going to win hearts and minds. You know, the far more potent tool if we want to attract countries into our strategic orbit is to use positive economic tools.

Now, why don’t we use them more often? I gave you one of the reasons. It’s bureaucratic friction. And you know, we—the Constitution requires us to consult with Congress, and there’s a lot of dysfunction in Congress and disagreement right now.

But also, I mean, there’s a—there’s a market failure. There is a problem of short termism in the private sector. If you think about projects that have—economic projects that have the greatest strategic value for the United States, whether it’s a technology moonshot like nuclear fusion or enhanced geothermal or post-quantum cryptography; or whether it’s s piece of critical infrastructure like ship-to-shore cranes or legacy semiconductor supply chains, resurrecting those, or just having a mining capability; a lot of these are sort of like hardware projects that require large upfront capital investment, they have long time horizons before they begin to recoup returns, they’re highly complex, they involve a lot of regulatory risk, and you know, a lot of early-stage private financiers say I can get superior risk-adjusted returns over a much shorter horizon by investing in software or apps. And so a lot of these projects—we can’t harness the power of the most innovative and dynamic financial system in the world for the projects that matter most to our national security.

So why don’t our public authorities fill the gap? Well, I mean, most of them aren’t really designed to be flexible, strategic investment authorities. The DFC—the Development Finance Corporation—is our flagship overseas investment vehicle, but it’s largely restricted against investing in countries that are upper middle income or high income. Well, 75 percent of the countries in Latin America and the Indo-Pacific are above that income threshold. Ex-Im and the Trade and Development Agency both are by mandate focused on promoting US exports, which is not the same thing as promoting US strategic objectives like technological preeminence or energy security or supply chain resilience. The Millennium Challenge Corporation and USAID have explicit development mandates; again, that’s not the same thing as what I’m talking about.

So we have a choice, either reimagine our existing institutions or develop new tools. I’m kind of agnostic as to what we do, but my bias would be that we should invent new tools. We should have a flexible, strategic investment authority that has the capacity to make investments where there’s a market failure, to invest at pace and scale in ways that allow us to compete. I think we should have much more frequent use of sovereign loan guarantees for middle-income countries so that we have a concessional lending instrument. I think we should consider having a strategic resilience reserve; kind of reimagine the Strategic Petroleum Reserve but focus on critical minerals and specialized technological inputs that we need, et cetera, et cetera.

But you know, we do have this unfortunate perception in much of the developing world that we show up with a long checklist of requirements before we invest and other countries have a blank checkbook. That’s a recipe for losing.

KIMBERLY DONOVAN: That’s an—you know, you raised this in your—China, specifically—in your remarks, and at least from my perspective, looking at the Belt and Road Initiative and where China is using its own economic statecraft rules to influence different countries. But I kind of wanted to switch gears a little bit where in your remarks you called out China from a cross-border payment project—

DALEEP SINGH: Yeah.

KIMBERLY DONOVAN:—and mBridge as one example of that. I mean, could you discuss, what has the US done in the past four years to kind of address advancements where China has made in a cross-border payment, and what should the US be doing going forward on that?

DALEEP SINGH: Oh gosh, ask me in one week. So mBridge—I mean, for everybody’s context, I mean, it’s the most advanced CBDC platform in the world. You know, it’s addressing a genuine market need. It’s faster, cheaper, less frustrating, if you want to move money across borders, than using the legacy dollar-based architecture. China, Hong Kong, Thailand, the UAE, Saudi have all joined the platform. Others are considering doing so. And it allows these countries, potentially others, to move money across borders to address the market need I referenced, but also potentially to sidestep any nexus with the US financial system.

Most worryingly—I mean, the BIS just pulled out of this project a few months ago, which means China now can exert tremendous leverage in setting the standards for this platform in terms of privacy, security, interoperability, and the enforcement of US sanctions.

So what should we do? We should compete. You know, we should innovate. We should build a better mousetrap or at least a prototype for a mousetrap that reflects our standards for privacy, for security, for interoperability, for illicit finance, counterterrorism, US sanctions enforcement, that leverages the most advanced technology, distributed-ledger technology, that brings in the major central banks of the world—Fed, ECB, BOJ, BOE—and that also creates a race to the top with privately issued dollar stablecoins. We can do all of those things, and we can bring in—Josh, you’ve written about this with Ananya—and we can get SWIFT into this conversation. This is the classic—this is the classic innovator’s dilemma. When you have an incumbent that’s been dominant for fifty years, it’s hard to reinvent yourself as more than just a messaging service, but it needs to become a messaging and a settlement service, just like SIPS, if we’re going to compete.

Now, this—all of these—all of these items, all of these lines of effort I’m mentioning were part of the implicit push of the digital assets executive order we announced in 2022, but the truth is—the truth is we’ve moved too slowly, too incrementally, and what we’ve done is utterly lacking in ambition.

KIMBERLY DONOVAN: That’s a great diagnosis—and hopefully—

DALEEP SINGH: That’s—

KIMBERLY DONOVAN: No, it’s very fair.

DALEEP SINGH: You know, truth-telling time.

KIMBERLY DONOVAN: Yes, absolutely.

If I can stick on China for a minute, I did go back and look at the Transatlantic Forum that we host every year—and you’ve been a huge part of this and we very much appreciate all of your support with it. So back in 2022 when we first launched the forum in Frankfurt, you did say that there was no country too big to sanction.

DALEEP SINGH: Yeah.

KIMBERLY DONOVAN: And now that—I know you’ve been in and out of government, but just—do you still feel that that’s the case?

DALEEP SINGH: Absolutely. But I mean, I—if I didn’t say it then, I should have—you’d better know what you’re getting into, right?

Because, you know, sanctioning Russia is not like sanctioning—sorry, sanctioning China is nothing like sanctioning Russia. It’s economy is ten times larger, the banking sector is thirty times larger, it’s got three trillion dollars of foreign reserves, multiples more than that in domestic savings. You know, it’s got all the chokepoints I mentioned in my speech, but it’s increasingly becoming a peer competitor in foundational technologies. It has enormous amounts of soft power with its development finance portfolio.

So this speaks to the need for the analytical muscle to simulate what does an escalatory tit-for-tat with China look like in a multiplayer, multistage contest that plays out over the course of years? And do we have the tools, do we have the defense mechanisms, do we have the kind of coalition that we would need to prevail? And you have to compare that path relative to other levers that you might deploy in a trigger scenario—military, diplomatic, et cetera.

I think you will come to the conclusion that there is no knockout blow that you can deliver without enormous spillover costs that may be unacceptable to Western democracies. And so we’d better try to avert that type of scenario as best we can.

KIMBERLY DONOVAN: That’s an—I really appreciated your points in your speech about the data-driven economic analysis that’s needed in this space, and I know at the GeoEconomics Center we work closely with Rhodium and try to do that on the—understanding the China front.

But, you know, I feel like some in our audience may actually be surprised to know that the US government doesn’t currently do a lot of this analytic work itself before it rolls out different sanctions packages and so I was wondering if you could talk with us a little bit of, like, why we haven’t as a US government really undertaken this type of in-depth economic impact assessments in the sanctions space which, you know, on the regulatory side is usually a huge requirement.

And then also if you could, you know, talk with us about, you know, how do we currently measure the impact and effectiveness of sanctions and identify where we need to kind of alter course.

DALEEP SINGH: Sure. I didn’t mean to suggest we don’t do this type of analysis at all.

KIMBERLY DONOVAN: I know. Yeah.

DALEEP SINGH: And I want to give kudos because the office of the chief economist at the State Department and the sanctions economic analysis unit at Treasury they’ve really ramped up and they’re doing fantastic work. It’s been instrumental for everything that we do.

But I just think we have got to strive to have the most sophisticated financial, economic, and political modeling on Earth. We have to. We can accept nothing less than having the ability to think about exactly what I just described.

If we’re in an escalatory tit for tat with a major economic power in which we and they are using sanctions, export controls, tariffs, investment restrictions, price caps, or some variation of price caps how does that play out over the course of time?

You know, if we apply pressure where our strengths intersect with the targets’ vulnerabilities and they do the same against us can we toggle that analysis, and, again, this should all be probabilistic, as I mentioned in my speech. Point estimates will be close to useless.

But we should have scenarios that think about how to toggle the estimates based on the size of our coalition, the size of the targets’ coalition, their ability to respond with monetary and fiscal responses, their existing buffers in terms of domestic production capacity. Can they import a product that we have controlled from third countries? Are we implementing sanctions by themselves or do we have other levers that we’re deploying at the same time? How do you attribute the relative weighting of those measures?

You know, that’s the kind of—and then we’ve got to imagine—we’ve got to also—beyond that analysis we’ve got to imagine scenarios that never happened before and what we’ll find, I think, from that type of infrastructure is we’ll recognize where we do need new tools, new defense mechanisms, new forms of coordination, if we’re going to prevail using economic statecraft in a variety of scenarios.

That we don’t have. We’re going to need more resources, we’re going to need more technology, we’ll need more expertise, and we don’t have a lot of time. So I do think this is urgent.

KIMBERLY DONOVAN: I agree, and it’s been really interesting just being in this space for so long where you look at the defense, you know, budget and, you know, trillions of dollars and then Treasury and Commerce. I mean, as you noted, like, their budgets have stayed pretty consistent in resource levels. So, hopefully, that’s an area for continued growth.

DALEEP SINGH: Yeah. I mean, we have—I mean, it would be the best bang for the buck that I can think of in our national security budget to upgrade the analytical infrastructure that exists at Treasury, Commerce, other departments, or just even third parties that can help us.

I can’t think of many other better uses. I mean, just to give you an idea, OFAC is still using IT systems that were built in the 1970s. You know this.

KIMBERLY DONOVAN: Yes.

DALEEP SINGH: That cannot continue to be the case.

KIMBERLY DONOVAN: Yeah. No, it’s—I a hundred percent agree with you.

So, like, while we’re still talking about sanctions I do want to highlight the fact that the Biden administration just ruled out very significant sanctions on Russia’s energy sector as well as different Venezuelan officials and in Sudan just over the past couple weeks and, you know, I wanted to get your thoughts on why are these sanctions so significant and why were they rolled out in the final weeks of the administration versus maybe earlier.

And do the sanctions that have been put in place, especially Russia oil sanctions and, like, the wind down with general licenses coming, do you think that these sanctions kind of follow the principles that you’ve laid out in your remarks on kind of recognizing the economic impact?

DALEEP SINGH: Yeah, I do. I mean, so why now?

I’ll start with Russia. The context changed. You know, for much of the—at the beginning of the war, the situation we faced was very different. Russia was the third-largest supplier of oil and gas to the world. Global energy supplies were very tight.

And so while we cut off our import of Russian energy imports within a couple of weeks after the invasion, and we soon thereafter surged to the tune of 180 million barrels from our SPR, our supply of oil to the world, the thought of—the idea of cutting off Russia’s exports to the rest of the world, that struck us as potentially self-defeating because it would likely have created a global shock to energy and food prices that would hurt millions of innocent people across the world, principally the most vulnerable members of society.

And even if the quantity of exports that Putin could sell to the world was reduced, the price spike could result in him benefiting the most in terms of energy export revenues, while at the same time inflating the cost of gas and energy at the pump. So we took a far more nuanced approach. We unveiled the price cap at the end of 2022 to try to limit the revenues that Putin could receive from exporting energy, while keeping the global supply of energy steady.

OK, so the situation is now very different. Most forecasters expect that global energy supply will comfortably exceed global energy demand over the next year. There’s plenty of spare capacity, both within OPEC+ and outside of OPEC+ if more production is needed. And, you know, the global inflation backdrop is also much improved. Here in the US, it’s down two-thirds from the peak. So we felt like the risk-reward of hitting Russia’s oil exports directly was much more favorable.

So the series of actions, not just what we announced last week, to really target every node of the production and distribution chain—two of the largest four oil producers, 183 vessels, dozens of oil service field—oil service providers, traders, a port that was receiving—knowingly receiving, sanctioned Russian energy—that, plus the designation of Gazprombank, and the removal of, you mentioned, General License 8, the energy exemption on our banking sector sanctions, all of those were done in the context of this changed reality.

And the geopolitical purpose, coming back to the principles, has always been the same. I mean, in the short term the way I’ve always thought about it is maximize the costs on Putin for prosecuting this war, subject to an acceptable amount of spillovers, to degrade over the medium term his capacity to exert influence and project power. And then, third, over the long run, create a demonstration effect for any other autocrat that wants to redraw borders by force. That’s still what we’re trying to do with these sanctions.

And if you want to make it really kind of short term, we’re trying to put Ukraine in the best possible position at the negotiating table, while at the same time increasing its staying power through other actions that we’ve taken to surge military assistance through the end of our term, but also to fulfill our commitment with the G7 to provide fifty billion dollars to Ukraine using the interest earned on frozen Russian reserves. In totality, that’s what we’re trying to do, is to change Putin’s calculus about the cost of continuing this war while giving Ukraine the best possible position to negotiate a just and lasting peace.

You mentioned a couple of other things that we did. I’ll just quickly—so with Venezuela, the actions that we announced were really an attempt to take a multilateral stand against the sham election. So the UK and the EU joined us in these measures. The EU had not done anything like this in a number of years. So it was—it was a big deal. Frankly, we’ve offered an off ramp to Maduro for some time. If he was willing to move in the direction of democratic norms, we were willing to relax sanctions. He chose not to do so. And that’s unfortunate. I think we inherited the maximalist sanctions regime. Put us in a bad position. And I think we’ve been trying to work our way out of it.

With Sudan, you know, the State Department found that Sudan’s Rapid Support Forces had committed genocide. That’s a very high bar. And so we responded. And then with Hungary, we announced a sanctions designation against one of Orban’s top aides who was the subject of a Global Magnitsky designation for serious human rights abuses and corruption. And here, again, there’s—we have a geopolitical objective to prevent any corrupt actors that are committing egregious human rights violations from having safe harbor in our financial system.

I think if one were to quibble about some of these latter measures, the question you would raise is efficacy. And I think, you know, to the extent that these principles get embedded into the practice of sanctions, you know, we should—we should require and demand that even if there’s a geopolitical principle that we’re upholding, whether it’s taking a stand against corruption or human rights abuses, there also has to be some threshold of efficacy that’s passed. And here I think reasonable people can debate whether we’ve done so.

KIMBERLY DONOVAN: That’s great. Thank you. And I very much appreciate all the sanctions that have come out over the past couple weeks. It really demonstrates the full range of these—the tools that we have at our disposal. And if you have time for one more question.

DALEEP SINGH: Sure, sure.

KIMBERLY DONOVAN: I just really wanted to get your thoughts. I appreciated that earlier this week President Biden laid out, you know, his legacy on foreign policy, and including, you know, where we strengthened the US position and our relationships with partners, as well as weakened our adversaries’ position around the world. And I was just wondering, from your perspective and your time as the deputy national security advisor two times—you know, what are some of your kind of biggest accomplishments? I mean, what are the memorable moments for you?

DALEEP SINGH: That’s a tough one for me. I mean, it’s just—I would need time and distance to give you a proper answer. But there’s nothing like—there’s nothing I have done alone, I promise you that. And anything good that we have done has benefited from those who did it before us, that’s for sure. I mean, honestly, rather than point to anything specific, maybe I can come to some of that, but what I have cared about most is creating a culture of conducting economic statecraft that I hope—that I hope endures. You know, because I think we are living through this extraordinarily uncertain moment where you have the intensification of geopolitical competition interacting with the polarization of our domestic political climate, all in the aftermath of a post-pandemic economy that’s still feeling the ripple effects of the shock. And so the uncertainty bands around what can unfold have widened dramatically.

And I think culture is really—having a cultural mindset in which we’re just constantly pressuring and probing our own base case, you know, attacking our own lazy narratives, trying to help each other see our blind spots, and trying to imagine as much as possible what could happen, because I always—things that have never happened are happening all the time, that’s the kind of culture that will allow us to make better decisions. And we made—I have made plenty of mistakes. But to the extent that we are caught off guard, if we’re surprised less often and we react better and we are surprised, we’re doing something well.

The only other thing I would say, in terms of culture, is we have really cared about relationships abroad. So I think the G7 really has become much more than a talk shop over the past four years. We’ve taken a number of actions which most people would have said the G7 would never take together. And that only happened because we did hard things together, like straight away. I remember in Cornwall in 2021, the first G7 summit, you know, we started—we started to do those things.

We agreed to give away a billion vaccines, which at the time was a big number, to the countries that were most in need, from our own stocks. We agreed with the EU to put down a seventeen-year tariff dispute between Boeing and Airbus. We came up with a transatlantic data privacy shield agreement. Those were hard things to do that built trust. And so then when the tanks rolled across the border on February 24 the subsequent year, we had relationships. You know, so we could—we could freeze over $300 billion of central bank reserves of Russia within forty-eight hours, because we trusted each other and we knew that we shared the same values, we had the same goals, and we’d have each other’s backs, to the extent that we could.

And then this year, you know, I came back. Most people said, you are—you are nuts if you think that you’re going to harness a dollar of the reserves that have been frozen for the benefit of Ukraine. And, you know, we listened to all the red lines. We listened a lot. And listening is a very important, and perhaps underappreciated, skill of diplomacy these days. And we found a way to maintain solidarity and to respect the rule of law, and still find fifty billion dollars of value that we could harness from those reserves to help forty-four million innocent people who have been terrorized for almost three years now fight for their freedom. I’m proud of that.

KIMBERLY DONOVAN: That’s fantastic. Thank you. And I know you have to get going, so just thank you so much for chatting with me today, thank you for your service, and thank you for your leadership in economic statecraft.

DALEEP SINGH: My pleasure.

KIMBERLY DONOVAN: And I would now like to—sorry, Will, but I would now like to introduce my GeoEconomics Center colleagues Alisha Chhangani and Mrugank Bhusari, who are going to review their research on the role of the US dollar and launch our new Dollar Dominance Monitor. Thank you.

ALISHA CHHANGANI: Thank you so much, Kim. And thank you so much, Daleep, for joining us today.

Very excited to be sharing a new update of our Dollar Dominance Monitor. The role the dollar plays in the international financial system is so core to the work we do at the GeoEconomics Center, so we’re very excited to be sharing this update.

So, Gank, the dollar has been the world’s reserve currency since World War II and the dollar has enjoyed this privilege for the last sixty years. But there’s kind of two roles the dollar plays, the macroeconomic role that we’ll talk about in the tracker—the reserves and transactions and trade—but there’s also a national security role of the dollar. And Daleep brought this up today.

MRUGANK BHUSARI: Yeah. As Daleep has mentioned multiple times in his speech and in the event, the US can wield influence in the global economy because everyone uses the dollar. It’s really central to the US power in the global economy.

And in the last two, three years, there’s two things that have happened simultaneously. In 2022, the US and the G7 sanctioned Russia. And also, the US Federal Reserve increased interest rates. So many emerging markets all around the world were now thinking about their dependence on the dollar, and they’ve been trying different things to reduce their dependence on the dollar. They’ve been trying to trade in domestic currencies. They’ve been building new infrastructures to facilitate that trade.

And in the media when we see these reports they’re often very alarmist, and they often miss a lot of context and data that we think is really important to bring to the discussion. And that’s why we created last year the Dollar Dominance Monitor, which brings in one spot all the data on the international reserves, on debt, on banking, on transactions, as well as what are different countries doing to reduce their dependence on the dollar and how is that progress going.

And today we’re launching a new major update to this data. And, Alisha, let’s dive right into it.

ALISHA CHHANGANI: So let’s get into the data. So let’s kind of walk through the three kind of main topline numbers that we are using to say—and the key takeaway for us is the dollar status as the reserve currency is secure in the short and medium term. And so these are the three topline numbers that we’re using to make this point.

First of all, the share of global foreign reserves. The dollar makes up 57 percent. And just to put this in perspective, just take a look at the euro. Take a look at the pound.

MRUGANK BHUSARI: They’re pretty small.

ALISHA CHHANGANI: Pretty small.

The two other numbers that I think are very important is this 54 percent. So the US is involved in about 12 percent of global trade, but it makes up 54 percent—or, the dollar touches 54 percent of export invoicing.

And third and finally, 88 percent in foreign exchange—in exchange transactions. So this means that nine out of ten transactions are touching the dollar. That’s huge, and basically makes our point that the dollar is so entrenched into the financial system and that the dollar is being used around the world outside of the United States.

MRUGANK BHUSARI: Even countries that are not the United States are using the dollar to trade between other countries, so that really tells you how deeply entrenched the dollar is in international trade and finance.

And, Alisha, you mentioned 57 percent, which is the share of—share of global reserves that are denominated in the dollar. Last year, when we launched this tracker, it was 59 percent, so a drop of two percentage points, which you might think is not a lot. But there you see—you can see a general downward trend for the US dollar since 2016, which is when the IMF data got really more complete.

But what you notice also is that this loss in US share is not being picked up by any single currency. It’s actually being distributed across all currencies, most notably in this “others” section. In this “others” is really the Canadian dollar and the Australian currency. And so what we see here is that the dollar’s reserve currency status, even though it’s becoming less dominant, is not necessarily—there’s no new competitor that is rising to compete against the dollar.

And we also have a lot more data that we invite our audiences to look through. We have data on currency transactions, on debt, and on banking. So please do take a look, and you will see that the dollar still maintains its share—at least maintains or has increased its share across these indicators.

ALISHA CHHANGANI: So, Gank, let’s go through probably my favorite part of this monitor, and this is this database that we use to track what it takes to be a reserve currency. And I think this is a very unique way of showing why the US dollar is the reserve currency, looking at its competitors and other currencies to see these six qualities that we have identified that makes the dollar the reserve currency. And here are some of the six that we have identified, but you’ll notice that there’s some shading. And the darker the color is, it’s more stronger in that quality, like the sizeable domestic economy, the size and depth of the financial markets. And so you’ll notice that the US dollar is very dark in many of these, and you can explore these much more there.

But, Gank, my question here for you is that the euro is also fairly dark here. What’s going on there?

MRUGANK BHUSARI: Well, it’s an interesting story, that one, and—because the euro has traditionally been considered as a competitor for the dollar. And you do see that it is dark across all six indicators, but these are just the basic requirements that you must have for the potential of being an international currency. The euro specifically has faced three challenges in the last few years that really have not helped it rise as a competitor truly to the dollar.

The first is that it joined the G7 sanctions, as Daleep mentioned. Any country that is looking to de-dollarize to sanction-proof its economy, there’s no point in moving to the euro because you’re also going to get sanctioned over there.

The second is financial markets and also interest rates. ECB’s interest rates and the Fed’s interest rates have moved generally in the—in similar directions for several decades. So if you want to reduce—if you want to enhance monetary policy sovereignty, the euro’s not the way.

And most importantly I think, it’s the lack—it’s the absence of a capital markets union. If you invest in the euro, you’re investing in many different countries. Each country has its own rules. Each country has its own market. And that—the absence of a market is making it really difficult for investors to really, truly invest in the euro in the same way that they look at the dollar as a store of value.

And so these are the reasons why the euro has not really risen as a competitor yet. And what I really find interesting here is also the renminbi. We all talk about how the renminbi could be a challenger, but it’s actually really light on all of these indicators. The only one where it really has a dark color is the share of global GDP. So, Alisha, now we have a good sense of where the dollar stands right now as an international currency. So let’s look at what countries are trying to do to reduce their dependence on the dollar.

And you’ve really looked at BRICS and the Kazan summit. This is something we’ve discussed, and you’ve written on a lot. So take us through it. What’s happened in Kazan?

ALISHA CHHANGANI: Yeah, for sure, Gank. So basically, the BRICS summit happened in Kazan last year in October. And a lot of conversations were happening on whether BRICS will create a common currency. Obviously, those plans were eventually ditched and they went to create something alternative, which is creating a cross-border payments infrastructure. And this kind of materializes in these three main projects.

But the main point here, Gank, is that they’re trying to make financial infrastructure to trade in their own national domestic currencies. And these are three individual projects that we found super interesting—BRICS Pay, BRICS Clear. But probably the most interesting to me is the BRICS Bridge. And the BRICS Bridge is using digital currencies, central bank digital currencies—Gank, you know, we’ve been interested in this at the GeoEconomics Center—as the backend for the financial infrastructure.

And this project will probably develop in the next couple of years. And we’d be looking into seeing what’s happening there. But with this table right here, we’ve also included some examples to kind of contextualize how these projects can actually be used in real life. But I do want to emphasize, Gank, really quickly, that these projects are in their early stages of development. They’re mostly words on paper, small agreements. There’s still a lot of internal disagreements that make negotiations around these projects extremely difficult. Which is why we’ve titled this section, “A Scattered Approach to De-dollarization.”

MRUGANK BHUSARI: Yes, Alicia, you’re completely right. Every country in BRICS has some issues with the dollar, but the issues are very different. So just look at Russia and Iran, for example. They are sanctioned. They have no choice but to look at other currencies, to look at domestic currencies. They have no—they have no other option. But India, on the other hand, for example, is looking to enhance monetary policy sovereignty. It wants to be able to trade with countries that do not have access to the dollar, or that have—that no law no longer dollar reserves. Egypt, on the other hand, it wants to enhance its access to global financial markets and capital markets because it has had some troubles in the past repaying debt denominated in dollars. So it’s looking at Japanese bonds and these kinds of other financial instruments.

These all bring different levels of urgency to the question of de-dollarization, and how do they deal with the dollar? So we’ve seen BRICS move very slowly. Russia this year, it did bring forward a lot of proposals which were actually agreed to and accepted. But they’re moving slowly because they don’t want these disagreements to rise up to the top. They want to keep it low enough that every country is fine with agreeing to it and moving on to see what happens.

And, Alisha, in the event we also mentioned—Daleep and Kim mentioned CIPS. And this is something that we’ve also been tracking. And we have data over here on what—how many banks are members of CIPS. And this is a part of—CIPS is the Chinese Interbank Payment System that they have developed to facilitate these transactions.

ALISHA CHHANGANI: And within just the last two years, the transaction volume has increased 80 percent on CIPS. And several of the BRICS members are involved and are direct members of CIPS. So we can really see that infrastructure being built. To your point, the renminbi probably doesn’t have a chance to challenge the reserve currency status, so it’s using alternative frameworks, that including the CIPS mechanism, to kind of challenge the role the dollar, and continue to use the renminbi in international transactions.

MRUGANK BHUSARI: And in this tracker we have—for every BRICS member we have included the size of the swap line that they have with the PBOC, which helps them build liquidity in the system if they ever need renminbi and they’re falling short of it, and also the number of members—direct members of the CIPS system, which Alisha just talked about. So we know exactly which banks and how many banks are part of this system, which gives you a sense of how CIPS is growing. And so, Alisha, you’ve spent the last six months working on dollar dominance and working on this subject. What are you looking for in 2025? Or, what are you keeping your eyes on?

ALISHA CHHANGANI: It’s a really good question, Gank. I think for me it’s the advent of financial technology in payments and payments architecture. We already see BRICS taking steps towards including, you know, central bank digital currencies and digital technology in their payments infrastructure. And I think this is going to play a bigger role. As Daleep mentioned, mBridge is becoming a larger project and is going to invite more members. Really looking at 2025 to see if the G7, the United States, and its allies can build an alternative that, you know, is using technology to make payments faster, safer, and cheaper for people.

What about you, Gank? Same question back to you.

MRUGANK BHUSARI: It’s fascinating. And I’m really watching out—or looking out for what the Trump administration does. President Trump himself and his administration has taken a keen interest in the dollar’s international role. In fact, the treasury secretary nominee Scott Bessent is at the Senate right now on Capitol Hill, where he has said that maintaining the dollar’s international role is critical for the US—the economic health of the US. And this—he has already threatened tariffs against BRICS countries, and also other economies that prop up a new currency as an alternative. I don’t think that’s likely, and I don’t know how it would happen.

But it does give you a sense that President Trump is taking this as a very serious concern. So BRICS members, especially those members that want to maintain close ties with the US, and with the West, and with the G7, will tread very carefully over here, because they don’t want to do anything to antagonize President Trump in his first few months in office. So that is something that I’ll be watching out for.

And so that is the tracker at large. And we welcome all of you to please explore. And, as always, we welcome your feedback, your thoughts. And we will be publishing analysis based on this tracker in the next few weeks. So keep an eye out for our new research. And we want to thank all of the GeoEconomics Center as well as well as the Atlantic Council’s engagement team. And especially thanks to Maia Nikoladze, who helped lead this project in its original design phase throughout 2024. And, Josh, with that, back to you.

JOSH LIPSKY: Well, thank you, Gank and Alisha, for that fantastic presentation. Thank you, Maia, for your contributions to this project since its inception last year. Everyone can check out the Dollar Dominance Monitor on the Atlantic Council website. I want to take a moment to thank the entire team of the GeoEconomics Center, as we mark our anniversary here. And if I could ask them to stand up. Charles Lichfield, Ananya Kumar, Maia Nikoladze, Sophia Bush, Jesse, Elizabeth de Kruijf. And you met Alisha and Gank earlier and, of course, Kim Donovan. This is our team. Please give them a round of applause. They help produce the amazing work you see every day. They are also geoeconomists at heart.

Now, next week a new chapter begins in Washington. And our commitment here at the Atlantic Council and at the GeoEconomics Center will remain the same. We will deliver world-class, data-driven analysis and provide a roadmap to help navigate the challenges of the era. First up, we are very proud to host Governor Waller of the Federal Reserve on February 6 for a special event on the future of the dollar and payment systems. We hope you join us in February. We wish everyone a pleasant rest of the day. Thank you for being here with us this morning.

Watch the full event

Dollar Dominance Monitor

The Dollar Dominance Monitor analyzes the strength of the dollar relative to other major currencies across the world. The project presents interactive indicators to track China’s progress in developing an alternative financial infrastructure.

New Atlanticist

Feb 22, 2024

Forging a positive vision of economic statecraft

By Daleep Singh

The United States must institutionalize how it uses economic tools in the context of today’s great power competition.

China Economic Sanctions

Report

Sep 20, 2023

The US, EU, and UK need a shared approach to economic statecraft. Here’s where to start.

By Kimberly Donovan, Maia Nikoladze, Nicole Goldin, Mrugank Bhusari, Sarah Bauerle Danzman, Ambuj Sahu, and Daniel McDowell

Economic Sanctions Economy & Business

The post Daleep Singh outlines five principles to guide—and constrain—the use of economic statecraft tools appeared first on Atlantic Council.

The world needs a common vision for the responsible use of economic statecraft tools

Daleep Singh — Thu, 16 Jan 2025 16:47:35 +0000

Watch the speech

Public Event Thu, January 16, 2025 • 10:00 am ET

The future of economic statecraft with Daleep Singh

A conversation on the future of economic statecraft with Deputy National Security Advisor Daleep Singh

Economic Sanctions Economy & Business United States and Canada

On January 16, 2025, US Deputy National Security Advisor Daleep Singh spoke at the Atlantic Council on the US principles of economic statecraft. His remarks as delivered are below, and the full transcript of the event, including Singh’s conversation with Atlantic Council Economic Statecraft Initiative Director Kimberly Donovan, is available here.

During this century, major powers have deployed economic sanctions and other restrictive tools of economic statecraft to an unprecedented degree. The number of sanctioned individuals and entities across the world has increased by an order of magnitude since 2000. Tariffs and other trade restrictions have tripled over the past five years. The percentage of OECD countries screening investments in sensitive sectors has risen over the past decade from less than a third to more than 80 percent, while the number of countries with sophisticated export controls has quadrupled since their inception during the Cold War.

In my judgment, the trendlines are set to extend, for three main reasons.

I suggest we seek to embed five principles in the practice of restrictive economic statecraft, first in our own conduct, and then among allies, nonaligned countries, and eventually our adversaries.

First, economic and financial sanctions should be used sparingly and in service of clearly defined and achievable geopolitical objectives.

Second, the force of restrictive actions should be responsibly calibrated to their expected impact, spillovers, and associated uncertainties.

Third, policymakers must consider explicitly and upfront the efficacy of restrictive measures on the decision-making calculus of the target.

Fourth, restrictive measures should be maximally coordinated, both with domestic stakeholders and international partners.

Finally, restrictive measures must be flexible and adjust to unintended consequences, evolving economic and financial conditions, and the reaction of the target.

Watch the full event

Dollar Dominance Monitor

New Atlanticist

Feb 22, 2024

Forging a positive vision of economic statecraft

By Daleep Singh

The United States must institutionalize how it uses economic tools in the context of today’s great power competition.

China Economic Sanctions

Report

Sep 20, 2023

The US, EU, and UK need a shared approach to economic statecraft. Here’s where to start.

By Kimberly Donovan, Maia Nikoladze, Nicole Goldin, Mrugank Bhusari, Sarah Bauerle Danzman, Ambuj Sahu, and Daniel McDowell

Economic Sanctions Economy & Business

The post The world needs a common vision for the responsible use of economic statecraft tools appeared first on Atlantic Council.

Webster quoted in Barron’s on new sanctions on the Russian oil industry

Joseph Webster — Thu, 16 Jan 2025 15:26:00 +0000

The post Webster quoted in Barron’s on new sanctions on the Russian oil industry appeared first on Atlantic Council.

Europe has a window of opportunity to shape Ukraine peace efforts

Doug Klain — Thu, 16 Jan 2025 02:58:36 +0000

Everyone wants to know what Donald Trump has planned for Ukraine. The US President-elect has pledged to secure a negotiated end to Russia’s invasion of Ukraine, but has yet to formally present his terms for any possible deal. At the same time, it is already clear that the new US administration will expect Europe to play a far more prominent role in the push for a sustainable peace. This creates opportunities for European leaders to seize the initiative.

In order to secure favorable terms in any future peace process, the West must approach negotiations from a position of strength. The only way Western leaders can achieve this is by dramatically expanding military assistance to Ukraine and intensifying economic pressure on Russia. Europe can show Trump that it’s ready to start leading on this without delay.

One major step would be using the more than €280 billion in Russian state assets currently frozen in European jurisdictions to support Ukraine economically and militarily, including by financing the production and purchase of US weapons. The case under international law for seizing these assets is strong. Both the US and Canada have already passed legislation to do so, while the British Parliament is moving forward with a report on how to use these assets to fund the war effort in Ukraine.

Using Russian assets to buy American weapons could certainly prove attractive to Trump, allowing him to claim a significant win for the US economy. Indeed, US House Speaker Mike Johnson has called the idea “pure poetry.”

Stay updated

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

The energy sector is another opportunity for Europe to set the agenda in potential peace talks, while also creating further incentives for the incoming US administration. Trump has repeatedly underlined his intention to expand US energy exports. Meanwhile, EU Commission President Ursula von der Leyen commented in November that it would make economic and political sense for Europe to import LNG from the US instead of Russia.

Increased US energy exports to the EU, if combined with a lower price cap on Russian oil and further crackdowns on Russia’s shadow fleet of oil tankers, could substantially reduce Putin’s energy revenues. The Kremlin would find itself confronted with a further loss of global energy market share, while transatlantic economic ties would be strengthened.

With Russia already facing high inflation and an overheating economy, additional energy sector measures may help force Putin to the negotiating table under more favorable conditions for the West. But once talks begin, European governments must be ready to take serious steps to achieve a real peace in their neighborhood. Members of Trump’s team, including Vice President-elect JD Vance, have suggested that European troops should deploy to Ukraine to enforce a ceasefire. NATO and European leaders met in Brussels last month to discuss the issue. However, there is currently significant resistance in numerous European capitals to the idea of sending troops to Ukraine.

Regardless of whether peace talks result in a road map toward future Ukrainian NATO membership, any security guarantees offered to Ukraine are likely to require foreign troops to credibly enforce a ceasefire. European leaders should demonstrate their readiness to deploy forces on the condition that the United States backs them with the logistical, military, and political support necessary to make such an operation feasible. This would help win over the incoming Trump administration and send a powerful signal of transatlantic unity to the Kremlin. Critically, it would also increase the likelihood of European leaders being included as full partners in negotiations.

Eurasia Center events

Drones, defense, and diplomacy: Negotiations and the battlefield in Ukraine

Conflict Defense Technologies Europe & Eurasia Politics & Diplomacy

Unless Ukraine receives credible security guarantees, any ceasefire negotiated in the coming months would almost certainly be violated by Moscow once Russia has had time to rearm. This should be at the forefront of European thinking ahead of possible peace talks.

Even without the resumption of full-scale hostilities, an insecure postwar Ukraine would be unable to recover economically and would be at risk of a major new exodus as millions sought to escape the uncertainty of a country on the brink of foreign conquest and collapse. Europe would face the prospect of a failed state on its doorstep, with Putin poised to renew his invasion under far more favorable circumstances.

With a new US policy toward Ukraine yet to take shape, now is the ideal time for European leaders to demonstrate the kind of decisiveness that has often been lacking since the onset of Russia’s full-scale invasion in February 2022. Throughout the past three years, the West’s collective response to the Russian invasion of Ukraine has been consistently dogged by delays, with promised aid often taking many months to arrive. This has given Russia time to dig in, while also convincing Putin that he can ultimately outlast the West in Ukraine.

European leaders now have an historic window of opportunity to shape the future of European security. Over the next few months, Washington will look to engage Moscow in discussions to end Europe’s largest invasion since World War II. European governments cannot afford to be bystanders as the fate of their continent is decided. Instead of waiting to see how the incoming US administration approaches the war, they should work proactively to create leverage by dramatically boosting support for Ukraine, increasing the costs of Russian aggression, and taking on a greater leadership role.

Doug Klain is a policy analyst at Razom for Ukraine, a US-based nonprofit humanitarian aid and advocacy organization, and a nonresident fellow at the Atlantic Council’s Eurasia Center.

irosales — Tue, 14 Jan 2025 18:08:49 +0000

The post Donovan quoted by NPR on the impact of sanctions on Russia and its ability to evade them appeared first on Atlantic Council.

Five questions (and expert answers) about Biden’s final round of sanctions on Russia

Atlantic Council experts — Fri, 10 Jan 2025 21:40:28 +0000

He’s delivering one last punch. With ten days to go in US President Joe Biden’s term, his Treasury Department on Friday announced tough new sanctions on Russia, specifically targeting the oil and gas industry. The United Kingdom also joined in the sanctions on the Russian oil companies Gazprom Neft and Surgutneftegas. To make sense of the impact of these measures as Russia’s full-scale war on Ukraine nears the three-year mark, and how the incoming Trump administration might react, we checked in with our sanctions experts.

1. How are these different from past rounds of sanctions?

Friday’s actions targeting Russia’s energy sector have the potential to significantly disrupt Russia’s ability to generate revenue from the sale of oil. Unlike previous efforts to restrict Russia’s oil profits, such as the sixty-dollar-per-barrel price cap and sanctions on financial institutions such as Gazprombank, the latest sanctions directly target Russia’s energy sector and its ability to export oil. Notably, the United States and the United Kingdom designated two important Russian oil producers and exporters, Gazprom Neft and Surgutneftegas, along with their subsidiaries, which handle more than a quarter of Russia’s seaborne oil exports. These entities were designated under two different authorities—Executive Order (EO) 14024 and EO 13662. This is significant because EO 13662 sanctions are codified in law, specifically the Countering America’s Adversaries through Sanctions Act of 2017. This means that the incoming Trump administration will need to confer with Congress if it wants to lift the sanctions on these companies.

Friday’s actions also include a significant amendment to General License (GL) 8k, which authorized energy transactions with certain Russian entities and was set to expire at the end of April 2025. The US Treasury amended GL 8k by issuing General License 8l on Friday. GL 8l authorizes the wind down of energy transactions with these entities by March 12, 2025. In effect, this means that after March 12, there are no more general licenses for energy transactions with Russia, and anyone that continues to transact with sanctioned Russian energy entities could expose themselves to US sanctions. This could severely restrict Russian energy exports.

The Biden administration has taken aim at Russia’s oil exports, by far its biggest foreign exchange earner, with a series of measures that will bite. The Biden team waited until late in the administration because US oil production (and exports) are at record levels and rising, and therefore the price impact of taking Russian oil off the market, the objective of today’s sanctions, will be attenuated. Additionally, the US election is over, meaning that tolerance for oil price hikes among some in extended Biden world is greater.

Today’s sanctions hit two big Russian oil companies, Gazprom Neft and Surgutneftegas, as well as 183 vessels in the Russian “shadow fleet” of sanctions-evading tankers, some of which have also committed sabotage against Baltic Sea infrastructure. The sanctions also go after dodgy oil traders from the United Arab Emirates and Hong Kong that appear responsible for circumventing the Russian oil price cap and oilfield technical services providers. In addition, the sanctions target Russian liquefied natural gas (LNG) terminals and Chinese companies involved in Russia’s Arctic LNG 2 project, with the aim of disrupting Russian LNG exports, as well as the Vostok oil project, coal companies, and other businesses in the metals sector. Lastly, the sanctions shorten a wind-down period for some energy related transactions.

In short, the US government has gone after the Russian oil sector in a big way, intending to deal what may turn out to be a body blow.

—Daniel Fried is the Weiser Family distinguished fellow at the Atlantic Council. As US State Department coordinator of sanctions policy, he crafted US sanctions on Russia following its 2014 aggression against Ukraine.

The steps taken by the Biden administration are excellent, putting additional pressure on Russia’s ability to profit from the export of oil. But the critical point, of course, is implementation of these new measures. Which means that it is the Trump administration that will determine if these measures do in fact put pressure on the Russian economy.

—John E. Herbst is the senior director of the Atlantic Council’s Eurasia Center. He served as the United States’ ambassador to Ukraine from 2003 to 2006.

2. What impact do you expect this to have on the Russian economy?

These sanctions were a long-time coming, having been delayed for two years. But they are a serious effort to curb Russian oil revenues. These sanctions’ unprecedented impact and thorough scope are not weighted down by the competing agenda of avoiding Russian oil volumes dropping on the market, which diluted the 2022 price cap’s effectiveness. While oil prices remain a concern, the market is in a much healthier, more resilient place compared to three years ago. The Middle East and spare capacity outside of the OPEC+ cartel can fill in lost Russian volumes if global oil prices keep rising. Moreover, these sanctions can help to bring Russia’s oil sanctions evasion—and resulting revenues—out from under the shadows, which could help with suppressing prices for the remaining Russian oil exports, as doing business with Russia’s energy sector becomes riskier, costlier, and even more complicated.

Today’s actions show the blueprint for addressing sanctions evasion. They highlight the United States’ and its allies’ ability to track Russia’s nefarious activities in the energy trade, as well as the players and foreign partners enabling circumvention by providing oilfield services, shipments, trading, port access, and insurance, and acting as intermediaries. They will constitute a financial hit to Russia’s budget, made only more powerful coming on the heels of a six-billion-dollar loss from the end of the Ukraine gas transit. The oil trade is the ruble’s last life raft, and the Kremlin does not have a quick fix to the punctures made by these new US sanctions.

—Olga Khakova is the deputy director for European energy security at the Atlantic Council’s Global Energy Center.

The Russian economy is already under stress, and these sanctions will add to it. How much is not knowable: the Kremlin will have motive and opportunity to try to evade these measures and much depends on how well they are enforced. But even imperfect sanctions have value. Sanctions by themselves will not save Ukraine, but intensified economic pressure, combined with the arms surge to Kyiv that the Biden administration has launched in recent weeks, have a good chance of eroding Russia’s advantage in its war against Ukraine. These latest sanctions are among the most important since 2022: they followed the money.

—Daniel Fried

Russia has continued to generate revenue from oil sales despite Western sanctions. Friday’s actions directly targeting Russia’s energy sector will make it very difficult for oil importers to transact with Russia, and they send a strong message to countries that continue to import Russian oil. Such countries could find themselves the subject of US sanctions if they continue to buy oil from Russia.

—Kimberly Donovan

To be clear, it is in the US interest to implement these measures fully. Both in Soviet and Russian times, high hydrocarbon prices fattened Moscow’s budget and gave it the means to pursue aggressive policies abroad. Low oil and gas prices in the 1980s heightened economic problems in the Soviet Union, prompted Soviet leader Mikhail Gorbachev to pursue reform and a true policy of détente, and ultimately hastened the collapse of the Soviet Union. Russian President Vladimir Putin’s policies turned aggressive in the aughts, after years of high oil prices that allowed him to reduce Russian debt and modernize his military.

—John E. Herbst

3. What impact do you expect this to have on the US and its European allies?

Going after Russia’s oil exports would have been a bad idea when US oil export capacity was less (which is why the Obama administration avoided such steps after the first Russian invasion of Ukraine in 2014, choosing to limit itself to steps to curtail future Russian oil production). Now that US oil production has grown, and Europe has diversified away from Russian energy sources, the options for hitting Russia’s oil industry are greater and the administration took them.

—Daniel Fried

4. How can we expect the Trump administration to pick up the baton from here?

It is difficult to determine what steps the incoming administration will take vis-à-vis Russia. It appears that President-elect Donald Trump intends to negotiate a deal with Russian President Vladimir Putin over Ukraine to end the war. These oil sanctions have the potential to squeeze Russia’s economy by reducing its oil revenues. If the next administration enforces Friday’s actions and takes further steps to target Russian oil, as well as the third countries importing and re-exporting Russian oil, then the Trump administration will be in a strong negotiating position to make a deal with Putin that is in the best interest for Ukraine and US national security interests.

—Kimberly Donovan

Trump has both economic and geopolitical reasons to implement these measures. He has not hidden his intention to “drill, baby, drill,” which means that reducing Russia’s ability to export oil will weaken a competitor to growing US oil exports. But Trump also has geopolitical reasons for doing so. His team has laid out terms for a potential peace deal to end Moscow’s aggression against Ukraine. Those terms require compromise from both Ukraine and Russia. Ukrainian President Volodymyr Zelenskyy has acknowledged his readiness to compromise. Putin has not. The incoming administration needs leverage to persuade Putin to compromise. Reducing Russian hydrocarbon revenues would provide some leverage. Not nearly as much as, for instance, a Trump-proposed military aid package, but still a good step forward.

—John E. Herbst

The Biden administration has done the incoming Trump team a solid: increasing its leverage as the incoming team intensifies efforts to reach a sustainable settlement of the war. Speculation that the Trump administration will immediately revoke the sanctions, giving away leverage, is premature and possibly flat wrong. In any case, the Trump team will not be able to rescind most of the sanctions without a fight: those sanctions issued under Executive Order 13662 are subject to the Countering America’s Adversaries Through Sanctions Act legislation from 2017 that provides for a mandatory congressional review of rescinded sanctions. Additionally, for reasons both strategic and economic, the Trump team appears interested in having US oil and LNG exports replace Russian supplies on world markets. The Biden administration sanctions advance that reasonable objective.

The chances of the Kremlin acting in good faith to help end the war are slim (to be generous). If some settlement takes shape, sanctions relief will be part of the Kremlin’s demands. The Trump team should be cautious about doing so. But that’s a different sort of challenge. The task now is to push back on Putin from a position of strength so he abandons his aim of conquering Ukraine and intimidating Europe through pressure and sabotage. These sanctions advance that objective, which just might be shared by the outgoing and incoming administrations.

—Daniel Fried

A lot has changed since Trump’s first term. The United States and Russia now much more directly compete with one another in global and European oil and gas markets. For instance, US global crude oil exports today stand at about four million barrels per day today, up from seven hundred thousand barrels per day in January 2017. Similarly, in January 2017, the United States exported about 1.7 billion cubic feet per day (Bcf/d) of liquefied natural gas; monthly exports now exceed 12 Bcf/d. Notably, in February 2022, many US oil and gas companies lit their Houston headquarters with images of the Ukrainian flag. This was no doubt done partly in solidarity with a sovereign nation facing an invasion, but economic self-interest may have also played a role. If Trump completely relaxes oil sanctions on Russia, then it will impact US oil and gas companies, along with their employees and investors. The Trump administration may recognize that Russia is not only a military threat, including through its transfer of ultra-sensitive weapons technology to China that could be used to target US forces. But Russia also threatens US economic interests.

The policy trajectory of the incoming Trump administration remains highly uncertain. Don’t be shocked, however, if Trump reinforces or intensifies oil sanctions on Russia instead of softening them. Indeed, the Trump administration may have a unique opportunity to leverage its relationships with Gulf Cooperation Council countries. OPEC’s crude oil spare production capacity was recently estimated at around 5.1 million barrels per day, whereas Russia’s export of crude oil and crude products runs between four million and five million barrels per day. If Trump can persuade OPEC to boost production at the expense of Russian volumes—a deal his predecessor was never able to strike—he could secure leverage over Moscow, maintain low world energy prices, and keep US oil and gas companies and their customers happy.

—Joseph Webster is a senior fellow at the Atlantic Council’s Global Energy Center and its Indo-Pacific Security Initiative. He is also an editor of the independent China-Russia Report.

The post Five questions (and expert answers) about Biden’s final round of sanctions on Russia appeared first on Atlantic Council.

What the world can do about Maduro

Atlantic Council experts — Fri, 10 Jan 2025 21:10:24 +0000

JUST IN

He’s tightening his grip. Venezuelan autocrat Nicolás Maduro was inaugurated for a third term as president on Friday despite international observers, including the United States, determining that his victory in last year’s election was fraudulent. Maduro’s swearing-in was accompanied by a new round of US sanctions against Venezuelan officials and comes one day after the government briefly detained opposition politician María Corina Machado. Below, our experts explain what Maduro’s inauguration means for the region, the Venezuelan opposition, and the future of US sanctions policy.

TODAY’S EXPERT REACTION BROUGHT TO YOU BY

Iria Puyosa (@NSC): Senior research fellow at the Atlantic Council’s Digital Forensic Research Lab
Jason Marczak (@jmarczak): Vice president and senior director at the Atlantic Council’s Adrienne Arsht Latin America Center
Geoff Ramsey (@GRamsey_LatAm): Senior fellow at the Adrienne Arsht Latin America Center

What Biden did, and Trump can do

“The Biden administration has slightly increased pressure” on Maduro’s regime, Iria tells us. While the United States has sanctioned two thousand individuals and raised the bounties on Maduro and his interior minister, Diosdado Cabello, US oil giant Chevron maintains its license to operate in Venezuela. “The new sanctions are insufficient to remove Maduro and Cabello from power,” she argues.
After it takes office in ten days, the Trump administration should work with regional governments, says Jason, to “accelerate diplomatic coordination to give new momentum to the opposition and to make life harder for Maduro and his accomplices.”
Despite the regime’s escalating crackdown on the opposition, “it is easy to overstate how strong Maduro really is,” Geoff argues. He points to Maduro’s post-election cabinet reshuffle to empower hardliners, coupled with the elevation of Cabello, a longtime rival, as “a sign of just how few friends Maduro has left.”
Geoff advises the incoming Trump administration to take note of internal divisions in the Maduro regime that can be further undermined by economic pressure. “Sanctions alone are unlikely to unseat Maduro,” he says, “unless they are accompanied by a clear roadmap to lift them, giving fence-sitting regime figures a blueprint to follow.”

Regional rejection

Maduro has brought Latin American leaders “from across the political spectrum together to reject his new power grab,” Jason tells us. Chilean President Gabriel Boric, Argentinian President Javier Milei, and Panamanian President José Raúl Mulino, he notes, have all rejected Maduro’s claim to victory in last year’s presidential election.
The highest-ranking foreign official at Maduro’s inauguration, Jason points out, may have been the speaker of Russia’s Duma.
“The continued large-scale regional rejection of Maduro is no small feat,” Jason says, given Latin America’s historical divisions. “But the critical question,” he adds, “is how to avoid complacency and leverage this unity to further support the democratic opposition.”

A mobilized opposition

Amid Maduro’s third inauguration, “Venezuelans are again taking to the streets in large numbers, demanding a transition to democracy and the inauguration of González,” says Iria. The Biden administration should use this opportunity to take more “meaningful action” against Maduro, she argues, as “the opposition is now strategically united, the people are mobilized, and the ruling coalition is showing cracks.”
Regional governments working to pressure Maduro, Jason says, should also strive to “avoid burdening the Venezuelan people with more hardships.” Pressuring Maduro’s government while sparing the Venezuelan people from the worst effects of sanctions is “a delicate tightrope to walk” Jason adds, but is “necessary to give further hope to the overwhelming number of Venezuelans who cast a vote for democracy and freedom in July.”

The post What the world can do about Maduro appeared first on Atlantic Council.

Khakova quoted in the BBC on US and UK sanctions on the Russian oil industry

Olga Khakova — Fri, 10 Jan 2025 15:22:00 +0000

The post Khakova quoted in the BBC on US and UK sanctions on the Russian oil industry appeared first on Atlantic Council.

Recalibrating the use of individual sanctions in Venezuela

Geoff Ramsey, Lucie Kneip — Wed, 08 Jan 2025 19:15:49 +0000

In response to Venezuela’s Nicolás Maduro’s decision to claim a new illegitimate mandate on January 10 based on a stolen election, the United States and its allies face a major test of their strategy moving forward. Effectively pressuring the Venezuelan government will require innovative thinking on the use of individual sanctions from US authorities, as well as careful coordination between the United States and Latin American and European governments.

As Venezuela continues to grapple with a deep political and economic crisis, the international community is at a critical juncture in shaping its response. The stolen presidential election of July 28 marked a watershed moment, signaling the country’s further descent into authoritarianism under Nicolás Maduro’s regime. In this context, policymakers in the United States and other countries are likely to continue to impose sanctions against political, military, and economic elites as a means of seeking to exert pressure without worsening the humanitarian situation.

With over eight million Venezuelans displaced by the crisis, US and other international policymakers are cautious about the unintended consequences of tightening existing oil and financial sanctions. Although the outgoing Biden administration at one point said it was evaluating whether to rescind privately issued specific licenses that authorize energy companies to maintain a foothold in the country, it has not done so, partly out of an interest in preventing the worsening of economic conditions. Instead, the Biden administration prioritized sanctions against individuals responsible for Venezuela’s deteriorating human rights situation. On September 12, the Biden administration sanctioned sixteen government-linked individuals, including leaders of the National Electoral Council who oversaw the stolen election, and members of the Supreme Tribunal of Justice who validated the fraudulent results. Biden’s Secretary of State Antony Blinken said that the goal of the individual sanctions is to “promote accountability” for those undermining democracy in Venezuela. Three months later, Canada’s foreign ministry announced it would add five of these same individuals to their sanctions list for fraudulently declaring Maduro the winner of the July election. The US added an additional 21 individuals to the sanctions list in November 2024. Following Maduro’s illegitimate inauguration in January 2025, the US, Canada, and the EU all announced additional sanctions on regime officials and affiliates.

This interest in targeted sanctions is likely to continue under the second Trump administration, given that Trump’s first term saw heated internal debate over the potential impact of broader economic sanctions on Venezuela’s migration crisis. Indeed, the use of individual sanctions accelerated under President-elect Trump’s first presidential term even as he oversaw the imposition of broader sectoral sanctions targeting Venezuela’s links to the international oil and financial markets.

With Trump returning to the Oval Office, here’s what policymakers should know about the use of individual sanctions—and what can make Venezuela sanctions policy more effective.

The sticks: A history of the Venezuela sanctions regime

From 2009 to 2015, Venezuela-related sanctions were few and primarily targeted kingpin leaders involved in drug trafficking and financial support for Hezbollah. In March 2015, Executive Order 13692 created the country-specific sanctions regime on Venezuela. Seven military officials were initially sanctioned for their involvement in stifling protests. This program allowed the United States government to sanction individuals involved in human rights abuses, corruption, or the undermining of democratic processes. In November 2018, Executive Order 13850 created a new Venezuela-related sanctions program under which the United States could freeze assets and prevent actors from conducting corrupt transactions with the Venezuelan government to move money. In August 2019, Executive Order 13884 blocked Venezuelan government assets and enabled sanctions on actors assisting the Venezuelan government, and an initial seven military officials were sanctioned for their involvement in actions undermining democratic processes.

This graph does not include sanctions issued by the United States on January 10, the date of Maduro’s illegitimate re-inauguration.

The Obama administration sanctioned seventeen individuals, including the first seven military officials sanctioned under the Venezuela-specific sanctions regime. After Trump took office in January of 2017, the number of individual sanctions increased dramatically, with forty-one issued in 2017 alone. The administration issued twenty individual sanctions in 2018, forty-nine in 2019, and twenty-five in 2020. (These numbers do not include individuals who were sanctioned and later delisted). Under the Trump administration, some of the sanctions targeted Venezuelan access to the US dollar and to international financing, and therefore Venezuela’s ability to reconcile its sovereign debt. The Trump administration’s “maximum pressure” strategy took off in 2019, which saw the imposition of over 180 Venezuela-related sanctions, including the forty-nine targeting individuals. That year also saw the first implementation of sectoral sanctions on industries including oil, gold, finance, defense, and security.

This shifted under US President Joe Biden. Until September 2024, Biden had not added a single Venezuelan national to the Specially Designated Nationals (SDN) list since taking office. However, after the July 28 stolen presidential election, the government-backed National Electoral Council declared incumbent Nicolás Maduro the winner, despite opposition candidate Edmundo González emerging as the clear victor following the opposition’s independent collection and publication of over 80 percent of the official actas, electoral vote tallies produced by each voting center. Roughly a month and a half after the election, the United States announced new sanctions on sixteen individuals, for obstructing the elections and intensifying post-election repression, ultimately forcing Gonzalez to flee the country. Two more rounds of sanctions were announced in November 2024 and January 2025.

The carrots: When and why individual sanctions have been lifted

The Biden administration largely opted for a different approach than the first Trump administration, seeming to prefer carrots over sticks. On multiple occasions, Biden took Venezuelan nationals off the list.

In December 2021, the administration announced it would no longer designate the former Colombian guerrilla movement, Fuerzas Armadas Revolucionarias de Colombia (FARC), as a terrorist group. As part of a package of ninety-two FARC-linked delistings, the Treasury Department lifted sanctions on five Venezuelans including Ramón Rodríguez Chacín, a military officer and former Venezuelan minister of interior who worked as a go-between between the FARC rebels and the Venezuelan government.

In June 2022, the Treasury Department announced that it had lifted the sanctions on Carlos Erik Malpica Flores, a former national treasurer and vice president of Venezuela’s state-owned oil company PDVSA. Malpica Flores is also the nephew of current Venezuelan first lady Cilia Flores, and his delisting was reportedly part of an effort to induce the Venezuelan government to restart negotiations with the opposition—and indeed, days later opposition and government representatives met in Oslo. In November 2022, two other nephews of Flores, known as the “narcosobrinos” due to their involvement in transnational drug trafficking operations, were released as part of a prisoner swap that included the release of ex-officials of Citgo, the US-based subsidiary of PDVSA.

In July 2023, the Treasury removed Carlos Rotondaro, former board president of the Venezuelan Institute of Social Security (IVSS), from the SDN list. Sanctioned for “economic mismanagement and acts of corruption,” Rotondaro was reportedly delisted for providing information to the United States on financial movements made by the family of Haiman El Troudi, former Minister of Planning and Development and Minister of Public Works.

These delistings fit with the Biden administration’s broader reticence toward announcing new sanctions on Venezuela. Rather than rolling out new sectoral sanctions, the Biden White House sought to incentivize a democratic opening by issuing licenses to US and Western oil companies to operate in the country despite broader oil and financial sanctions, in exchange for a series of agreements between the government and the democratic opposition that led to the July 28 election.

Biden was not alone in attempting to use sanctions relief to incentivize change in Venezuela. Even as the first Trump administration ramped up the use of individual sanctions, it also offered sanctions relief to individuals who “take concrete and meaningful actions to restore democratic order, refuse to take part in human rights abuses and speak out against abuses committed by the government, and combat corruption in Venezuela.” As part of this strategy, the Trump administration lifted sanctions in two cases. In March 2019, the Treasury delisted the wives of Raúl Gorrín and Gustavo Perdomo, two regime-linked businessmen who reportedly tried to work as middlemen between Washington and Caracas. According to press accounts, Gorrín worked to support a failed attempt to overthrow Maduro in April of that year, and Treasury’s removal of his wife and the wife of his business partner from the sanctions list was a decision made in exchange for his support for the coup.

In May 2019, after the uprising failed, the United States delisted Manuel Cristopher Figuera, former Director General of Venezuela’s National Intelligence Service (SEBIN). Figuera had taken part in the coup attempt and fled the country when it failed. In its press release, the Treasury Department stated that the move “demonstrates that U.S. sanctions need not be permanent and are intended to bring about a positive change of behavior.”

Who’s on the list?

The United States has rescinded the visas of almost two thousand Venezuelans and currently sanctions 202 Venezuela-linked individuals on the SDN list (as of January 13, 2025). Of these 202, eighty-one have been sanctioned primarily for their current or former roles with Venezuelan security and intelligence outfits. Nine have worked in the military counterintelligence branch known by its Spanish-language acronym DGCIM, eleven have worked in the intelligence branch (SEBIN), thirty have worked in the national armed forces (FANB), twenty-six have worked for the national guard (GNB), and seven have worked for the national police (PNB). Some of these individuals have worked for multiple branches of the security or counterintelligence service.

The United States also has a history of sanctioning key Venezuelan political officials. Maduro has been sanctioned since 2017, and his wife and son have been sanctioned since 2018 and 2017, respectively. Attorney General Tarek William Saab was sanctioned in 2017. Vice President Delcy Rodríguez and her brother, Communications Minister Jorge Rodríguez, Former National Assembly President Diosdado Cabello and his wife and brother, and Defense Minister Vladimir Padrino Lopez were all sanctioned in 2018.

Beyond key officials of the Venezuelan government and their affiliates, the United States has also sanctioned several economic and financial elites linked to operations with the government or the state-owned oil and natural gas company. Veronica Esparza Garcia, Joaquin Leal Jimenez, and Olga Maria Zepeda Esparza were sanctioned in 2020 for “operating a sanctions-evasion scheme benefitting the illegitimate Maduro regime and PDVSA.” In early 2021, Alessandro Bazzoni, an Italian citizen, Francisco Javier D’Agostino, a dual Spanish-Venezuelan citizen, and Philipp Paul Vartan Apikian, a Swiss citizen, were sanctioned for their ties to “a network attempting to evade United States sanctions on Venezuela’s oil sector.” Apikian and his company, Swissoil, were removed from the sanctions list in June 2023. Bazzoni and D’Agostino were removed in January 2025.

Additionally, as of September 2024, eleven individuals connected to Venezuela have been sanctioned under the Foreign Narcotics Kingpin Designation Act and classified as “specially designated narcotics traffickers.” The sanctions connected with this particular designation are separate from the Venezuela-specific sanctions programs created by executive order but have been perceived by observers as connected to the US-led pressure campaign.

Coordinating sanctions with allies

This graph does not include sanctions issued by all three countries on January 10, the date of Maduro’s illegitimate re-inauguration.

The United States, with its current list of 202 designees, is not the only government that has sanctioned individuals related to Venezuela. Canada currently sanctions 115, and the European Union (EU) sanctions sixty-nine. Of the 202 US-sanctioned individuals, Canada sanctions eighty-three of the same individuals, while the EU sanctions fifty-eight. Forty-eight individuals are currently sanctioned by all three parties. Most of these were sanctioned by the United States months or years before they were sanctioned by Canada and the EU. These include high-level officials such as Delcy Rodríguez, Tarek William Saab, and Diosdado Cabello. However, it is notable that the EU has not placed individual sanctions on Maduro himself. Neither Canada nor the EU has placed sanctions on any individuals sanctioned by the United States that we have classified as economic elites.

Of the thirty-two people that Canada sanctions that the United States does not, a number are judicial officials such as magistrates and individuals associated with repressive acts. All except for one were sanctioned between 2017 and 2019. The eleven individuals sanctioned by the EU that are not sanctioned by the United States include people known to have committed human rights violations and officials contributing to the erosion of democracy and democratic institutions. Most of these were sanctioned between 2020 and 2021.

How effective are individual sanctions?

Individual sanctions can allow decisionmakers in Washington to signal a policy stance and provide a degree of accountability, which may be useful to victims of Venezuela’s authoritarianism. Listed individuals are unable to travel to the United States and they cannot operate directly in broader financial systems. There is an argument to be made that this makes the target’s life uncomfortable or at least more difficult, whether the sanctions involve freezing assets, limiting their mobility, or restricting business operations. Individual sanctions may also serve as a measure of justice for human rights victims. However, in Venezuela so far there is little evidence that being added to the individual sanctions list encourages defection. Only one case of a sanctioned official defecting exists (Manuel Christopher Figuera). Other key individuals who have defected, such as former Oil Minister Rafael Ramírez and former Prosecutor General Luisa Ortega Díaz, were never sanctioned by the United States (although Ramírez was sanctioned by Canada).

One way to tighten the strategy for individual sanctions involves targeting more overseas assets of Venezuelans who have contributed to political and economic destabilization, and those of their family members and associates. While some of the assets of more prominent Venezuelans have been seized, a number of Venezuelan officials still own properties in Miami and other US cities, Latin America, and Europe. According to a 2022 joint investigation by Armando.Info and El Nuevo Herald, at least 718 companies in Florida are owned by current or former Venezuelan officials, including over two hundred that are owned by members of the military. Most of these owners have not been sanctioned. While an SDN designation implies that all US properties and financial assets of the individual will be frozen, some sanctioned officials continue to have access to large financial networks through assets held by family members or affiliates who are not sanctioned. Ramping up the targeting of the asset networks of current or former affiliates of the dictatorship could potentially create more room for those affiliates to consider the value of remaining loyal to Maduro, while avoiding harming the Venezuelan people.

The key question lies in how international actors can sanction individuals in a way that pulls the regime apart instead of consolidating it. Maduro has honored some of those sanctioned with replicas of independence leader Simón Bolívar’s sword. After the most recent wave of sanctions, government officials have painted being sanctioned as a badge of honor, a sign of loyalty to the revolution. According to Defense Minister Vladimir Padrino López, being sanctioned is a recognition of officials’ “morale, physical and professional integrity, and their leadership.”

One way to mitigate this is to follow sanctions announcements with targeted, discrete, and strategic communication with sanctioned individuals on the steps needed to get off the list, as occurred in the case of Manuel Christopher Figuera. Similar communication could occur with individuals the government is considering sanctioning, as may have been the case with Ortega Díaz. Coordinating more closely with multiple countries to impose parallel individual sanctions on individuals can help the international community to align on sanctions priorities. This may include advising interested international allies on the creation of their own legal sanctions frameworks.

But sanctions should not be the only manner of engagement with regime affiliates. The goal should always be to identify and engage those most likely to support democratic reform from the inside. This means empowering moderate elements within Chavismo and isolating hardliners to maintain the potential for a peaceful, democratic solution.

Methodology

Designations were drawn from the following sanctions programs: VENEZUELA, VENEZUELA-EO13884, VENEZUELA-EO13850, SGDT, and SDNTK. For the SGDT and SDNTK programs, only Venezuelans or individuals sanctioned for Venezuela-related activities were counted.

At least four individuals on the SDN list are reportedly deceased but have yet to be removed from the list: Henry Castellanos Garzón, Hernán Darío Velásquez Saldarriaga, José Leonardo Noroño Torres, and Miguel Santanilla Botache. Castellanos Garzón and Darío Velásquez were ex-FARC commanders killed in 2021. Noroño Torres reportedly died in a transit accident in 2020, and ex-FARC dissident Santanilla Botache was reportedly killed in 2022. The Treasury often takes time to formally delist deceased individuals due to various factors, such as difficulty in obtaining a formal death certificate or verifying an individual is deceased, and ensuring the individual’s assets are not used by a third party. As these individuals are still on the SDN list, they were included in the analysis.

Geoff Ramsey is a senior fellow at the Atlantic Council’s Adrienne Arsht Latin America Center.

Lucie Kneip is a program assistant at the Adrienne Arsht Latin America Center.

The authors would like to thank Brennan Rhodes for his research support in contributing to this piece.

Sanctioned kleptocracy: How Putin’s kremligarchs have survived the war—and even prospered

Ilya Zaslavskiy — Wed, 08 Jan 2025 18:00:00 +0000

Russia’s full-scale invasion of Ukraine in February 2022 challenged much of the common Western understanding of Russia. How can the world better understand Russia? What are the steps forward for Western policy? The Eurasia Center’s new “Russia Tomorrow” series seeks to reevaluate conceptions of Russia today and better prepare for its future tomorrow.

Download PDF

Introduction
How did we get here?
Where are we now?
What can we do about the Russian weaponization of kleptocracy?
Apart from sanctions, what else can the West do about the Russian weaponization of kleptocracy?
Acknowledgements
About the author

By the time Russia launched its full-scale war against Ukraine in February 2022, the Kremlin’s transnational kleptocracy had achieved substantial global reach. It had penetrated every continent with corrupt practices, boasted abundant finance for its operations, and found every vulnerable strategic point where it could challenge the United States and its allies politically. Crucially, it had also inserted itself in key global financial and natural resources value chains in a way that ensured that it would be extremely difficult for the West to disentangle from it or counter it through sanctions or other measures.

With such a high level of global infiltration, even today’s unprecedented Western sanctions are only partially curbing Russia’s weaponized kleptocracy. Despite setbacks, Kremlin-led networks are still capable of undermining the West and its allies. This report will seek to answer three questions.

• How and why did the West allow this to happen?
• What is the state of the Kremlin’s kleptocratic networks today?
• What policy measures can combat Russian kleptocracy?

How did we get here?

Until the end of his first presidential term in 2004, Vladimir Putin was hiding his true intentions for imperial revanchism and deploying weaponized kleptocracy as a foreign policy tool. First, he needed to consolidate power. He also needed to leverage the global economy and rising commodity prices to augment his resources and assets, as well as those of his inner circle. This period of consolidation coincided with an era of rising living standards (measured by rising personal income, socioeconomic indicators, and other measures) as Russia recovered from the economic crisis of 1998.

Early in Putin’s tenure, leading Western politicians—including UK Prime Minister Tony Blair, Italian Prime Minister Silvio Berlusconi, German Chancellor Gerhard Schröder, and even US President George W. Bush—assisted Putin, sometimes wholeheartedly and sometimes inadvertently, in his kleptocratic exploitation of globalization. So did large Western corporations such as British Petroleum (BP), Shell, and Exxon. Many focused on securing their share of economic benefits in trade with Russia, seeing this as a win-win scenario, while ignoring warning signs, including Putin’s brutal war in Chechnya and his suppression of dissent.

The United States was also preoccupied with its war on terror after the September 11, 2001, attacks and including the subsequent invasions of Afghanistan and Iraq. At the time, Washington shifted foreign policy attention from Europe to the Middle East, devoting resources to combat al-Qaeda and other extremist groups and, in the process, neglecting transatlantic security.

Putin and his kleptocratic proxies leveraged these US priorities to their advantage, portraying the war in Chechnya as part of the Global War on Terror—despite Putin and his security services escalating the conflict in Chechnya themselves to consolidate their grip on power. The Kremlin also pushed a model of trade that prioritized big energy deals, turning Western partners into effective political lobbyists. In the process, it co-opted Western political and economic elites.

Big, high-profile deals with Western majors were the order of the day. A good example was the Tyumen Oil Company (TNK)-BP oil joint venture, which earned praise from Western media.

Vested interests and naïve Western experts persuaded the public that such deals would lead to Russia’s development and integration into the global economy, cementing democratic practices. These beliefs persisted despite warning signs like the arrest of oil tycoon Mikhail Khodorkovsky, the takeover of his Yukos oil company, and the suppression of independent television channels such as Vladimir Gusinsky’s NTV. The Kremlin presented such moves as part of Putin’s battle against unruly oligarchs and, for the most part, the West went along.

In the case of the Yukos takeover, Western governments issued statements about the need for fair legal processes and respect for property rights but did not take strong diplomatic or economic action. I personally observed Western diplomats and energy executives in Moscow in 2006–2008, noting that geopolitics and the desire to maintain stable relations with Russia—particularly given its energy dominance—muted a stronger response from Western governments and investors. In her highly acclaimed book Putin’s People, Catherine Belton noted that when Rosneft successfully carried out an $80-billion initial public offering in the West in 2006 (using expropriated assets), the result was “presented as a triumph for Putin as he played host to the [Group of Eight] group of developed nations in St. Petersburg that summer,” protests and the threat of lawsuits notwithstanding.

Russia and its emergent transnational kleptocracy were steadily gaining wealth, technology, and power. As they did, they began exporting their own business “understandings” (i.e., criminal informal practices) to the West. Putin, meanwhile, put his weight behind elevating his loyal cadre of “kremligarchs”—that is, tycoons with strong connections to Putin’s Kremlin regime.

It should be noted that Putin’s kremligarchs are qualitatively different from the Boris Yeltsin-era oligarchs, the so-called “seven bankers” who controlled much of the Russian economy in the 1990s and enjoyed independent political power. Instead, Putin’s kremligarchs are economic and political agents for the Putin regime with a track record of carrying out both economic and political operations against the West on behalf of the Kremlin. They have access to billions of dollars and extensive connections in the former Soviet space and Europe. They are supported by the Russian propaganda machine, as well as Kremlin-connected organized crime groups and the security services.

The term “kremligarch” is, therefore, a more accurate description of Russia’s business elite under Putin than the outdated term “oligarch.” While the 1990s oligarchs were powerful businessmen who had significant influence over political decisions, the situation changed dramatically under Putin’s rule. As he steadily consolidated power, noncompliant figures like Khodorkovsky were arrested, exiled, or stripped of their assets, signaling the end of any independent power among Russia’s wealthy elite.

“Kremligarch” reflects the reality that these individuals are no longer even partially autonomous. Instead, they operate under the Kremlin’s direct control, serving as extensions of state power. Their wealth and personal security are contingent on loyalty to Putin, and their economic enterprises thrive only through state contracts, tax breaks, and alignment with Kremlin interests. Their enterprises should not be considered businesses in the Western sense, as there is no free market or private property; the kremligarchs’ ownership rights came at the whim of a systemically corrupt judicial system hijacked by Putin’s proxies. The term “kremligarch” highlights these individuals’ roles as custodians of Kremlin assets rather than free-market entrepreneurs, and it helps to dispel the misleading notion that they possess political independence.

In Putin’s second presidential term, from 2004–2008, the Kremlin’s kleptocratic networks took advantage of rising commodity prices, which leveraged their uninhibited penetration of the global financial system. Putin’s kleptocracy worked hard to undermine neighboring states, including Ukraine, through a variety of corrupt political and economic means, such as corruption in the gas sector and undermining of other strategic industries.

Putin’s kremligarchs also expanded their horizons beyond the former Soviet Union and Eastern Europe—moving into Western Europe, the Middle East, Africa, and South America. Examples include the US-sanctioned kremligarch Viktor Vekselberg’s control of mining assets in South Africa, kremligarch Dmitry Rybolovlev’s use of banking assets and cryptocurrencies to influence politics in Uruguay, and the lucrative operations of the late kremligarch Yevgeny Prigozhin and his mercenary Wagner Group on three continents.

The Putin regime and its kremligarchs have also tested other subversive techniques. The Nord Stream 1 pipeline project co-opted Schröder, who served as German chancellor from 1998–2005 and took an executive position with the project upon leaving office. So flagrant was Moscow’s cooptation of the former German leader that his name became a moniker for compromised officials—“Schröderization” refers to the process of Western politicians being corrupted by Kremlin cash.

The Kremlin also became more ruthless and brazen, eliminating whistleblowers who exposed the regime’s dark underbelly. The 2006 poisoning of Russian security service veteran Alexander Litvinenko, who had defected to the United Kingdom and was cooperating with British law enforcement, was the most dramatic example. This period culminated in Russia’s 2008 invasion of Georgia, which had distinguished itself for its fight against Moscow-backed corruption, its democratic reforms, and its determined effort to join Euro-Atlantic institutions. The West yet again failed to grasp that the invasion was also the first open military shot in the Kremlin’s war on democracy abroad.

The Western response to Russia’s 2008 invasion of Georgia was notably muted, as the West failed to impose serious consequences on Moscow. Despite initial condemnation, European leaders, particularly French President Nicolas Sarkozy, brokered a ceasefire that largely favored Russian interests. The European Union and NATO were hesitant to escalate tensions, prioritizing diplomatic engagement over sanctions or military intervention. Under Bush, the United States issued critical statements but refrained from taking meaningful security steps or economic action against Russia, largely due to concerns about broader geopolitical relations and economic interdependence. The passive Western response emboldened Russia, signaling to Moscow that further territorial aggression in its “near abroad” might not provoke a strong Western backlash.

The 2008 global financial crisis temporarily mitigated Russia’s openly aggressive approach. The crisis caused a dramatic drop in the price of oil—Russia’s main economic driver—which led to a significant decrease in government revenues. This forced the Kremlin to prioritize stabilizing its domestic economy, curtailing its ability to invest in military expansion and to project power abroad. Russian foreign policy became more restrained as the government diverted resources toward supporting key industries and ensuring macroeconomic stability during the downturn.

This was during the period of “the tandem,” when Putin temporarily stepped down as president in favor of his loyal crony Dmitry Medvedev. Putin remained in de facto power as prime minister and returned to the presidency in 2012. During this period, Putin restrained himself from his previous hyperactive and aggressive foreign policy role, while Medvedev played the role of a more cooperative president who sought to attract Western investments and could abstain from standing in the way of NATO’s airstrikes against the Libyan regime, even if he still advocated for a multipolar world and Russia’s special interests in the so-called near abroad.

Not only did the West refrain from imposing serious sanctions on Russia following the invasion of Georgia, but it did not enact any effective countermeasures to Moscow’s use of weaponized corruption. The West largely allowed business-as-usual trade relations with the Kremlin, while Russia continued to export its corrosive practices on multiple levels, including state and corporate levels. These practices ranged from monopolistic abuses by Gazprom in Europe to bribes and cooptation of the mechanisms of Western politicians, academics, and other influential figures and institutions. Western policy at this time was defined by US President Barack Obama’s reset with Moscow, which effectively exchanged stable relations for Russia’s acquiescence on sanctions against Iran’s nuclear program and supply routes to Afghanistan.

As a result, Putin’s team was able to leverage the reset to ensure continued appeasement by the West while the Kremlin could continue its global kleptocratic advance, rising military spending, and revival of imperialistic policies toward Russian neighbors.

For Russia, 2012 was a turning point when any hope for far-reaching domestic reform died. Putin formally returned to power following the Medvedev interregnum and made it clear that he would use any means necessary to remain indefinitely in the Kremlin. It was at this time that Putin’s Kremlin also escalated its political warfare against the West, stepping up military support to the dictatorial regime in Syria, openly claiming imperial-style interests in the post-Soviet space, holding the largest military exercises since 1991, deploying disinformation campaigns (including through adoption of an anti-LGBT propaganda law in 2013) to counter Western values, and giving asylum to and amplifying messages from fugitive US whistleblower Edward Snowden.

However, even Russia’s forceful and illegal annexation of Crimea, its armed intervention in Ukraine’s Donbas region in 2014, and the shooting down of Malaysian Airlines Flight MH17 were insufficient to awaken the West to the danger emanating from the Kremlin. Western sanctions in response were unified but tepid, and business continued as usual.

These sanctions focused narrowly on targeted measures like asset freezes and travel bans on key individuals involved in the violent grab of Ukrainian territory. Only a few kremligarchs were targeted and most of them, like Gennady Timchenko, an insider from Putin’s inner circle, already had little economic exposure to the West. While the sanctions caused economic strain in Russia, particularly with capital flight and a weakening ruble, they were not severe enough to force a policy reversal. This allowed Russia to consolidate its hold on Crimea without facing crippling consequences. Major Western policymakers continued with consumerist, transactional, or outright appeasing approaches to Moscow.

Emboldened by the tame Western response, the Kremlin became more aggressive. In 2015, Russia launched a military intervention in Syria after a request by the government of dictator Bashar al-Assad for military support in its fight against domestic opposition. This bold move, along with the widening scale of operations in Africa by Kremlin-connected mercenary groups like Prigozhin’s Wagner Group, showed that Putin’s regime was prepared to act as a global arsonist and extortionist in places beyond Russia’s immediate neighborhood.

For many experts, Moscow’s increasing belligerence highlighted that Putin’s regime was not just an authoritarian kleptocracy focused on amassing wealth but one driven by a deeply ingrained anti-Western ideology and willing to act on these beliefs even if it meant sacrificing some financial gains.

Finally, after the majority of members of the US Congress acknowledged Russia’s meddling in the 2016 US presidential elections, the criteria for sanctioning Russian officials and oligarchs (as the US administration continued to call them) expanded in mid-2017 with the enactment of the Countering America’s Adversaries Through Sanctions Act (CAATSA). This marked a significant shift in US sanctions policy against Russia by expanding the criteria for targeting the Russian elite. CAATSA allowed for sanctions based not only on direct involvement in specific actions like the annexation of Crimea or gross human rights violations but also for those close to Vladimir Putin’s regime. The law outlined broad metrics such as proximity to Putin, net worth, and documented corruption as grounds for inclusion on sanctions lists. This widened the scope of potential sanctions to include individuals integral to Russia’s political and economic systems.

While conceptual applicability of sanctions expanded, actual designations lagged. The Kremlin list, published in January 2018, was initially only a warning. It included ninety-six Russian oligarchs and 114 senior political figures, sending a signal that these individuals were under scrutiny for their ties to the Kremlin. However, this list was not equivalent to sanctions. When the United States imposed sanctions in April 2018, the list was much narrower, targeting only seven oligarchs, including only three kremligarchs outside of Putin’s tight Saint Petersburg circle: Oleg Deripaska, Viktor Vekselberg, and Suleiman Kerimov, all of whom had limited economic exposure to the United States at the time.

Where are we now?

The start of the full-scale war against Ukraine should be seen in a dual light. On one hand, it is proof that Putin’s plan to use kleptocratic corruption and hybrid and limited warfare alone was not enough to crush Ukraine’s drive for Western integration. But it is also an example of the consequences of two decades of Western appeasement. When Russia invaded Georgia in August 2008, just as the global financial crisis was hitting, Russia’s economy was at its most vulnerable since 2000. Strong sanctions at this juncture might have deterred future aggression.

By unleashing full-scale war in February 2022, Putin took a calculated risk that the West would be as passive in defending Ukraine as it was in defending Georgia in 2008—or Ukraine in 2014.

It also shows how acceptable and normalized massive violence against peaceful neighbors as a tool of foreign policy has become for the Russian elite, including the kremligarchs. They no longer feel the need to limit their actions only to hybrid war or to create façades and plausible deniability as much as they did before 2022. Russian politicians and economic agents now openly defy international economic institutions, rule of law, and norms. The kremligarchs no longer pretend to be private Western-style businessmen. Instead, they seek more state support and try to protect any remaining trade links in the global economy. Some, like Mikhail Fridman and Oleg Deripaska, are providing various forms of support to the Russian army.

The kremligarchs’ ability to weather the post-2022 Western sanctions shows how resilient and globally entrenched they have become. Russia is now under more sanction mechanisms than Iran, Venezuela, and North Korea combined. Yet even these sanctions can only partially reduce resources available for the war as Russia continues to expand its military budget.

Western countries have also taken different approaches. US sanctions targeted Russian financial institutions by cutting many of them from the Society for Worldwide Interbank Financial Telecommunications (SWIFT) international payment-messaging system, suspending stock and US dollar exchanges, and restricting access to the global financial system. The United States also stepped up sectoral sanctions against Russian exports of mineral resources and production, as well as restricting technology transfers. The United States sanctioned many, but not all, key kremligarchs (for example, Roman Abramovich, Leonid Mikhelson, and Dmitry Rybolovlev remain unsanctioned in the United States).

The European Union, United Kingdom, and other Western allies aligned with some of the US sectoral sanctions, but did so after the United States took action, and often in a limited way. Instead, they placed much greater emphasis on individual sanctions, designating hundreds of kremligarchs and other political figures and officials— in numbers greater than those sanctioned by the United States. This reflects priorities, capabilities, and the fact that the Russian elite had used Europe as their primary destination for business and leisure before 2022.

Since 2022, most kremligarchs simply moved their funds to Dubai and other Gulf and Asian jurisdictions outside of Western purview. Some found visa and financial loopholes to continue their pre-2022 lifestyles and operations. But one thing did not change: their main currency remains loyalty to the Kremlin, not their nominal assets. Not a single prominent kremligarch defected to the West or even spoke unequivocally against Putin’s war of aggression.

This is the result of the Kremlin’s carrot-and-stick policy. In terms of incentives, the Kremlin keeps money flowing to the kremligarchs. Forbes reported that Russia’s wealthiest individuals added $72 billion to their collective fortunes over the past year, bringing their combined wealth to $577 billion. This marks a recovery from 2022, when their total wealth had plunged to $353 billion due to Western sanctions. For context, in 2021, Russian billionaires’ total wealth stood at $606 billion.

Russia’s economy shrank 2.1 percent in 2022 under the pressure of Western sanctions, but it was still able to sell oil, metals, and other natural resources to global markets—in particular to China, India, and the Middle East—and to increase its kremligarchs’ wealth in 2023.

Putin has repeatedly touted the failure of Western sanctions to cripple Russia’s economy, highlighting that the country’s gross domestic product (GDP) grew by 3.6 percent in 2023, outpacing any of the Group of Seven (G7) nations responsible for the sanctions. There are different views on the quality of this alleged economic growth, with some Western experts arguing an economic catastrophe is lurking for Russia beneath its nominal GDP growth, possibly as early as 2025. Russian opposition figure Vladimir Milov also supports this view, arguing that Russia’s wartime growth is unsustainable, artificially is driven by state spending, and paints a misleading picture of the country’s economic resilience.

Despite the debate over Russia’s true economic performance, the size of the nominal economic decline or growth is less relevant when it comes to the effect of sanctions on kremligarchs. As long as the political system remains intact and can sustain the war effort, the loyal kremligarchs’ wealth and place in the system are largely preserved.

More important than the carrots are the sticks. The Kremlin has put in place a highly repressive system that commandeers resources for the war effort without any significant resistance, including from the kremligarchs. Putin’s Russia is shifting to a “mobilization economy,” in which state power is used to redistribute property, excluding disloyal business figures and transferring their assets to a new, Kremlin-loyal elite, adding new people to the ranks of old kremligarchs. In this system, loyalty to the Kremlin must be proven constantly.

In this sense, the kremligarchs’ staunch loyalty to Putin resembles a Mafia mentality that does not allow one to leave the boss’s operations without explicit permission. The wave of suspicious accidental deaths among top Russian officials and important business figures after 2022 is a constant reminder to all kremligarchs that their perceived disloyalty will be punished through Mafia-style executions.

What can the West do about the Russian weaponization of kleptocracy?

The guiding principle of any policy recommendations is that Western policymakers need to take the kremligarchs seriously as a security threat. They are among the most effective agents of the Kremlin abroad, employing sophisticated kleptocratic methods with the support of Russia’s propaganda machine, security services, and organized crime networks.

Such wide acknowledgement will enable Western governments to allocate more resources to establish a systemic whole-of-government response to the threat. Sanctions should target not only family members or nominal owners of kremligarchs’ assets, they should also include those who aid various operations of kremligarchs against Western democratic values, norms, and institutions.

Western policymakers should be skeptical of arguments suggesting that the West try to divide the Russian elite through the selective application of sanctions. There are no credible examples of such tactics working.

Below is the list of improved sanctions that would be more effective in assisting Ukraine and improving Western security against Russian revanchism.

1. Create a multilayered, systemic response to stop imports of electronic chips, other sophisticated equipment, and raw materials used in Russia’s military-industrial complex.

Over the last two years, Western media have reported extensively on illegal smuggling or the exploitation of sanctions loopholes that allowed Russia to get access to critical technology to produce drones, missiles, and other weaponry used in Ukraine. Kremlin surrogates and covert agents have been instrumental in these smuggling operations using third countries and sophisticated manipulation of financial mechanisms. A recent report from the Independent Anti-Corruption Commission shows that, via third countries, as many as fifty-eight Russian enterprises get dozens of parts for Russian jets from up to two hundred enterprises outside of Russia.

Given the scale of such smuggling, imposing sanctions alone is not enough. Sanctions should be monitored closely, and sanctions policies should be updated regularly to be effective. Western governments should ensure stricter export controls, and manufacturing companies should monitor and analyze the movement of dual-use goods abroad with enhanced due diligence and advanced know-your-customer policies.

Western governments have slowly reacted by increasing staff in the Office of Foreign Assets Control (OFAC), the Bureau of Industry and Security (BIS), and similar bodies in G7 and EU states, expanding the list of prohibited items and passing some of the monitoring responsibilities to the banking sector. These are all useful, albeit limited and reactive, steps.

A more systemic and lasting solution would be not to shift the enforcement burden from the understaffed public sector to the private sector, but to beef up the public sector and create better coordination “among customs, export control agencies, intelligence services, and financial institutions to map out the entire supply chain and identify evasion tactics.” With enhanced capacity, the United States would be better positioned to implement a robust compliance system for the manufacturing and technology sectors, similar to what was done with banks post-9/11, using collaboration, warnings, and enforcement actions to curb the flow of Western-made components to Russia and ensure adherence to know-your-customer principles.

2. Enforce and expand sanctions on Russian fossil fuel exports by the United States, G7, and EU.

Russia’s full-scale invasion of Ukraine would not have been possible without its fossil fuel revenues, which have now surpassed €780 billion globally and continue to rise.

Stemming these flows requires better enforcing and lowering the $60-per-barrel oil price-cap mechanism created by Ukraine’s Western partners. The West can do this by limiting the number and scope of licenses that facilitate oil trade financing. To improve enforcement, banks’ ability to support the sale of Russian oil above the price cap should be restricted by the US with restriction measures supported by other Western allies. This could be achieved by tightening the scope of licenses that allow financing for oil trade by US Treasury and its G7/EU counterparts. They can also enhance enforcement by introducing (or threatening) secondary sanctions against third-country insurers, traders, and shippers who help Russia evade the price cap. This would penalize entities outside of sanctioning nations that assist Russia in circumventing the cap. This would also help improve the attestation mechanism to ensure that buyers and sellers provide shipowners and insurers with adequate pricing information to verify that Russian oil is being sold below the price cap, thus ensuring compliance.

Another key is closing the “refining loophole,” which allows EU and G7 countries to import oil products—mainly diesel, jet fuel, and gasoline—produced from Russian oil at refineries in third countries such as India, Turkey, or the United Arab Emirates.

The European Union must go beyond its limited liquefied natural gas (LNG) sanctions (and the United States should assist it politically) by adopting a full embargo on Russian LNG, as current measures barely affect Russia’s gas revenues. With Russia recently surpassing the United States as Europe’s top gas supplier, a complete ban is essential to stop the booming trade in Russian LNG (especially by Novatek, a company owned by kremligarchs Mikhelson and Timchenko), which continues despite prior bans on coal and crude oil.

New oil and gas production and new export projects should be sanctioned. Just as sanctions helped halt the development of Arctic LNG 2, other as yet unsanctioned Arctic projects—including the already functioning Yamal LNG and prospective pipelines in Siberia, from within Russian oil fields to its Arctic ports, and from gas fields in Western Siberia overland to China—should be prevented from realization. US sanctions should counter these efforts. Actions could include pushing all LNG service companies out of the sector through the threat of secondary sanctions and imposing further sanctions on new Russian production projects (such as Vostok Oil and the Yamal LNG expansion) along with the corresponding new export flows from these projects.

Western governments should also pressure SLB (formerly Schlumberger) to swiftly exit Russia, as its continued operations and technology support are crucial for enabling Russian oil and gas projects, especially following the departure of other Western competitors after the 2022 Ukraine invasion.

3. Create a systemic Western response to the growing problem of the Russian shadow tanker fleet.

Closely related to the question of poor enforcement of the oil price mechanism is a massive illicit development—the Russian shadow oil and LNG tanker fleet—which has been formed over the last two years by Russian transnational kleptocracy. This matter is so crucial that it deserves detailed analysis.

In setting up the shadow tanker fleet, Russia has followed other bad actors like Iran, Venezuela, and North Korea, which have been under various embargos for many years and have developed their shadow fleets to circumvent sanctions. Russia, however, has taken this kleptocratic endeavor to the next level.

The G7 and EU oil price cap was introduced in 2022 to prevent Russian oil exporters from legally selling crude oil at more than $60 per barrel, with the goal of reducing Russia’s oil revenue and its ability to wage the war against Ukraine. The necessary condition for this measure to be effective is a ban by the UK and other Western governments on Western insurance companies providing protection and indemnity (P&I) insurance for Russian oil cargo sold above the price cap.

In response, learning primarily from Iran’s experience over the last two decades, Russia has created an unprecedented shadow fleet of hundreds of oil tankers whose primary goal is to sneak oil above the price cap without proper P&I insurance. This enabled the Kremlin to largely circumvent the cap and to add hundreds of billions of dollars and euros to its war chest. Multiple kremligarchs from Novatek, Sovcomflot (and its newly set up proxy companies in the Gulf countries), Rosneft, Lukoil, Rosatom, and other entities and proxies are involved in this massive endeavor.

While there are varying estimates regarding Russia’s financial ability to increase such shadow fleets at the same rapid pace, what it has already achieved is staggering. Just in the last two years, the shadow tanker fleet directly servicing Russian oil exports is estimated at between three hundred and 1,400 vessels. No one knows the number for sure because Russia has invested billions of dollars in this new shadow market and elevated it to a massive and global phenomenon with multiple destinations including Gabon, Liberia, Cameroon, Palau, the Cook Islands, Saint Kitts and Nevis, Vietnam, the Marshall Islands, and Panama acting as flag-of-convenience states. This means that Russian proxies can operate hundreds of ships that fly flags from countries with lax maritime regulations, making it nearly impossible to track ownership and the true origin of cargo.

Through its shadow tanker fleet, Russia is also exporting other corrupt practices, using offshore accounts, cryptocurrency, and illicit finance to pay for change of ownership, circumvent local maritime regulations, and hire uninsured and otherwise “flexible” vessel staff. Companies frequently hire crews that might not have strong moral principles or industry standards, and that are ready to switch off transponders, manipulate automatic identification systems, forge documentation, do dangerous ship-to-ship transfers in open seas, or engage in other operations that would obscure ship routes or crude origin from G7 or EU authorities.

Worryingly, around 80 percent of these shadow oil tankers are more than fifteen years old and unreliable, and they represent a serious risk of malfunction, collision, spillage, or other human and environmental damage. Given the enormous reach of the Russian shadow fleet, it is only a matter of time before a major incident occurs. Such a disaster could result in massive amounts of taxpayer money spent in countries around the world to clean up oil spills, as well as shipping companies spending huge sums on damage caused by old uninsured vessels. The increasing risk of disaster can impact both the global environment and that of countries in whose waters these accidents occur, as well as legal shipping. The escalating situation presents significant risks to compliant vessels, the environment, and the affected countries overseeing the waters in which these incidents occur.

The Atlantic Council’s Elisabeth Braw is right to point out that the potential danger is a choice by Russia, which is instrumentalizing the shadow fleet and deliberately passing all risks associated with it to coastal states.

In turn, Russia is weaponizing the export of corruption and undermining international rules, of which the shadow fleet is just one example. Allowing hundreds of potentially dangerous old vessels with owners and crews open to illegal activity should be seen in the larger context in which Russian hackers try to damage Western infrastructure and commercial ships engage in massive espionage against strategic maritime assets. The Russian military deliberately provokes NATO ships and warplanes, and the Russian navy tries to illegally interfere with the global maritime trade in the Black Sea.

To respond to the growing problem of the Russian shadow tanker fleet, policymakers must first consider that the potentially massive threats coming from the shadow fleet are not only about the war in Ukraine and undermining of Western sanctions, but about multiple impacts on the environment and different coastal countries around the world. To address this, the following pragmatic instruments should be used.

Western allies should enable enhanced intelligence sharing on tanker movements and ownership structures.
Countries allowing their flags to be used by shadow fleets should face diplomatic and economic pressure from EU and G7 states.
EU and G7 entities, among others, should prevent the sale of tankers to operators who do not comply with the price-cap policy, and to Russian or undisclosed buyers.
OFAC and European sanctioning agencies should step up their sanctioning of individual oil and LNG tankers from a few vessels to hundreds, and should also step up enforcement of oil price-cap implementation.
The United States, European Union, and Western allies should enable greater coordination on sanctions, including bans on P&I insurance and maritime services to LNG tankers licensed by Russia for navigation through the Northern Sea Route in the Arctic.
New sanctions should be added to target not just the oil itself, but also all the companies and individuals across the value chain who facilitate its transport using shadow fleets. If the shadow fleet is downsized and mainstream compliance is tightened, this would incentivize Moscow to revert to a volume-over-value export strategy.

Western allies should realize that the price for Russia’s military upper hand in Ukraine, achieved through petrodollars, or for massive environmental accidents, is greater than the risk of a spike in global oil prices. As such, the oil price cap should be lowered and secondary sanctions on non-cap countries should be gradually introduced so that all Russian oil exports are banned.

4. Expand the list of Russia’s export commodities to be sanctioned by the United States, G7, and European Union.

Russia relies heavily on exporting metals like aluminum, nickel, copper, zinc, and cobalt. But Russia’s significance to global markets is limited, constituting no more than 6 percent of global supply in any of these commodities. There is ample evidence to refute the widespread concerns that imposing sanctions on Russia’s metal exports would disrupt the global economy. Of course, there is a difference between export targets with a varying degree of disruption and unintended consequences for Western economies that need to be constantly assessed. That is why, in 2022, the EU had to choose which particular steel and other metal products it could sanction and decide on long phase-out periods for them. In April 2024, the United States and the United Kingdom jointly announced a ban on imports of Russian aluminum, copper, and nickel, pushing Russian metal producers to rely even more heavily on China to facilitate production and exports.

Any sanctions in the metals sector will carry a price tag for the West. However, we should not forget that the revenue generated from these metal exports still plays a significant role in fueling Putin’s aggressive military actions. Thus, sanctioning more of Russia’s metal export commodities—including the sensitive subsidiaries of NLMK in Europe and among joint ventures of Rusal and Nornickel with Chinese companies—is imperative. The West must focus on hampering Putin’s ability to finance further aggression, as long as the adverse effects for the West and the global economy are limited.

Apart from sanctions, what else can the West do about the Russian weaponization of kleptocracy?

Sanctions and their better enforcement alone are not a panacea. As Russia continues its war against Ukraine, it is evident that relying solely on sanctions and their enforcement is insufficient to address the multifaceted challenges posed by Russian kleptocracy. The United States and its allies need to adopt a nuanced and comprehensive strategy that goes beyond sanctions. The West should craft an updated containment strategy that recognizes the role of Russian kleptocracy in fueling aggression and destabilization and addresses the root causes of the problem, while minimizing the risk of escalation.

Moreover, Russia’s alliances with other authoritarian regimes, such as China and Iran, amplify the risk of broader geopolitical destabilization and that these kleptocracies will continue learning from each other to undermine Western democratic institutions and security.

An updated containment strategy would crack down more forcefully on Russian financial flows and other global avenues of political and economic infiltration. This entails not only targeting sanctioned individuals and entities but also disentangling the Western financial system from the networks of corruption and illicit finance that underpin Putin’s regime. The West needs to acknowledge that Russia has chosen to engage in a hybrid war against the West and hot wars against its partners. Western leaders can’t afford to keep open business and legal avenues that Russian kleptocracy freely uses. The West must consider options to reduce all trade with Russia, as it did during certain periods of the Cold War, and must designate Russia as a terrorist state like North Korea for its war crimes, political murders, and other horrific actions.

The West must learn from past mistakes and acknowledge the cost of appeasement in dealing with the anti-Western kleptocratic Kremlin regime. Two decades of diplomatic overtures and economic engagement have only emboldened Putin and his kremligarch network and facilitated their expansionist agenda. As the war in Ukraine continues, the West cannot afford to repeat the same mistakes. Instead, it must adopt a firmer stance that prioritizes the defense of democratic values and the rule of law, and that necessarily includes full economic and financial disentanglement from Russia.

Acknowledgements

I would like to extend my deepest gratitude to those who made the preparation of this report possible. First and foremost, I am grateful to Brian Whitmore for inviting me to participate in the Eurasia Center’s critical “Russia Tomorrow” series and for his careful guidance and dedication throughout all stages of this work.
I owe a special debt of appreciation to Ambassador John Herbst and Ambassador Daniel Fried for their vital insights, thought-provoking questions, and thorough peer review, which significantly enhanced the quality of this paper. I would also like to thank Andrew D’Anieri and Aleksander Cwalina for their excellent editorial supervision and overall support in preparing this paper. Their expertise and consistency were instrumental in shaping the final outcome

Special gratitude goes to my brother Alexander Zaslavskiy for his sharing of political and industry knowledge, which provided valuable perspectives for this work. My heartfelt thanks go to my family for their unwavering moral support throughout 2024, a period marked by dedication and focus on this paper.

I am appreciative of Oleh Savitskyi for sharing his insightful views. Finally, I am grateful to Jeff Fleischer and Cate Hansberry for their diligent work in providing the final editorial touches and for overseeing the publication process.

About the author

Ilya Zaslavskiy is a specialist in due diligence, sanctions, kleptocracy, energy regulation, and political risks. His expertise spans anti-corruption, policy reform in the mineral extraction sector, corporate governance, climate change issues, and advocacy for robust policies countering post-Soviet kleptocracy, especially Kremlin-connected oligarchs and entities. His latest work includes containment policy against Russian hybrid threats, and this briefing paper is written in his independent expert capacity on Western sanctions against Russia.

Currently, Zaslavskiy also works as a senior campaigner with Razom We Stand, a Ukraine-based and internationally active peace, clean energy and climate organization. In prior roles, he was senior program manager at the Center for International Private Enterprise (CIPE), head of research at DC-based Free Russia Foundation, fellow at Chatham House and Legatum Institute, and collaborated with the Atlantic Council, Hudson Institute, Martens Centre, and other leading think tanks. He also worked on climate change issues at a Danish company RCF, and in the gas business stream at TNK-BP in Moscow before 2010. He holds a BA degree in Modern History (First Class), an MPhil in International Relations from the University of Oxford, and an Executive Master of Management in Energy from BI Norwegian Business School.

The Eurasia Center’s mission is to promote policies that strengthen stability, democratic values, and prosperity in Eurasia, from Eastern Europe in the West to the Caucasus, Russia, and Central Asia in the East.

Sanctioning China in a Taiwan crisis report cited by the Wall Street Journal on China’s sanctions preparedness

irosales — Fri, 03 Jan 2025 15:30:14 +0000

The post Sanctioning China in a Taiwan crisis report cited by the Wall Street Journal on China’s sanctions preparedness appeared first on Atlantic Council.

What role will the Gulf states play in shaping the new Syria?

Joze Pelayo — Tue, 24 Dec 2024 16:56:37 +0000

For the past six years, Gulf countries had been starting to normalize relations with the Bashar al-Assad regime in Syria, with several even reopening their embassies in Damascus, which had been shuttered after the civil war broke out in 2011. This was driven by the perceived strategic costs of keeping Assad isolated even as he seemed entrenched in power, and while Iran’s influence in the region continued to grow.

Gulf countries publicly cited regional tensions and the growing role of non-Arab states in Syria as reasons for normalization. Saudi Arabia was the latest to reopen its embassy in Damascus in September 2024, following similar moves by the United Arab Emirates (UAE) and Bahrain in December 2018, ostensibly to “reduce Iranian influence,” according to Robert Ford, a former US ambassador to Syria. (By contrast, Qatar maintained a staunchly critical stance toward the Assad regime, refusing to normalize ties.)

Assad was welcomed back into the Arab League last year, attending a summit in Saudi Arabia. And the UAE even reportedly joined the United States in negotiations aimed at securing US sanctions relief in return for Assad curbing Iran’s arms smuggling through Syria.

With Assad having fled to Moscow after the stunning and rapid fall of his regime this month, Gulf states that had supported Assad are now left empty-handed. But the turn of events offers these countries, which rarely act as a bloc, an immense opportunity to join forces and wield significant influence—both political and financial—over Syria’s future while adapting to Turkey’s rising prominence in the country.

The Gulf’s friendly overtures

Shortly after Assad’s December 8 fall, Saudi Arabia, the UAE, Bahrain, and Oman resumed their diplomatic activities in Damascus, and they were in turn thanked by the new Syrian government’s Department of Political Affairs in a December 12 statement. This statement followed meetings the new leadership held with the ambassadors from these countries, as well as Qatar. Also on December 12, Bahrain—which headed the Arab League this year—expressed its support for the transition via a letter to the new leadership in Syria. On December 14, the Arab Ministerial Contact Committee on Syria (which includes Arab, Western, and Turkish diplomats) highlighted Arab support for Syria’s political transition under the interim authorities.

Meanwhile, Saudi Arabia expressed the “strongest support” for Syria’s people after the fall of Assad’s government, commending measures taken by the new leadership in Damascus to protect Syria’s minorities and promote stability. A Saudi delegation headed by an advisor from the Saudi Royal Court met with Syria’s new leader on December 22, amid reports that Saudi Arabia will start supplying oil to Damascus. A good indicator that Saudi Arabia is serious about cooperating with Syria’s transition is that the kingdom is already cooperating at the highest level with the most influential outside player in Syria—one that is rapidly ascendant in the region—Turkey.

The UAE, which started the normalization process with Assad in the Gulf, was the last Gulf country to publicly signal positive engagement with Syria’s new administration, marked by a phone call between the respective foreign ministers on December 23. It remains to be seen whether Abu Dhabi will cautiously move to fully and publicly support the new administration in Damascus by sending humanitarian or financial aid to the country in the upcoming weeks, as neighboring Qatar has already done. On December 14, Anwar Gargash, diplomatic advisor to the UAE’s president, expressed optimism about the new leadership’s language on unity. Gargash also strongly emphasized the need to remain on guard given the new leadership’s ties to Islamist factions. He also wrote in an X post that the Arab Ministerial Contact Committee on Syria’s meeting “reflected a positive Arab approach to support our brothers in the path of political and peaceful transition” in Syria.

These moves across the Gulf add up to a positive signal that the countries that normalized with Assad are likely to deal pragmatically with the realities of the new Syria.

Turkey’s rising influence

As the country with the strongest relationship with Syria’s new leadership, Turkey is likely to hold ample leverage over Syria’s future—and even the region, given its increasingly assertive role across the Middle East and North Africa. Turkey’s gains in Syria bolster its standing vis-à-vis Iran in other areas such as the South Caucasus, where Turkey maintains close cooperation with Azerbaijan while Iran has close ties with Armenia. However, Ankara should not shoulder the role of reconstruction and state-building in Syria alone. Collaborating with the Arab states of the Gulf could bring both legitimacy and essential financial resources to Syria’s reconstruction efforts.

Among the Gulf states, Qatar is likely to wield the most influence over the new leadership in Damascus, having played a central role in facilitating talks between foreign ministers from Arab states, Turkey, Russia, and Iran during the Doha Forum that ultimately determined Assad’s fate. In meetings in Doha with Atlantic Council experts (myself included) just hours after the fall of Assad had been announced on December 8, senior Qatari national security figures expressed an air of vindication for their refusal to normalize with the Assad regime. Notably, Qatar was the only country in the Gulf already hosting the Syrian National Coalition, which it recognized as Syria’s sole legitimate representative.

The Trump administration’s opportunity

The fall of Assad represents a massive setback for Iran, and Gulf states must seize this moment as an unparalleled opportunity to reinforce the Arab role in Syria’s future. By pressuring and guiding the new leadership in Syria to form an inclusive government, Gulf countries can safeguard their interests while minimizing the risks of renewed instability that threaten the entire region.

The Trump administration also has a key role to play. As the new Syrian government faces the daunting and costly task of reconstruction, regional and international support will be indispensable to ensure that Syria does not fail again and destabilize the region. President-elect Donald Trump should lead the way alongside Turkey and the Arab Gulf states in pooling the funds required for Syria’s reconstruction and transitional governance, which would also strike a decisive strategic blow to Iran’s presence in Syria. Such assistance should be tied to clear conditions that would guarantee stability and an inclusive political process to build something better than what Syrians endured under Assad.

The fall of the Assad regime will have profound consequences for the region in the years ahead. And the United States and Gulf states have new leverage—both financial and diplomatic—to shape what those consequences will be. Any new administration in Damascus is likely eager to get Washington’s approval at the earliest possible moment to solidify its international legitimacy. That gives the United States and its Gulf allies the chance to positively impact the new political process in the country—and to secure any necessary changes from Syria’s new leadership—if it strays off course.

Joze Pelayo is an associate director at the Atlantic Council’s Scowcroft Middle East Security Initiative.

The post What role will the Gulf states play in shaping the new Syria? appeared first on Atlantic Council.

Mark quoted by MarketWatch on updates to new restrictions on American investments in China

irosales — Tue, 24 Dec 2024 15:33:32 +0000

The post Mark quoted by MarketWatch on updates to new restrictions on American investments in China appeared first on Atlantic Council.

How might Germany’s coming election shape future support for Ukraine?

Stuart Jones, Katherine Spencer — Tue, 24 Dec 2024 15:32:53 +0000

The collapse of the governing coalition in Germany, which was made official on December 16 when Chancellor Olaf Scholz lost a Bundestag no-confidence vote, has been followed closely in Kyiv. This interest is understandable; Germany is one of Ukraine’s most important supporters in Europe and has provided military aid valued at over 11 billion euros since the onset of Russia’s full-scale invasion almost three years ago. This is more than any other European country and second only to the United States.

The next government in Berlin will be confronted by a number of challenges as it addresses the future of German support for Ukraine. However, there are indications that Kyiv and the wider transatlantic community may have reason to welcome the early Bundestag elections slated for February 2025.

With the Christian Democratic Union (CDU) currently well ahead in nationwide polls, CDU leader Friedrich Merz is widely expected to be the next chancellor. This is potentially good news for Ukraine. Merz is more hawkish toward Russia than current German Chancellor Olaf Scholz. He is also poised to have a stronger majority in the Bundestag than Scholz, whose three-party coalition ultimately imploded amid internal feuds. For Ukraine, this would hopefully mean more predictability in bilateral relations with Berlin.

Before the election campaign officially began in Germany, Merz traveled to Kyiv in early December for meetings with the Ukrainian government. He is a vocal proponent of delivering German Taurus cruise missiles to Ukraine, which Scholz has consistently refused to allow.

Scholz has also been criticized for a recent phone call to Vladimir Putin, which critics saw as indicating Western disunity at a critical point in diplomatic efforts to set the stage for possible peace talks. Meanwhile, Scholz’s party has been emphasizing “peace” rather than security in its campaign messaging, further widening the gap with the CDU, which is seen as being comparatively tougher on Russia.

Stay updated

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

The outlook from Ukraine’s perspective is not entirely favorable. If he does secure election victory, Merz will face many of the same issues that confronted his predecessor. This includes Germany’s constitutional debt brake, which in effect limits the German government’s ability to spend more on defense without cutting expenditure elsewhere.

The CDU would have limited tools to safeguard funding for Ukraine. They could potentially reform the debt brake or seek to reduce state funding in other areas like welfare and transportation (which voters would be unlikely to appreciate). Alternatively, they may repeat the approach adopted by Scholz and attempt to pass another extra-budgetary “special fund.” While this is not a long-term solution for Germany’s defense spending, a new special fund specifically for Ukraine could potentially win enough political will in the Bundestag under the right stewardship.

Eurasia Center events

Drones, defense, and diplomacy: Negotiations and the battlefield in Ukraine

Conflict Defense Technologies Europe & Eurasia Politics & Diplomacy

With Donald Trump’s election victory fueling uncertainty over the future of US military support for Ukraine, finding solutions to maintain German aid should be high on the agenda for the new government in Berlin in early 2025. In addition to Trump’s imminent return to the White House, France also remains stuck in a period of domestic political instability, which could disrupt French aid to Ukraine at a time when Europe’s Franco-German engine is more necessary than ever.

Officials in Kyiv will be keen to avoid any developments in Germany that raise questions over the country’s continued backing for Ukraine. Russian President Vladimir Putin is widely believed to be counting on an eventual weakening of Western resolve as he looks to outlast the democratic world in Ukraine. Any signs of disunity or uncertainty in Berlin could help convince Putin that time is on his side, thereby further reducing the chances of meaningful peace negotiations.

Trump has vowed to end the war and is widely expected to push for the start of talks once he takes office in January. However, with the Russian army advancing in eastern Ukraine amid mounting signs of deteriorating Ukrainian morale and increasingly acute troop shortages, Putin will be in no hurry to compromise. Unless the battlefield dynamics change significantly in the coming weeks, it may prove difficult to persuade Putin to accept any peace terms that do not legitimize his invasion or represent a clear Russian victory.

There is a good chance that Germany’s snap elections will result in increased support for Ukraine in Berlin. However, the uncertainty of the next two months presents an unwelcome challenge, particularly as Kyiv seeks to convey a message of Western unity to Moscow. As they face another wartime winter, Ukrainians must wait to see who will lead the new German government and how they will articulate their plans.

Stuart Jones is a program assistant at the Atlantic Council’s Europe Center. Katherine Spencer is a program assistant at the Atlantic Council’s Eurasia Center.

1. Provide diplomatic recognition to the new government

The political situation in Syria is fluid, and the future government will likely be a coalition of opposition groups, civil society organizations, and representatives from various ethnic and sectarian groups, including HTS. One of the most significant actions that Washington could take is to provide early diplomatic recognition to this emerging government—contingent on commitments to a peaceful transition, democratic reforms, and the protection of human rights. Recognition may be contingent upon specific steps, including:

Formation of a transitional government: This government should be representative of Syria’s diverse political and ethnic groups, and include women, youth, political structures currently in exile, and opposition military factions.
Commitment to a democratic process: The interim government should agree to hold free and fair elections with international oversight and establish a justice and accountability mechanism to address past atrocities.
Constitutional reform: A new, inclusive constitution should be developed with input from all Syrian stakeholders to lay the foundation for a democratic governance system.
International oversight: The United Nations should be allowed to oversee the transition, including monitoring justice and accountability processes and ensuring the dismantling of Syria’s chemical weapons program. Encouragingly, HTS has indicated its readiness to cooperate with the international community to monitor Assad regime military sites.

2. Provide humanitarian aid and reconstruction assistance

Syria faces an enormous humanitarian crisis. Millions of Syrians are displaced, and much of the country’s infrastructure is in ruins. The United States should work with international organizations to ensure that aid is distributed effectively. Given the opposition’s experience in governance, existing structures on the ground can be leveraged to channel aid, minimizing the risks that would come from trying to create entirely new systems from scratch. However, this aid should be conditional on:

Political inclusivity: The transitional government must equitably provide aid to all regions of Syria.
Anti-corruption measures: Donors must insist on transparency and accountability mechanisms to prevent misuse of funds.

3. Begin the process of removing sanctions on HTS and the new Syrian government

HTS is currently designated by the United States as a Foreign Terrorist Organization (FTO). The group’s evolving stances, including its recent public commitments to protect religious minorities and refrain from retributive violence, suggests that HTS may be open to political accommodation. The United States should initiate a gradual, good-faith process for removing sanctions and designations on HTS and the new Syrian government. Additionally, the United States has designated the government of Syria as a state sponsor of terrorism since the 1970s and has since added additional sanctions beginning in 2011 in response to the Assad regime’s exercise of violence and repression. This process could include:

Phased sanctions relief on HTS: The United States should start by removing sanctions on individuals who demonstrate a willingness to engage in a political transition, particularly HTS leaders. Over time, as HTS shows concrete steps toward reconciliation, further sanctions can be lifted.
Quick sanctions relief on Syria: Removing broader sanctions on Syria can be done swiftly, as the new Syrian government will likely be hostile to US-designated terror groups like Lebanese Hezbollah or Iraq’s Asaib Ahl al-Haq, which were instrumental in bolstering the previous Syrian regime. As for the second batch of sanctions on Syria related to the regime’s exercise of violence on civilians, if HTS follows through on its promises to refrain from retributive violence against civilians, the United States should lift this second set of sanctions as well.
Diplomatic engagement: Engaging with HTS and other opposition groups is critical. Past US policy on similar groups, such as the Revolutionary Armed Forces of Colombia (FARC), shows that delisting a group from the FTO list is possible if the organization demonstrates a genuine commitment to peace.

4. Cooperation on counter-terror measures

HTS has a law enforcement body that has since 2017 conducted dozens of operations against Islamic State of Iraq and al-Sham (ISIS) cells operating in northwestern Syria, including arresting many members of its leadership. HTS has also arrested members of the al-Qaeda branch in Syria, Hurras al-Din, largely dismantling the organization. HTS will have an interest in preventing more extremist actors from trying to reform in Syria as the rest of the state rebuilds. The United States may thus find HTS willing to cooperate on counterterror measures.

Intelligence sharing: Intelligence sharing on counterterrorism measures can build good faith on both sides and prevent extremist groups from proliferating.

5. Encourage SDF participation in the political process

Syria’s Kurdish population, particularly those in the northeast, will play a crucial role in the country’s future. The US-backed Syrian Democratic Forces (SDF) have been key allies in the fight against ISIS, but tensions with other opposition groups remain. The United States should encourage dialogue between the SDF and HTS, as well as other opposition factions. This dialogue could include:

Inclusion of Kurdish leaders in the political process: A future Syria should represent the interests of all Syrians, including Kurds, Arabs, and other minorities. The United States can mediate discussions between the SDF and HTS to ensure Kurdish representation in the future government.

Seizing the moment

Failure for the United States to engage with Syria’s new leadership can lead to several negative outcomes. HTS could radicalize further if it does not have international checks or relies on other actors for diplomacy, trade, and support. Russia and Iran could fill the vacuum and partner with the new Syrian government to sideline the United States in the region. A new Syrian government without international support could fall into chaos and sow instability, leading to further mass displacement throughout the rest of the region. The United States must seize this moment to help influence the future of Syria, rather than waiting to see what happens. No potential path forward for Syria or HTS is inevitable. The sooner the United States takes concrete action, the more likely it can positively impact Syria’s future.

HTS leader Ahmed al-Shara, formerly known by his nom de guerre Abu Mohammed al-Jolani, entered the political scene in Syria over ten years ago. He has long been mindful of the lessons learned from the failures of al-Qaeda to win the support of the Iraqi people. HTS was formed by military officials who wanted to work within the contexts of the societies they lived in. HTS has continuously moderated since its inception and break from Jabhat al-Nusra—al-Qaeda’s Syria branch—in 2017. Of course, part of its strategy may be for optics, but much of the group’s rhetoric about moderation has taken the form of concrete actions. HTS has a Directorate of Minority Affairs that has guaranteed the safety of Christians and Alawites under its control. HTS has ordered its fighters not to disturb public institutions. And the larger and more diverse the population that comes under its governance, the more HTS will need to evolve and the less power it will have to determine what governance looks like on the ground.

It is important not to overstate the current moderation of HTS. The group is not a bastion of liberal democracy, and its political evolution is still ongoing. However, HTS is actively seeking diplomatic recognition and has expressed a willingness to engage with the international community. The United States should not expect perfection but should recognize that political entities are capable of evolving, especially when faced with the realities of governance and international expectations. Shara has already reached out to regional countries, including Lebanon, Iraq, and Russia, reassuring them that he intends to have good relations despite past support their past support for Assad. If HTS proves genuinely open to dialogue and reform, the United States should pursue engagement rather than exclusion.

As long as HTS is willing to evolve and accept constructive criticism, the United States should engage with the group. Ignoring Syria’s new leaders will not make them go away. US outreach to HTS is not just engagement for the sake of engagement. A post-Assad Syria, especially one with leaders willing to engage with Washington, presents an opportunity for the United States to promote stability and democracy in the Middle East, curb Iranian and Russian influence in the region, and provide a safe and secure home for Syrians both inside and outside Syria.

Sana Sekkarie is a digital threat analyst focusing on the Middle East. She was previously a researcher focused on Syrian opposition groups at the Institue for the Study of War and the University of Virginia.

The post A US blueprint for Syria’s fragile transition appeared first on Atlantic Council.

Decoding French economic statecraft

Charles Lichfield — Fri, 20 Dec 2024 14:30:00 +0000

There are many things an economic policymaker can admire about France. The European Union’s (EU) second-largest economy is quasi-autonomous for electricity production, in large part thanks to a long-standing civil nuclear program. France hosts globally competitive multinationals in diverse sectors including aeronautics and finance. The commitment to having an independent military-industrial complex has fostered a tradition of strategic thinking on economic security. Its long coastline is served by many international shipping routes and its firms enjoy near-full mutual market access with all of France’s neighbors.

Yet working with France has sometimes been challenging for US officials. Where Washington sees an obvious case for alignment, France will sometimes assert independence. There is a consistent thread from General Charles de Gaulle’s assertive policies to President Emmanuel Macron’s semi-successful push for the EU to embrace strategic autonomy from everyone, including the United States. Macron’s cause célèbre is already getting a second hearing now that President Donald Trump will be returning to the White House.

Understanding how France “does” economic statecraft will be crucial for US and other Western policymakers in the months and years ahead. Therefore, over three months, we have conducted interviews with the relevant teams in Paris, Brussels, and Washington DC, which agreed to meet despite very busy schedules. The goal of this piece is to represent how these teams are organized and how they think about their issues.

Before delving in, it’s worth knowing the basics about France’s place in the global economy.

France produces competitive exports in the sectors in which it is specialized: aeronautics, beverages, and cosmetics. In these sectors, France is among the top five countries in terms of quality ranking, indicating high non-cost competitiveness. However, these export sectors make up less than 20 percent of France’s export revenues. The rest of France’s exports (mainly in electrical equipment, machinery, vehicles, plastics, and pharmaceuticals) have more average quality rankings and these have deteriorated over time. This makes French exports sensitive to cost competitiveness—which has been a problem in recent decades because of high unit labor costs. President François Hollande’s Tax Credits for Competitiveness and Jobs (CICE), as well as other steps taken toward flexibility in the labor market by Macron, have gone some way in addressing this. Even without the scale advantages of the US market, the French start-up ecosystem has produced unicorns like BlaBlaCar in the sharing economy and Mistral.AI—the highest-valued artificial intelligence (AI) firm based outside the San Francisco Bay area.

Still, France’s trade deficit, which has grown since the mid-2000s, remains a persistent concern for French voters.

France’s manufacturing sector relies heavily on foreign inputs. The French Treasury estimated that 40 percent of manufacturing inputs were imported in 2020, albeit predominantly from other European countries. The energy sector is the most dependent on non-EU inputs, relying on crude oil imports. The textile industry has seen the largest growth in import dependency over the past two decades, with more than 60 percent of inputs imported. The textile sector is the most dependent on Chinese inputs, followed by the electronics and transport sectors.

Meanwhile, high social spending—the legacy of COVID-19—has left France with a heavy debt pile. Paris has struggled to bring down deficits even as COVID-related and other price shields brought in at the beginning of Russia’s full-scale invasion of Ukraine have been phased out. The short-lived Michael Barnier government has already fallen before passing a budget for 2025. The successor François Bayrou government will probably succeed in passing a late budget, but with little margin for savings. Along with being costly, France’s debt can affect its credibility in EU debates. Yet it would be a big mistake to underestimate French influence in Brussels. Our journey through French economic statecraft will take us there first.

France and EU economic statecraft

Through its membership in the EU, France participates fully in the Customs Union and the border-free Schengen Area. Any targeted sanction—such as an asset freeze or a travel ban—must therefore be applied in the whole EU, though implementation is carried out by national immigration and customs authorities. Even for a well-established EU tool like sanctions, the fact that they belong to foreign policy means that member state unanimity is required for renewal every six months. Teams at the European External Action Service (EEAS) decide whom to sanction—and national diplomats on loan are heavily present there. France’s permanentrepresentation tries to get involved early to avoid the leak of draft proposals that are difficult for France. Trade and regulation policy, on the other hand, tends to rely on qualified majority voting (QMV) in the Council of the EU. A timely example of this is France’s current effort to slow or block the ratification of the EU-Mercosur trade agreement by working with other member states with strong agricultural sectors.

Russia’s full-scale invasion of Ukraine forced France and the EU to beef up their activities in most of these clusters, while causing few if any recriminations regarding who’s in charge. The French interministerial process run by the General Secretariat for European Affairs(SGAE) in Paris and the permanent representation in Brussels have allowed France to bring a quick end to the rare initiatives that might have disproportionately affected the French economy, such as sanctioning Rosatom.

Perhaps counterintuitively, tensions have arisen more frequently in abstract discussions about which tools the EU should equip itself with next. The division of labor between the EU and national powers becomes muddier as newer tools are explored. National security remains the preserve of member states and is not as well defined in the treaties of the European Union as it is in the General Agreement on Tariffs and Trade. On the other hand, economic statecraft touches on trade, regulation, and competition rules, which are the EU’s prerogative and areas in which the European Commission has the sole power to initiate legislation. The following chart shows there is a sliding scale of policy clusters. These are not exhaustive, nor is their position set in stone. However, the chart provides a fairly accurate map of where Paris’s preferred mix of pooled sovereignty and national competence currently lies for each cluster.

There has been a trend of President Ursula von der Leyen’s European Commission publishing turnkey compromises on newer areas of economic statecraft, such as outbound investment screening. The January 2024 white paper on outbound investment conspicuously avoids mentioning “national security” and instead refer to risks to “common EU security.” Paris argues that trying to replicate instruments born in the US approach to national security is counterproductive and that respecting the committee-based process for using existing tools and elaborating new ones will lead to better outcomes.

The Council of the EU hosts myriad committees focusing on thematic areas pertaining to economic statecraft (customs, trade, financial regulation, and merger control), each with its own communities of experts and preferences. France is represented in each one and is confident in its abilities to shepherd discussions. The SGAE plays a key role in coordinating between ministries so that the French positions on different committees are compatible. The French Treasury (DG Trésor) and its trade and investment policy office (MULTICOM) are competent authorities for investment screening in France, making them an important knowledge hub for where France’s interest lies in these discussions.

In Paris’s view, allowing time for comitology has two other advantages. It enables member states to find the right balance between the ability to intervene and block an investment when necessary and creating rules to prevent the profligate use of new tools by some capitals. It also allows the EU to devise economic statecraft tools in a way that is coherent with its internal rules. For example, the Carbon Border Adjustment Mechanism will use the Emissions Trading System’s method to calculate adjustments due on third-country goods. A new challenge will be making inbound investment screening more explicitly compatible with competition rules on mergers.

Paris is focusing carefully on how the European Commission is preparing to divvy up the economic statecraft brief over the 2024–2029 term. The clearest owner of the issue, alongside von der Leyen herself, will be four-time Commissioner Maros Sefcovic, whose portfolio now includes trade and economic security. In his mission letter, he is also instructed to lead work on a New Economic Security Doctrine for the EU.

The inner workings of French institutions in shaping economic statecraft

The French Treasury and its MULTICOM office fit within a wider ecosystem feeding into French economic statecraft policy. The SECFIN office of the French Treasury is the most competent authority on sanctions and controls. It runs regular dialogues with the Office of Foreign Assets Control and the Bank for International Settlements and oversees the work of the customs service (la douane). The Directorate General for Firms (DG Entreprises) is a separate directorate within the Economics Ministry that helps the private sector with compliance. A subdivision created in the 2019 reform of French economic security policy, the Strategic Information and Economic Security Service (SISSE) also fulfils an economic intelligence role and can contact and support firms of strategic importance which it believes are being targeted by foreign economic statecraft or simply by investors the French government deems inappropriate. Ever since a blocking law was passed in 1968, French firms have needed to seek permission from the French government before transmitting sensitive information to foreign governments or justice systems. The 2019 reform makes SISSE the point of contact for seeking this authorization.

Paris argues that its rules on inbound investment are clear, as are its demands when it intervenes in a transaction. These demands usually include key elements like research and development and production staying in France. US investors certainly don’t seem to fear politically motivated or arbitrary interventions. France usually tops the list for US foreign direct investment into Europe and US firms’ direct investment position in France was in excess of $100 billion in 2023. This doesn’t make the investment screening mechanisms totally immune to political pressure, but this tends to be exercised for firms with high symbolic but low strategic value, as in the recent case of Sanofi’s attempt to spin off its Doliprane painkiller brand.

While it sits in the imposing Economics and Finance Ministry, which is sometimes described as a fortress, the French Treasury is comfortable with Brussels’s process and pooling sovereignty because its areas of competency are already quite Europeanized. But it’s important to understand which other ministries have an economic statecraft role.

Though it is not the hub of economic statecraft thinking, the Ministry for European and Foreign Affairs plays an important role. The main reason is that its diplomats are likely to be present when policy deals are struck at a political level, be it Joint Comprehensive Plan of Action (JCPOA) negotiations in Vienna or more recent Group of Seven (G7) meetings focused on responding to Russia’s aggression against Ukraine. The need for in-house coverage is mainly fulfilled by the globalization directorate, which has several teams working on economic diplomacy, including a deputy director for sanctions, economic norms, and the fight against corruption. But because of the EU components, the deputy director for external relations of the European Union and the deputy director for EU and international economic law will also be heavily involved in interministerial discussions before every new EU sanctions package or white paper on economic statecraft.

Collaboration between the foreign and economics ministries works well, and it is useful to meet and discuss matters with both. The Foreign Ministry is more comfortable than the Economics Ministry in owning France’s independent streak and justifying the need to stand up to the United States on occasion. The historical purpose of the office of the deputy director for sanctions was to deal with the spillover effects from US economic statecraft, as demonstrated by the 1990s blocking regulation meant to protect EU firms investing in Cuba or setting up the Instrument in Support of Trade Exchanges to maintain some economic relations with Iran when the United States left the JCPOA in 2018, leaving French banks and energy firms particularly exposed. Today, the Foreign Ministry’s sanctions team thinks of itself as the knowledge hub on sanctions complications—which can also mean anticipating unintended consequences from European sanctions. Foreign Ministry teams are also keen to remind interlocutors that none of the tools built for economic statecraft are targeted only at China and will be careful to make sure this remains the case in European policy.

Not all policy issues are coordinated through the SGAE. The same ministries can also be summoned to coordinate through the Defense and National Security Council Secretariat (SGDSN), which prepares Defense Councils. In addition to the sliding scale of instruments—some more national than others—France also guards some sectors from European policy. Everything related to civil nuclear contracts is kept quite separate from the EU, as are military export contracts. This may be part of the reason why France is cautious about outbound investment screening, as some of these contracts come with local production partnerships (offsets or mesures de compensation).

The 2019 reform also instituted the Economic Security Liaison Committee (COLISE) meetings, which include ministries that weren’t historically alert to these risks, such as the Education and Research Ministries. The public financial institutions that form France’s robust infrastructure for positive economic statecraft are not officially part of COLISE meetings but can be invited. The French Development Agency (AFD) and its development finance subsidiary PROPARCO are powerful instruments, but their status as a bank makes them quite independent from political priorities in Paris. The Public Investment Bank (Bpifrance), a joint venture between the state investment bank and previous iterations of strategic investment funds, can be asked to make domestic investments—including when the French government has blocked an inbound investment.

All of these ministries and coordination bodies are meant to answer to the top. But even in France’s presidential system, the prime minister can sometimes assert themself. There have been no obvious divergences while Macron has had prime ministers from his own or allied parties. Still, the SGAE explicitly sits under the prime minister, so a more assertive prime minister from a political party different from the president’s can heavily influence what position France takes on EU policy. Still, the presidency will always remain heavily involved through the president’s own presence at European Councils and at G7 summits. Macron’s diplomatic adviser Emmanuel Bonne was on the now notorious WhatsApp group used to finalize the first salvo of G7+ sanctions in February 2022, as was von der Leyen’s Chief of Staff Björn Seibert.

Putting collaboration on a more sustainable footing

If our interlocutors in Paris would like US readers to take one message on board, it would be that they should have more faith in the EU’s way of doing things. Provided there is enough time for comitology, they say, EU economic statecraft can have formidable effects. The often-cited Anti-Coercion Instrument—which is meant to allow the EU to respond as one bloc when coercion is being exercised on one member state—was first introduced in 2018 and work was stepped up in 2021 when China started piling economic pressure on Lithuania. The instrument entered into force in December 2023. This might seem slow to Washington, but this is the price to pay for a policy with which all member states are comfortable. This, in turn, relies on two crucial elements. First, new tools must be country agnostic. Setting up China-specific instruments will alienate key member states and—even if the instruments are set up—will require starting all the comitology from scratch if a new threat emerges from a country other than China. Second, there needs to be trust that there are sufficient guidelines to prevent a minority of member states from free riding on others’ efforts.

The EU’s fourteenth sanctions package against Russia from June 2024 provides a more recent example of just how effective EU measures can be when a consensus is finally reached. In this case, the EU gave itself the legal basis for sanctioning Chinese firms with extensive activities in Russia. While the EU didn’t even designate any bank, the news drove many Chinese banks out and commercial interest rates in Russia up. Paris would argue that this was worth the wait.

Attempts by Washington to hasten progress haven’t necessarily been productive. The clearest example concerns outbound investment screening. Von der Leyen’s endorsement of this approach during her March 2023 US visit, and the last-minute addition of a white paper on the topic to the January 2024 package of papers on economic statecraft, has generated rumors about pressure from the White House and poisoned the committee-based discussions on the topic. Going forward, the fact that Macron’s former Europe adviser Alexandre Adam now serves as von der Leyen’s deputy chief of staff should avoid a repeat of this kind of hiccup.

There is a conundrum for the three EU member states that are also part of the G7, including France. Washington sometimes takes the shortcut of assuming G7 statements commit the EU to a particular course of action, when the reality is that comitology will need to take place anyway. There is also a lesson here for the EU institutions, which tend to be quiet in G7 working groups when they should instead provide feedback on what is feasible for the EU and how long it will take.

In a way, the US-EU Trade and Technology Council (TTC) was designed to build trust between technical teams so that this type of hurdle would be less of a problem. It isn’t clear whether the format will survive under Trump. In any case, imposing solutions on Europe is bound to backfire and to return knee-jerk criticism of extraterritorial justice. Instead, experts are capable of having a nuanced debate and can see how EU law also carries global implications, though without the same means of enforcement.

As one experienced practitioner told us, “If Europe is both taken for granted and collateral damage of US economic statecraft, this makes it harder for us to push back on extremist parties’ arguments against any sort of restrictive measures.”

Strategic empathy is therefore crucial. This is especially true as our interlocutors tended to land on the same parting thoughts that any US policymaker might share at the end of a similar discussion, such as the need for a doctrine of economic statecraft.

About the author

Charles Lichfield is the deputy director and C. Boyden Gray senior fellow of the Atlantic Council’s GeoEconomics Center.

The report is part of a year-long series on economic statecraft across the G7 and China supported in part by a grant from MITRE.

At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.

Cryptocurrency market capitalization

The post Decoding French economic statecraft appeared first on Atlantic Council.

By the numbers: The global economy in 2024

GeoEconomics Center experts — Thu, 19 Dec 2024 17:52:02 +0000

100 percent

US tariff rate on electric vehicles imported from China

In May, US President Joe Biden announced a 100 percent tariff on all electric vehicles (EVs) imported from China. The administration had two main objectives: 1) Protect and stimulate US clean energy industries and supply chains, and 2) counter a flood of Chinese goods as Beijing turns to exports to compensate for its weak internal demand. For the United States, these tariffs are largely preventative and symbolic, as Chinese EVs make up only around 2 percent of total EV imports. For other Group of Seven (G7) countries, it’s too late for prevention, as Chinese EVs already dominate.

The Biden administration coordinated with concerned allies and, in August, Canada also announced it would levy a 100 percent tariff on EV imports from China. The European Union (EU) later imposed up to 45.3 percent tariffs on Chinese EVs. Economic stress due to Chinese dumping increasingly reaches beyond the United States––and even beyond the G7. Since 2023, Argentina, Brazil, India, and Vietnam have all begun anti-dumping or anti-subsidy investigations into Beijing’s practices.

The incoming Trump administration will now have a choice. It can revert to President-elect Donald Trump’s previous preference for bilateral negotiations, or it can continue to restrict China’s access in step with allies and partners, possibly by creating a “buyers club” to regulate standards and open markets to a select few.

—Sophia Busch is an assistant director at the Atlantic Council’s GeoEconomics Center.

Ten septillion (10^25)

Computational operations triggering new investment prohibitions

In October 2024, the US Department of the Treasury issued final regulations implementing the Executive Order on Addressing United States Investments in Certain National Security Technologies and Products in Countries of Concern. Once it comes into effect on January 2, 2025, the Outbound Investment Security Program (OISP) regulations will prohibit or subject to notification requirements certain transactions involving Americans and persons affiliated with designated countries of concern (presently, China, including Hong Kong and Macau) operating in the semiconductor and microelectronics, quantum information technology, or artificial intelligence (AI) sectors (“covered foreign persons”).

With respect to AI, the OISP will generally prohibit US persons from investing in a covered foreign person that develops any AI system trained using a quantity of computing power greater than ten septillion (10^25) computational operations (integer or floating-point operations). In addition, the OISP sets forth other computational thresholds implicating investment prohibitions (i.e., greater than 10^24 computational operations using primarily biological sequence data) or notification requirements (i.e., greater than 10^23 computational operations). Notably, regardless of computing power, covered transactions involving AI systems designed or intended for military, government intelligence, mass surveillance, cybersecurity, digital forensics, penetration testing tools, or the control of robotic systems end uses are also subject to prohibitions or notification requirements.

Absent practical guidance or enforcement history, exactly what these computing power thresholds mean in practice, as well as how they reasonably can be determined, remain to be seen. However, given its breadth, complexity, and enforceability, the OISP seems likely to have a significant effect—most notably with respect to US persons, but also in connection with the activities of certain foreign persons controlled by US persons or for which US persons serve in key roles. Such persons have until the new year to start making sense of what may be about 10^25 questions regarding their exposure under the OISP.

—Annie Froehlich is a nonresident senior fellow at the GeoEconomics Center and partner at Cooley LLP.

Number of countries in Kazan, Russia, for the BRICS+ annual summit

The 2024 meeting of the BRICS+ gathered the representatives of forty countries on October 22-24 in Kazan, Russia. This number is about four times the size of the BRICS+ (named for members Brazil, Russia, India, China, and South Africa), which expanded in 2023 to include Argentina, Egypt, Ethiopia, Iran, the United Arab Emirates, and Saudi Arabia.

While the creation of a BRICS currency still appears unlikely, the bloc announced a substitute for Western payment systems called BRICS Clear. Circumventing sanctions or the extraterritoriality of US banks and, more generally, becoming less dependent on the US dollar are clear motivations behind such endeavors, as well as a growing interest in making bilateral arrangements to use China’s e-yuan.

Some notable leaders, such as Argentine President Javier Milei and Brazilian President Luiz Inácio Lula da Silva, were absent. But the attendees were a large and heterogeneous group, including both Turkey and North Korea. But without being officially opposed to the United States, the US dollar, or even the G7, the summit in Kazan visibly illustrated increasing global fragmentation. True, it took two world wars for the British pound to be dethroned by the dollar, and the latter remains dominant, representing about 60 percent of central banks’ official reserves, international debt, and credit. But in a multipolar world, could too much hegemony be its own undoing?

—Marc-Olivier Strauss Kahn is a nonresident senior fellow at the Atlantic Council and honorary director general at Banque de France.

Percentage of raw lithium used in the EU originating from China

Russia’s invasion of Ukraine laid bare a vulnerability in Europe’s energy strategy: an overreliance on a single supplier for critical resources. The EU is determined to avoid repeating the same mistake with lithium, a critical mineral often referred to as “white gold” for its indispensable role in the decarbonization race. However, the EU faces an uphill battle to reduce its near-total dependence on China, which currently supplies 97 percent of the bloc’s raw lithium.

With its ability to produce lithium at low cost thanks to cheaper labor, state-controlled financing, and energy subsidies, Beijing has flooded global markets and produced much more lithium “than the world needs today, by far,” according to Jose Fernandez, under secretary for economic growth, energy, and the environment at the US Treasury Department. To mitigate this monopoly, the EU has set ambitious targets, including producing at least 10 percent of its annual lithium consumption within the bloc by 2030. However, the region’s lithium mining projects are not expected to begin production until the end of 2026, leaving a significant gap in the interim.

As the world transitions to green technologies, lithium will remain a cornerstone of the global energy transition. For the EU, building a resilient, diversified supply chain is a strategic necessity.

—Grace Kim is a young global professional with the GeoEconomics Center.

Countries that held elections

Almost half of the world held elections in 2024. In Western democracies, opposition parties have won six out of fifteen decisive elections. Globally, more than half of incumbents or ruling coalitions managed to stay in power. However, unstable coalitions prompted multiple collapsed governments in Europe, including Germany and France.

Meanwhile, Russia’s efforts to interfere in Eastern European and Eurasian countries’ elections were a prominent but not unexpected problem. Russia’s direct and indirect interference in the Georgian parliamentary elections has been thoroughly researched and documented. Like in Georgia, the Moldovan elections were fraught with Russian disinformation and meddling, although pro-Western incumbent President Maia Sandu emerged victorious. Meanwhile, Romanian intelligence services declassified documents showing that the country’s elections have become the target of “aggressive hybrid Russian action,” including 85,000 cyberattacks on Romanian election websites.

These instances of interference throughout 2024 demonstrated that Russia and other adversaries are invested in undermining elections as a fundamental principle of democracy. This is an opportunity for the United States and the EU to leverage positive economic statecraft tools to equip countries in Eastern Europe and Eurasia with secure election technologies and provide financial assistance to educate populations in identifying and thwarting Russian propaganda and disinformation.

—Kimberly Donovan is the director of the Economic Statecraft Initiative within the Atlantic Council’s GeoEconomics Center. Follow her at @KDonovan_AC.

—Maia Nikoladze is the associate director at the Economic Statecraft Initiative within the Atlantic Council’s GeoEconomics Center. Follow her at @Mai_Nikoladze.

—Mikael Pir-Budagyan is a young global professional at the Economic Statecraft Initiative within the Atlantic Council’s GeoEconomics Center.

$3 trillion

Since the start of the year, the cryptocurrency market capitalization nearly doubled from $1.65 trillion to $3.65 trillion. This year, the digital asset industry made significant inroads into the global economy, especially bitcoin and stablecoins.

Bitcoin continues to dominate the digital asset market, accounting for more than 50 percent of the total market capitalization as the asset crossed $100,000 on December 4. On January 10, the US Securities and Exchange Commission approved the bitcoin spot exchange-traded funds, giving retail and institutional investors greater access to the asset—in November, a group of US bitcoin exchange-traded funds recorded $6.2 billion of inflow. Stablecoins also saw significant, use accounting for trillions of dollars of transaction volume every month. In October, Stripe acquired stablecoin platform Bridge for $1.1 billion, demonstrating what may be fintech firms’ bigger push into digital assets.

Digital assets should be expected to see more mainstream adoption under the Trump administration and a Republican-led House and Senate, which have expressed a pro-crypto stance. This will likely result in more open-source developers in the United States and greater exploration by financial institutions.

—Nikhil Raghuveera is a nonresident senior fellow at the GeoEconomics Center and co-founder of Predicate.

$1.4 trillion

Debt service spending by developing countries

As interest rates hit twenty-year highs, developing countries paid out a staggering sum of $1.4 trillion to service their foreign debts. The details behind that headline are equally stark and troublesome. Interest payments alone amounted to more than $400 billion as rates surged. And, as with most shocks, the poorest countries and most economically insecure people have been hit the hardest as governments are forced to make tradeoffs between development and growth, and as spending is diverted from critical health, education, and infrastructure investments. Low-income economies eligible for the International Development Association (IDA) paid $96 billion in debt service; and their interest payments now amount to nearly 6 percent of the export earnings of IDA-eligible countries—a level that hasn’t been seen in more than twenty-five years. For some countries, the payments run as high as 38 percent of export earnings. And more money is flowing out than in. Since 2022, foreign private creditors took in almost $13 billion more in debt-service payments from public sector borrowers in IDA-eligible economies than they doled out in new financing. Multilateral banks have been playing a larger role, even as service payments, interest rates, fees, charges, and surcharges have come under scrutiny.

For its part, the World Bank announced in advance of the Annual Meetings in October that it was lowering the minimum equity-to-loan ratio from 19 percent to 18 percent, freeing up $30 billion more in financing, removing certain fees, and lowering the price of loans for smaller economies. Meanwhile, the International Monetary Fund (IMF) announced a package of reforms to its General Resources Account lending that will significantly reduce the cost of IMF borrowing, which has compounded the crisis for many countries. The principal changes include a reduction of the margin over the Special Drawing Rights interest rate, an increase in the threshold at which surcharges apply, a lower rate for time-based surcharges, and a higher threshold for commitment fees. More than a third of General Resources Account (GRA) borrowers are currently subject to surcharges. By fiscal year 2026, the number of nations subject to surcharges is projected to drop from twenty to thirteen. Hefty savings for GRA borrowers are expected––$1.2 billion annually, or 36 percent.

––Nicole Goldin, PhD, is a nonresident senior fellow at the Atlantic Council’s Geoeconomics Center.

56.6 percent

The drop in revenue from Chinese government entities’ sale of state-owned land in the first three quarters of 2024 compared with the same period in 2021

Nothing encapsulates China’s economic crisis better than the steep fall in government revenue from “land use” sales. Since peaking in 2021, the country’s booming real estate sector has fallen into a deep depression, with construction grinding to a halt in many cities and falling prices adding to deflationary pressures in the Chinese economy. That has proven devastating to China’s heavily indebted local governments, which have relied on the sale of “land use” rights for much of their operating income. The IMF estimated in 2023 that the debt of local governments and financing vehicles they’ve set up over the years to raise (and spend) money totaled more than 100 trillion yuan ($13.7 trillion). With an estimated fifty million residences sitting empty nationwide, many property developers having defaulted on debts, and local governments unable to pay their bills, Beijing is struggling to sustain economic growth.

—Jeremy Mark is a nonresident senior fellow at the Atlantic Council’s GeoEconomics Center.

318

The number of transactions each year that Treasury estimates could be covered by the new Outbound Investment Security Program

In 2024, the US Department of the Treasury took the final steps to implement Biden’s Executive Order 14105 to create a targeted Outbound Investment Security Program. During the rulemaking process, Treasury initially estimated that 212 transactions per year could fall within the program’s jurisdiction. The public comment period apparently caused Treasury to raise their estimates to 318 to “account for the likely underrepresentation of potentially relevant transactions,” but the private markets are famously opaque and Treasury went on to concede that “precise data that matches the scope of potential covered transactions is not available.” Treasury’s revised estimate should still only implicate less than 1 percent of deal activity (by deal count, vice value). The question for 2025 is whether this small percentage is an accurate reflection of the program’s impact on US outbound investments and the costs of compliance.

—Jesse Sucher is a nonresident senior fellow at the Atlantic Council’s Economic Statecraft Initiative in the GeoEconomics Center.

10%? 20%? 25%? 60%? 100%?

Trump’s tariff proposals

There is nothing like large, unilateral, and across-the-board tariff proposals from the United States to get tongues wagging and economic models churning. The latest tariff proposals from the president-elect are no exception. But maybe more important than the impact of such tariffs is the question of whether the EU should view these tariff proposals as weapons and threats directed against trading partners, or as tools of US domestic policy that result in collateral damage to the EU. Each characterization is credible, but the difference is huge in terms of the direction of transatlantic relations. And once EU policymakers start to publicly own one narrative or the other, it is hard to go back.

If the tariff proposals are viewed as weapons and threats, a reasonable EU response—and maybe the only one—is retaliatory tariffs, and to refuse to negotiate “with a gun to our heads” (in well-worn EU parlance). This would likely lead to tit-for-tat retaliation or even a trade war. If, by contrast, the EU views the tariff proposals as tools of US domestic policy that inflict collateral damage on the EU, then a reasonable response is an early bilateral discussion on other ways to achieve US domestic policy objectives, but with less or no collateral damage to the EU.

Among the policy objectives for these and previous proposed tariffs are: addressing persistent goods trade imbalances, encouraging domestic manufacturing, raising revenue, and protecting against and disincentivizing nonmarket excess capacity. These are policy goals that the EU and other trading partners can understand (and even arguably share), even if they disagree that tariffs are always a good way to achieve them. Indeed, some of these goals—like addressing the challenges posed by nonmarket economies—are better achieved in coordination with like-minded allies, which provides a clear opening and opportunity for collaboration.

The current moment is ripe for early US-EU engagement on achieving the United States’ policy objectives while minimizing collateral tariff damage (including to the US economy itself). Engagement could, indeed, drive the percentage numbers in the header above closer to zero, at least for the EU.

––L. Dan Mullaney is a nonresident senior fellow with the Atlantic Council’s Europe Center and GeoEconomics Center.

$50 billion

That’s the amount of money generated by pulling forward future interest earnings on Russia’s blocked sovereign assets. For nearly three years, the G7 debated how to handle the $300 billion in Russian foreign exchange reserves being held in Western central banks. While some advocated for a total seizure of the full amount, others worried about the legality of such a move and the backlash it would create across the Global South.

So the G7 reached a game-changing compromise. Creatively, and drawing in part on Atlantic Council GeoEconomics Center research (see our simple annuity formula below), the G7 calculated the interest these assets would earn over the next twenty years and deliver that total—$50 billion—to Ukraine in this calendar year. When you consider that Ukraine’s total budget in 2023 was around $80 billion, you understand that this solution is more than just a temporary fix—it’s a surge of resources delivered at a critical moment. And the number also represents what can happen when allies work together and think outside the box during an unprecedented situation.

––Josh Lipsky is the senior director of the Atlantic Council’s GeoEconomics Center.

Number of countries with an active digital ID system that has been operationalized in two or more sectoral use cases.

Digital ID presents massive opportunities for governments and the private sector to interact with people more efficiently; well-known examples include India’s Aadhar system and Estonia’s e-ID. As governments digitize services and interfaces with constituents, digital ID is expected to play a significant role in resource allocation, access control, and data collection. At the same time, digital ID poses a number of challenges. Prior research (including from me and my colleagues at Carnegie Mellon University) has shown that ID requirements can pose significant barriers—particularly to marginalized populations—due to procedural challenges and/or limited resources for onboarding, identity-proofing, and authenticating individuals. Another prominent challenge is privacy and security. Digital ID systems typically collect and process sensitive data such as biometrics; ensuring proper privacy and security protections for this data is far from trivial. Moreover, not all countries with digital ID systems even have data protection laws in place—or the means to enforce them.

As governments around the world increasingly embrace digitization and adopt digital ID, they will face a challenging balancing act between providing useful, usable services while also providing safeguards against many potential pitfalls that can have disastrous outcomes for constituents.

—Giulia Fanti is a nonresident senior fellow at the Atlantic Council’s GeoEconomics Center and an Angel Jordan associate professor of electrical and computer engineering at Carnegie Mellon University.

35 percent

Through May of 2024, Russia supplied approximately 35 percent of US imports for nuclear fuel. Biden imposed a ban on the importation of uranium products from Russia, which went into effect in August. This was a significant move for the US energy sector transitioning away from resources that had been a critical part of the US nuclear energy regime. It’s important to note that a waiver process exists to allow some importation of enriched uranium to continue for a limited time.

This very narrow resource that continued to be purchased from Russia by a country that had imposed crippling sanctions on the Russian economy is an important reminder that Russia was still very much part of global supply chains this year.

—Daniel Tannebaum is a partner at Oliver Wyman, where he leads the Global Anti-Financial Crime Practice, and a nonresident senior fellow within the Atlantic Council’s GeoEconomics Center.

Technology companies that plan to use energy generated by nuclear power plants by 2030.

In October, the Associated Press reported that Microsoft and Google would invest in small nuclear reactors to support “surging demand [for carbon-free electricity] from data centers and artificial intelligence.” Amazon also announced plans to invest in small nuclear reactors as dedicated sources of zero-carbon energy to support its data centers and server infrastructure.

These investments occur as technological innovation sparks sharp increases in demand for electricity, as seen in data released by the US Energy Information Administration.

Goldman Sachs research this year estimates that AI alone will generate a more than 160 percent surge in demand by 2030 for electric power to cool data centers and maintain operational integrity for the physical servers that support cloud-based AI computing.

The share of demand for electricity by US data centers is expected to double by 2030, although it will still remain in the single digits relative to other sources of demand.

For decades, energy and national security have had a high degree of overlap with geopolitics due to the unique role that fossil fuels play in the global economy. One consequence of Russia’s aggression in Ukraine since 2014 has been to incentivize the rapid adoption of clean energy in order to minimize geoeconomic vulnerabilities associated with imported fossil fuel energy.

Many will celebrate the proactive shift toward renewable and nuclear energy by the three largest technology companies on Earth. But the shift will also create national security issues among three critical infrastructures: the electricity grid, nuclear energy, and AI/data centers. Local, renewable, zero-emission energy will transform and potentially complicate the interplay between national security policy, energy policy, and AI policy.

—Barbara C. Matthews is the CEO of BCMstrategy, Inc., a company that generates AI training data from the language of public policy. When in government, she was the first US Treasury Department attaché to the EU and, prior to that, senior counsel to the House Financial Services Committee. She is a nonresident senior fellow with the Atlantic Council’s GeoEconomics Center.

The post By the numbers: The global economy in 2024 appeared first on Atlantic Council.

Nicaragua is consolidating an authoritarian dynasty. Here’s how US economic pressure can counter it.

Brennan Rhodes — Tue, 17 Dec 2024 21:12:10 +0000

On November 22, the Nicaraguan National Assembly all but solidified the country’s dynastic dictatorship, led by President Daniel Ortega and his wife, Rosario Murillo. The legislature approved a constitutional reform providing the regime power over all sectors of government, extending the presidential term from five to six years, and elevating Murillo from vice president to “co-president” alongside Ortega. The reform strengthens the Ortega-Murillo regime’s pressure campaign against civil society, the Catholic Church, and the media, all while it claims to protect the country from “foreign interests.” This constitutional reform has caused serious concerns among international watchdogs over a further escalation of human rights and civil liberties abuses.

All the while, the regime has grown economic and strategic ties with China and Russia as well as weaponizing vulnerable migrants against the United States. As Nicaragua’s top trading partner, the United States is well-positioned to leverage economic policy to push more against the country’s brand of dynastic authoritarianism. Applying stronger economic pressure would hold Nicaragua’s co-presidents accountable for their human rights violations, help promote democratic reform, and prevent further consolidation of the regime.

Nicaragua’s malign activity

The China-Latin America and the Caribbean Business Summit, held in Managua in November, marks the culmination of China and Nicaragua’s growing economic ties over the past year. With Nicaragua having joined the Chinese Belt and Road Initiative in January 2022, relations between the two countries have developed considerably. In January, China and Nicaragua signed a free trade agreement, which was followed by the inauguration of their first direct maritime trade route from Tianjin, China, to Corinto, Nicaragua, in August. Furthermore, the ship that inaugurated the trade route was carrying materials for the Chinese-sponsored construction of Punta Huete International Airport.

Even more recently, Nicaragua sent a delegation of thirty-one business leaders, led by Laureano Ortega Murillo, son of the two co-presidents, to the China International Import Expo. During the event, he stated, “Our government is fully open to Chinese investment. We are under the guidance of our president to facilitate everything we can do for Chinese businesses.” Chinese foreign investment oftentimes undermines US geopolitical interests, which has made curbing such investment a key foreign policy priority of the incoming Trump administration. For example, Nicaragua severed diplomatic ties with Taiwan right before joining the Belt and Road Initiative. China’s willingness to engage with authoritarian actors like Nicaragua greatly impacts US hemispheric goals for democracy.

On the national security front, military cooperation between Nicaragua and Russia has intensified. Over the past decade, nearly 3,500 Russian military personnel have entered the country, and Moscow has been providing the regime with military equipment and training since 2016. In March, the legislature, which is dominated by Ortega’s ruling party, permitted the construction of a police training center run by the Russian Interior Ministry. This deal builds upon previous espionage concerns associated with Mokorón Base, claimed as a hub for Russian espionage, and the Russian Global Navigation Satellite System. At the beginning of December, the Russian government approved a draft proposal establishing a joint military working group and extending military cooperation. In reference to Russia’s military presence, Laureano Ortega Murillo stated, “Nicaragua is Russia’s strategic ally in Central America. We position ourselves as its regional platform in all fields and we are committed to enhancing Moscow’s influence and action in the region.”

Furthermore, the Nicaraguan government traffics migrants to systematically increase migration pressure and fuel remittance payments, which comprise 30 percent of Nicaragua’s gross domestic product. In an effort to protest existing sanctions, the regime loosened visa restrictions for countries across the Caribbean, Asia, and Africa and sold ninety-six-hour visas to migrants looking to bypass the treacherous journey through the Darién Gap. The Nicaraguan government organizes charter flights for migrants through third-party airline companies while creating a million-dollar enterprise charging migrants predatory visa fees. Between May 2023 and May 2024, an estimated 200,000 migrants arrived in Augusto Sandino International Airport on “pseudo-commercial flights.” Approximately 10 percent of all migrants arriving at the United States’ southern border start the trek in Nicaragua.

Countering Chinese influence, curtailing immigration, and bolstering national security are issues that President-elect Donald Trump campaigned on. Since Nicaragua poses a threat to all three of these goals, the question becomes: What tools are at the disposal of the Trump administration?

Go for the gold

One option for the incoming administration is to enact wider sectoral sanctions, but there are pros and cons to this approach.

Following the 2018 antigovernment protests in Nicaragua, the first Trump administration issued Executive Order 13851 sanctioning key officials, including Ortega and Murillo. These individual sanctions did not have a significant impact on the regime. Therefore, the Trump administration should consider imposing wider sectoral sanctions on key economic sectors, such as gold and precious metals. The Biden administration slowly began to target the gold sector, designating multiple private companies and a government-run mining organization. All the while, the Biden administration still negotiated through diplomatic channels to release 135 political prisoners.

However, the sanctioned companies comprise only 1 percent of Nicaraguan mining concessions. Broader sectoral sanctioning on the gold industry would send a strong message by targeting one of the country’s top exports, serving as a bargaining chip to release remaining political prisoners and to promote democratic reform. Gold exports already outnumber Nicaraguan production rates, hinting at illegal gold mining and smuggling, which gold sector sanctions would likely exacerbate. As such, the administration must prepare a holistic framework to tackle illicit gold trade from artisanal and small-scale mining operations through commodities tracking, custody ledgers, or even chemical trace analysis measures. Lastly, the Trump administration should harmonize sanctions programs with allies such as the United Kingdom and the European Union to increase their efficacy. Considering that the United States imports the majority of Nicaraguan gold, targeting this sector would eliminate a large cash flow for the regime.

Push where the regime feels pressure: Trade

In recent years, some policymakers have proposed expelling Nicaragua from the Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) to increase pressure on the Ortega government. For example, the first Trump administration considered it in 2019, seeing the agreement as providing an economic lifeline to an authoritarian regime. The Biden administration also considered expelling Nicaragua in 2022. But without an expulsion clause, there is no feasible avenue to expel Nicaragua without dismantling the entire agreement.

As Trump discusses the renegotiation of the US-Mexico-Canada Agreement (USMCA), sights could turn to CAFTA-DR. Any potential renegotiation of CAFTA-DR could include tougher restrictions on member countries’ interactions with Chinese investors while excluding Nicaragua from an updated CAFTA-DR to help prevent Chinese transshipment of goods into the United States. However, a review pathway for Nicaragua would need to be made available pending significant democratic reform.

Alternatively, the Trump administration could keep the CAFTA-DR in place while presenting the opportunity for accession of other qualifying members to the USMCA agreement. In this scenario, Nicaragua would not qualify, considering its rebuke of democratic principles, centralization of power, and strong ties to China. If Nicaragua’s neighbors choose to join the USMCA, Nicaragua would become susceptible to Trump’s proposed blanket tariffs, losing favored access to US markets. However, prior to the official disruption of CAFTA-DR, Trump should continue the US Trade Representative’s Section 301 investigation into Nicaragua’s adherence to labor rights, human rights, and the rule of law, which is a pathway to increased sanctions. The United States could also consider mobilizing the Department of Labor’s Bureau of International Labor Affairs in conjunction with the CAFTA-DR oversight commission to review labor and environmental requirement adherence.

Trade plays a significant role in Nicaragua’s economy, which makes these approaches a likely effective way to increase pressure on the government.

Keep the end in mind

Avenues exist to increase pressure on the Nicaraguan government, but it should be pressure with a point. Any new measures from Washington should be tied to specific calls for the regime to carry out democratic reforms, ensure human rights, and/or take steps to address security concerns emanating from its dealings with Russia and China.

In addition, the Trump administration should be aware that new punitive economic measures would likely result in an increase of Nicaraguan emigration. More than a fifth of Nicaragua’s population has already left the country and this will likely increase if the economic situation gets worse. To confront the regime’s exploitation of migrants, existing programs such as the Department of Homeland Security’s Operation Sentinel should be bolstered to investigate migrant trafficking operations and further explore their connections to the Ortega-Murillo regime.

Finally, the Trump administration will need to decide whether to continue the Biden administration’s policies toward Nicaragua, including the reallocated quota on imports of Nicaragua’s sugar, as well as existing export controls pursuant to the International Traffic in Arms Regulations and Export Administration Regulations.

The incoming Trump administration has consequential choices ahead of it, but the sooner it acts the better. The Nicaraguan regime’s increasing collaboration with China and Russia is providing the economic backing to crack down at home and make Nicaragua increasingly dangerous to the region. If Trump wants to meet his foreign policy campaign goals while reaffirming hemispheric human rights, Nicaragua is a good place to start.

Brennan Rhodes is a former young global professional with the Atlantic Council’s Adrienne Arsht Latin America Center.

The post Nicaragua is consolidating an authoritarian dynasty. Here’s how US economic pressure can counter it. appeared first on Atlantic Council.

Donovan quoted by Bloomberg on the private sector’s role in sanctions compliance

mpirbudagyan — Mon, 09 Dec 2024 17:45:07 +0000

The post Donovan quoted by Bloomberg on the private sector’s role in sanctions compliance appeared first on Atlantic Council.

Donovan quoted by the Wall Street Journal on how using sanctions impacts the dollar’s use as a national security tool

irosales — Fri, 06 Dec 2024 20:53:42 +0000

The post Donovan quoted by the Wall Street Journal on how using sanctions impacts the dollar’s use as a national security tool appeared first on Atlantic Council.

Sanctioning China in a Taiwan crisis: Scenarios and risks report cited by the Wall Street Journal on how Western sanctions could impact the Chinese economy

irosales — Fri, 06 Dec 2024 20:40:07 +0000

Nonresident Senior Fellow

The post Sanctioning China in a Taiwan crisis: Scenarios and risks report cited by the Wall Street Journal on how Western sanctions could impact the Chinese economy appeared first on Atlantic Council.

How Congress can thwart the flow of fentanyl using economic statecraft

David Mortlock — Thu, 05 Dec 2024 19:00:51 +0000

More than 74,000 people in the United States died from synthetic opioids such as fentanyl last year. That is the equivalent of a large commercial airliner crashing and killing all of its passengers each and every day of the year. It is also a stark increase from the 3,100 deaths per year a decade earlier.

Given the atrocious impact of the fentanyl crisis on Americans, Congress is examining ways to halt or hinder the flow of fentanyl into the United States, particularly from China. In April, the Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party (the Select Committee) found that Chinese companies produce virtually all fentanyl precursors used to produce illicit fentanyl worldwide. This near monopoly on producing this deadly drug owes to grants and tax rebates the government of China awards to companies involved in the manufacturing and export of fentanyl materials and other synthetic narcotics.

To address this crisis, the Select Committee has proposed several tools to combat the flow of fentanyl into the United States, including the establishment of a Counter Opioid Joint Task Force, trade and customs enforcement measures, and prioritizing fentanyl programs in domestic and international law enforcement and intelligence efforts. But another tool is needed as well: economic statecraft. In particular, the United States could use sanctions to target entities involved in the fentanyl trade.

My previous roles as director of international economic affairs at the National Security Council and deputy coordinator for sanctions policy at the Department of State put me at the heart of US economic statecraft. More recently, I have worked with industry to implement and comply with numerous sanctions programs. Based on this experience, I believe that sanctions are an effective tool to isolate and frustrate the bad actors trying to profit from the fentanyl crisis in the United States, and could be used even more effectively to stem the flow of the drug into the United Sttates. The use of sanctions can make a real difference in denying traffickers the financial resources and support they need to run their illegal businesses. History has demonstrated how sanctions programs like these can strangle access to financing for bad actors.

The effectiveness of sanctions to restrict financing for nefarious traffickers has been well demonstrated in the fight against terrorist financing. Mere weeks after the September 11, 2001, attacks, then President George W. Bush issued Executive Order 13224, which authorized sanctions on people who commit acts of terrorism and on those providing financial support to those terrorists. In the more than twenty years since, the Office of Foreign Assets Control (OFAC) has used this authority to impose sanctions on the financiers of terrorism and throttle the flow of resources to al-Qaeda, the Islamic State of Iraq and al-Sham, Hamas, Hezbollah, and other terrorist groups. Recently, OFAC has used this authority to restrict Hamas’s access to financing through the use of cryptocurrency and other channels. In January of this year, OFAC sanctioned thirteen individuals and entities for running two separate money laundering networks supporting Hamas. OFAC’s actions represent part of a coordinated effort targeting Hamas financing since the attacks on Israel of October 7, 2023.

Similarly, sanctions can and should be used to cut off funding to fentanyl traffickers and their money men. OFAC has already begun. Not only has the agency sanctioned fentanyl trafficking rings, it has sanctioned individuals and entities involved in various stages, including suppliers, money launderers, and laboratory operators affiliated with those traffickers. In all, since 2018, OFAC has designated 108 individuals and seventy-one entities linked to fentanyl smuggling rings.

Now is not the time to let up. The incoming Congress should take several steps to support and escalate these efforts to strangle fentanyl financing.

1. Don’t just codify sanctions authorities, but regularize their use

Codifying Executive Order 14059, the tool OFAC uses to sanction those involved in fentanyl would constitute an important congressional endorsement of the administration’s use of sanctions. It would not by itself, though, expand or strengthen any of the administration’s available tools. While Congress has codified numerous executive orders related to sanctions, it largely failed to change the administration’s policy or practices unless coupled with a requirement for reporting and regular updates to the sanctions lists. Congress should codify Executive Order 14059 and pair it with a biannual requirement to update the list of sanctions targets.

Congress has codified numerous sanctions authorities issued by the president, including making some of those sanctions mandatory. For example, in 2017 President Donald Trump signed into law the Countering America’s Adversaries Through Sanctions Act, which codified the Russia sanctions program established in various executive orders. In the North Korea Sanctions and Policy Enhancement Act of 2016, Congress modified the sanctions authorities for North Korean weapons of mass destruction programs from discretionary to mandatory. The Ukraine Freedom Support Act of 2014 codified any executive order addressing the crisis in Ukraine, the Hezbollah International Financing Prevention Amendments Act of 2018 codified sanctions against Hezbollah, and the Iran Threat Reduction and Syria Human Rights Act of 2012 codified nonproliferation and terrorism executive orders. Yet none of these actions seem to have materially changed each administration’s approach to sanctions.

Congress has found greater success, however, when it paired sanctions with a requirement for the administration to regularly update a sanctions list. In the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2011, Congress required the Obama administration to impose sanctions on Iranians responsible for human rights abuses. The statute required the administration to submit an updated list of sanctioned individuals to congressional committees every six months. The statute provided not only a political endorsement of the sanctions, but also a nudge to the administration every six months to convene a process to consider sanctions targets and to prioritize the resources to impose sanctions. In my experience, the added reporting requirement made a material difference in the administration’s response to the legislation. Congress should do the same with respect to the fentanyl sanctions and require regular updates from the administration to the list of sanctions targets.

2. Increase resources for the implementation and enforcement of sanctions

Congress should support the administration’s ability to implement and enforce sanctions by providing more resources to ensure the sanctions on fentanyl networks are actually effective. Earlier this year, I co-authored an article arguing that Congress should provide additional resources to OFAC to improve not just the imposition of sanctions, but also their implementation and enforcement. As I noted in that article, OFAC administers thirty-seven different economic sanctions programs with only a few hundred employees. “OFAC has a nearly unparalleled national security mandate with oversight of the US economy and many other facets of global economic activities,” Alex Zerden and I explained. It is unrealistic, then, to expect OFAC to continually do more with the same resources. In that article, I recommended that Congress provide budgetary resources for OFAC to prioritize the hiring of legal and prosecutorial experience to better enforce the sanctions. Congress should grant the Treasury Department enforcement capabilities on par with other civil regulatory agencies.

3. Allow victims of fentanyl crimes to seize blocked funds from perpetrators

Congress could enact legislation to provide a private right of actions to the family members of those who have suffered the deadly consequences of fentanyl trafficking. The measure would allow family members to seize and secure the assets of criminal groups and their supporters, including assets that have been blocked due to sanctions. Again, this is not without precedent. The Anti-Terrorism Act of 1990 created a federal right of action for US nationals “injured in his or her person, property, or business by reason of an act of international terrorism.” The Anti-Terrorism Act has enabled more than 150 lawsuits against organizations including Hamas, Hezbollah, the Revolutionary Armed Forces of Colombia, and their supporters. The rights of action created under this legislation have resulted in billions of dollars of damages being awarded to the families of victims of terrorism. Congress could create a similar right of action to allow the families of US victims of fentanyl trafficking to seek compensation from the blocked funds of groups targeted by OFAC and seek some compensation for the great harm they have suffered.

Congress should take steps to promote information sharing between financial institutions, agencies involved in responding to the fentanyl crisis, and international partners. The Financial Crimes Enforcement Network (FinCEN), which enforces anti-money laundering regulations, released an advisory in June 2024 emphasizing the need for financial institutions to report illicit or suspicious activity related to fentanyl, and to provide specific red flags that financial institutions should monitor related to fentanyl. The advisory highlights the need for information sharing among stakeholders—not only have evasion techniques been highlighted by OFAC in its designations, but FinCEN’s advisory flags financial typologies related to fentanyl production which can help identify sanctions targets. This is important not only among agencies such as the Department of Justice and Department of the Treasury, but also with foreign partners. A key element of this information-sharing process is with financial institutions, as emphasized by the FinCEN advisory and the role that this information has played in identifying sanctions targets.

As Congress is well aware, the fentanyl crisis, and the flow of fentanyl from China specifically, must be addressed using many of the United States’ and local governments’ tools. Economic statecraft should be among that tool set and offers several promising options to make it more difficult, expensive, and dangerous for fentanyl traffickers to ply their trade.

David Mortlock is a nonresident senior fellow at the Atlantic Council and a partner at Willkie Farr & Gallagher LLP. The author thanks Josh Nelson for his help in preparing this piece.

The post How Congress can thwart the flow of fentanyl using economic statecraft appeared first on Atlantic Council.

Extend and expand the Nord Stream sanctions now

Alan Riley — Mon, 02 Dec 2024 21:59:58 +0000

The US Senate is moving toward preserving sanctions on the Gazprom-owned Nord Stream 2 pipeline, which expire at the end of 2024. The Senate must press ahead and extend those sanctions to Nord Stream 1 as well. By doing so, the United States would strengthen Ukraine’s security and Europe’s energy independence.

STAY CONNECTED

PEESA needs a refresh

In 2020, the United States enacted the Protecting European Energy Security Act (PEESA), which was adopted as part of that year’s National Defense Authorization Act. The act imposes sanctions on foreign persons who provide vessels or ancillary services in the construction of Nord Stream 2, Turk Stream, or any successors of those projects to create new routes for Russian gas to reach the European Union (EU).

This legislation was an appropriate response to European and Ukrainian security threats in early 2020. At the time, construction of Nord Stream 2 would have provided an additional 55 billion cubic meters per year (bcma) of Russian gas to Germany directly through the Baltic Sea.

The route would allow Moscow to bypass transit states to Germany’s east—creating the possibility for the Kremlin to threaten these countries with gas shut offs or other coercive measures without interrupting shipments to the lucrative markets to their west. No country was more exposed than Ukraine, which transited 90 bcma of Russian gas to the EU—half the bloc’s total imports from Russia—as late as 2019. While Nord Stream 2 never came online, the European security situation has changed dramatically since Moscow launched a full-scale invasion of Ukraine in February 2022. Before and during the war, Gazprom found excuses to cut gas supplies via Nord Stream 1. By the time Nord Stream 1 and 2 were rocked by explosions in September 2022, neither were transiting gas.

Down, but not necessarily out

The explosions took out Nord Stream 1 pipelines A and B, which each carried up to 27.5 bcma of Russian gas to Germany before the war. Nord Stream 2 pipeline B was taken out by a third explosion, while pipeline A remains intact but is still not operational.

PEESA should be extended to prevent any of the Nord Stream pipelines being brought online. The legislation places sanctions on activities supporting the “construction” of Nord Stream 2. The words “or reconstruction” should be added to remove any doubt that sanctions would also apply to pipelines being repaired.

The law should also be extended to Nord Stream 1. It’s clear that both Nord Stream 1 pipelines will need to be repaired before they can become operational again. It would be unfortunate if Nord Stream 2 could not be repaired because of PEESA, but Nord Stream 1 could—when in fact that both pose grave security risks to Ukraine and Europe. The historical circumstances which meant that only Nord Stream 2 could be addressed by PEESA should not now constrain the opportunity to address the threat posed by both sets of pipelines.

In addition, the EU has much more difficulty in blocking Nord Stream 1’s reopening because it is subject only to an earlier regulatory regime and not the 2009 Gas Directive. Nord Stream 2 could be stymied even if PEESA were to lapse by the directive’s security of supply test for non-EU owners—which Gazprom would have significant difficulty meeting. A recent scheme by a Miami-based investor to acquire Nord Stream 2 would likely also fail that test, given the prospective buyer’s 20-year business career in Russia. But no existing US sanctions nor EU legislation could block reconstruction of Nord Stream 1.

Updating PEESA would benefit Ukraine, the EU, and the United States

Extending PEESA to Nord Stream 1 would strengthen Ukrainian security. It would prevent Moscow from doing gas deals in Western Europe that isolate Ukraine against Russian economic and military power. Instead, Ukraine would gain leverage: most Russian gas sent to the EU would have to transit Ukraine. This would permit Kyiv greater negotiating power with Moscow and open the prospect of effectively taxing Russian gas to help pay for reconstruction, thereby reducing the cost to the West of rebuilding Ukraine. While Kyiv currently has little appetite to extend a gas transit contract permitting a limited 15 bcma of gas to flow through Ukraine that will terminate at the end of December, post-war flows could give Ukraine bargaining power and a revenue stream for compensation.

By contrast, leaving Nord Stream 1 untouched by PEESA would undermine Europe’s energy security by locking in its dependence on Russian gas. On the eve of the war in February 2022, the EU sourced 45 percent of its gas imports from Russia—in Germany, this figure was 55 percent. Extending PEESA to Nord Stream 1 would encourage continued supply diversification and make it less likely that Europe would return to its dependence on Russian energy.

The Senate must amend and expand PEESA. Simply preserving the existing legislation past its 2024 expiration date does not recognize the dramatic changes in Europe since 2020. The Senate cannot miss a major opportunity to enhance the security of Ukraine, the EU, and the United States.

Alan Riley is a nonresident senior fellow at the Atlantic Council Global Energy Center and a visiting professor at the College of Europe in Natolin, Poland.

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

MEET THE AUTHOR

Fellow

Alan Riley

Global Energy Center

Energy & Environment Europe & Eurasia

OUR WORK

learn more

The post Extend and expand the Nord Stream sanctions now appeared first on Atlantic Council.

Abandoning Georgia to the Kremlin would be a big geopolitical blunder

Zviad Adzinbaia — Tue, 26 Nov 2024 12:05:23 +0000

Georgia’s disputed October 26 parliamentary elections have plunged the country into a democratic crisis, jeopardizing its EU candidacy and Euro-Atlantic trajectory. At the core of the crisis lies evidence of electoral manipulation, Russian interference, and a ruling party apparently determined to consolidate its grip on power.

Left with no other institutional mechanisms to defend democracy, Georgia’s united opposition, led by President Salome Zourabichvili, has launched a nonviolent protest movement. The country now stands at a pivotal crossroads in its modern history, with the outcome of the current confrontation set to have geopolitical consequences that will reverberate far beyond Georgia’s borders.

Stay updated

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

President Zourabichvili’s denunciation of the October parliamentary elections as illegitimate has shaken the nation. She has claimed that evidence of Russian interference and systematic election manipulation reveal a ruling party embracing increasingly authoritarian tactics.

Zourabichvili and other opposition figures accuse the governing Georgian Dream party of weaponizing anti-Western and anti-Ukrainian narratives in order to gain political advantage during the election campaign. This included claims that the country’s opposition forces are part of a Western-led “Global War Party” that is allegedly seeking to open a “second front” against Russia.

Critics claim the events of October 26 in Georgia were less an election and more a performance designed to entrench the political status quo in the country. Independent exit polls revealed a decisive majority for Western-leaning opposition parties. Nevertheless, Georgian Dream declared victory.

Reports from international observers and Georgian civil society reveal a troubling reality including widespread evidence of glaring irregularities such as altered voter turnout figures and statistical anomalies. The vote itself featured numerous examples of violence and intimidation.

Eurasia Center events

Drones, defense, and diplomacy: Negotiations and the battlefield in Ukraine

Conflict Defense Technologies Europe & Eurasia Politics & Diplomacy

Developments in Georgia are geopolitically significant for the surrounding region. Positioned at the crossroads of Europe and Asia, Georgia serves as a critical energy transit hub and a potential model of democratic resilience in a region where autocracies and empires have long vied for dominance.

Since coming to power in 2012, the Georgian Dream party has increasingly aligned with authoritarian regimes. This has included favoring Chinese firms over American companies for projects like the Anaklia deep sea port, and facilitating Russian sanctions evasion.

Allowing Georgia to slip into authoritarian hands would send a dangerous message that democratic values are negotiable. For the US and EU, this is not just about Georgia. At stake is the West’s credibility in the wider region. Georgia aligns with Western foreign policy priorities such as countering the expansion of Chinese, Russian, and Iranian influence in the Black Sea region.

Georgia’s united democratic opposition and civil society have shown they are ready to lead a peaceful transition of power and position Georgia as a dependable Western ally. Achieving this vision, however, demands coordinated action from Washington, Brussels, and London.

First, new elections under international supervision are necessary. Only transparent elections monitored by independent actors can succeed in restoring democratic integrity and advance Georgia’s EU accession prospects.

Second, the West should impose targeted sanctions on Georgian Dream leaders and their enablers for undermining democracy and advancing Russian interests. These sanctions would send a clear message of support for Georgia’s democratic aspirations.

The US could expand current visa bans to include financial restrictions, with Brussels doing likewise. The prompt adoption of pending legislative bills in the US Congress to support the Georgian people would further demonstrate decisive commitment.

Third, Georgia’s civil society, and independent media need greater protection from repression. With a Russian-inspired “foreign agents” law now in place in Georgia, targeted funding and diplomatic support are crucial to ensuring these democratic pillars remain free and accountable.

Coordinated transatlantic pressure is crucial. Decisive action on Georgia can help strengthen a Western ally and stabilize a critical region, while also bolstering democracy at a pivotal moment. Georgia is far from a lost cause, but it will require bold Western leadership to prevent the country’s capture by the Kremlin.

Zviad Adzinbaia is a doctoral fellow at The Fletcher School of Law and Diplomacy specializing in Russian hybrid warfare, disinformation, and Euro-Atlantic security and politics.

If the next administration decides to expand sanctions on Russia, there is one tool that was employed in a limited form in Trump’s first administration that could be considered: secondary sanctions. Secondary sanctions force countries to choose between doing business with those imposing sanctions or those that are the subject of sanctions. President Obama’s administration leveraged secondary sanctions to bring Iran to the negotiating table to form the Joint Comprehensive Plan of Action (JCPOA) in 2015, a deal that Trump ultimately abandoned in 2018. Secondary sanctions related to Russia were imposed by President Biden in December 2023 and have slowly begun to be implemented. It’s conceivable that this instrument of foreign policy could be used as another stick in a Trump 2.0 strategy to compel unaligned countries, including current US allies, to align with American objectives regarding Russia or other national security priorities, such as China.

However, relations with China are not as tense as they were when Trump left office nearly four years ago. The Biden administration sought a reset of US-China relations after tensions reached a peak during the spy balloon incident in 2023, and has largely followed the path of export control and sanctions policy that started during the Trump administration. It notably eased, but did not pull down the Trump-era tariffs targeting China’s unfair trade practices. The Economic Working Group was formed between the United States and China in October 2023 to serve as an ongoing channel to discuss bilateral economic policy matters including climate change, capital requirements, and fentanyl trafficking. While there continues to be a tit for tat on trade and export control matters, it is on a less prominent scale than the first Trump administration.

Given President-elect Trump’s rhetoric on the campaign trail about the importance of building relationships with your adversaries, it is still an open question of whether he will resume his tactics of trade and tariff threats against China once in office. The landscape with China has changed since Trump left the White House, including through China imposing the Anti-Foreign Sanctions Law in 2021. The law forbids compliance with foreign sanctions in China, complicating the ability of any US business to fully comply with both Chinese and US regulations. It is conceivable that, between the Anti-Foreign Sanctions Law requirements and export control bans China has put in place for rare earth minerals and precious metals, Trump 2.0 takes a more diplomatic approach toward China lest he more broadly disrupt global supply chains.

Daniel Tannebaum is a non-resident senior fellow with the Economic Statecraft Initiative at the Atlantic Council and partner in Oliver Wyman’s Finance & Risk Practice, where he leads the firm’s Global Anti-Financial Crime Practice.

New Atlanticist Nov 21, 2024

Five questions (and expert answers) about major new US sanctions on Russia’s Gazprombank

By Atlantic Council experts

To decipher these moves, we turned to some of our top sanctions experts to reveal what’s behind the decision and what to expect next.

Economic Sanctions Russia

Econographics Apr 17, 2025

Russia Sanctions Database

By Kimberly Donovan, Maia Nikoladze, Lize de Kruijf

Eastern Europe Economic Sanctions

New Atlanticist Mar 28, 2024

The axis of evasion: Behind China’s oil trade with Iran and Russia

By Kimberly Donovan, Maia Nikoladze

Beijing has developed a way to import Iranian and Russian oil while bypassing the Western financial system and shipping services.

China Economy & Business

Economic Statecraft Initiative

Read the full report here

The post Sanctions expectations in a second Trump administration appeared first on Atlantic Council.

Five questions (and expert answers) about major new US sanctions on Russia’s Gazprombank

Atlantic Council experts — Thu, 21 Nov 2024 22:35:14 +0000

The vise is tightening. The US Treasury Department today announced sanctions on Russia’s Gazprombank—which Russia uses to pay soldiers, among other things—as part of a barrage of economic measures targeting its war effort. The announcement comes as the Biden administration has fast-tracked aid to Ukraine and loosened its restrictions on how Ukraine responds to Russia’s war of aggression. To decipher these moves, we turned to some of our top sanctions experts to reveal what’s behind the decision and what to expect next.

1. What exactly did the United States just do?

The United States today advanced its pressure on the Russian financial system, imposing full blocking sanctions against 118 entities and individuals, including Gazprombank—the largest bank not previously sanctioned—and fifty other banks. The Office of Foreign Assets Control (OFAC, the branch of Treasury that administers financial sanctions) also issued a warning that noted the sanctions risks related to association with Russia’s System for Transfer of Financial Messages (SPFS, a sort of Russian parallel to the SWIFT international banking messaging system).

—Daniel Fried is the Weiser family distinguished fellow at the Atlantic Council and a former US State Department coordinator for sanctions policy.

Today’s Treasury action targeting Gazprombank brings the United States’ sanctions regime in line with Western allies including the United Kingdom, Australia, Canada, and New Zealand, which previously designated the financial institution. While this action does not target the oil and gas industry directly, it will impact payments and transactions related to the sale of Russian oil. Gazprombank has been on OFAC’s radar for a long time, but the United States was reluctant to add the bank to the Specially Designated Nationals (SDN) list out of concern that designating the bank would send oil prices soaring.

—Kimberly Donovan is the director of the Economic Statecraft Initiative at the Atlantic Council’s GeoEconomics Center. She previously served in the federal government for fifteen years, most recently as the acting associate director of the Treasury Department Financial Crimes Enforcement Network’s Intelligence Division.

2. How does it fit in with the US sanctions approach since February 2022?

These steps are a logical extension of the US financial sanctions imposed since Russia’s first invasion of Ukraine in 2014 and intensified after its full invasion in 2022. It is not a full financial embargo against the Russian banking system (that some, myself included, had recommended) but is getting close to that.

—Daniel Fried

3. How does this action fit into a broader Biden strategy on the war as he prepares to leave office?

The Biden administration in its final weeks is rushing to impose additional sanctions in parallel with steps it is taking to send additional military equipment to Ukraine, such as anti-personnel land mines, and remove barriers to Ukraine’s use of that equipment, as it did earlier this week by lifting restrictions on Ukraine’s use of Army Tactical Missile Systems (ATACMS).

—Daniel Fried

4. What does this mean for other countries that do business with Russia?

It is important to note that the authority used to sanction Gazprombank (Executive Order 14024) carries the risk of secondary sanctions. This means any foreign financial institution doing business with Gazprombank may find themselves at risk of being sanctioned by the US government. Today’s action will likely send shock waves across the financial sector as well as the oil and gas industry as financial institutions and oil importers and exporters review and consider the new sanctions landscape and how much risk they’re willing to take on to continue buying cheap oil from Russia.

—Kimberly Donovan

5. What impact will this have on Russia’s ability to wage the war?

The financial sanctions announced today will impose additional restraints (“friction”) on the Russian economy. The sanctions on Gazprombank and other Russian banks could complicate sales of Russian oil, possibly forcing the Russians to resort to weaker currencies (not the dollar, euro, or pound) or even to barter arrangements. But they are unlikely by themselves to constitute a crippling blow against the Russian economy. If today’s sanctions were the final such moves by the Biden administration, I would regard them as insufficient given the gravity of Russia’s ongoing war and Russia’s ongoing attacks on Ukrainian civilians and advances in some areas. Happily, I have heard that these are not the administration’s final sanctions against Russia. Bottom line: stay tuned.

—Daniel Fried

The post Five questions (and expert answers) about major new US sanctions on Russia’s Gazprombank appeared first on Atlantic Council.

Donovan and Nikoladze cited in the US-China Economic and Security Review Commission’s annual report on the cooperation between Russia, China, Iran, and North Korea

mpirbudagyan — Thu, 21 Nov 2024 14:21:47 +0000

The post Donovan and Nikoladze cited in the US-China Economic and Security Review Commission’s annual report on the cooperation between Russia, China, Iran, and North Korea appeared first on Atlantic Council.

Plitsas quoted in ATN News on US sanctions on senior Hamas officials

Atlantic Council — Wed, 20 Nov 2024 19:27:32 +0000

Original Source

The post Plitsas quoted in ATN News on US sanctions on senior Hamas officials appeared first on Atlantic Council.

Avoiding Entanglement: G20 Responses in a Taiwan Crisis report cited by the Wall Street Journal on how China would respond to trade restrictions from the West

irosales — Fri, 15 Nov 2024 20:41:17 +0000

The post Avoiding Entanglement: G20 Responses in a Taiwan Crisis report cited by the Wall Street Journal on how China would respond to trade restrictions from the West appeared first on Atlantic Council.

Avoiding Entanglement: G20 Responses in a Taiwan Crisis report featured in a SCMP article discussing the report’s findings

irosales — Fri, 15 Nov 2024 20:40:46 +0000

The post Avoiding Entanglement: G20 Responses in a Taiwan Crisis report featured in a SCMP article discussing the report’s findings appeared first on Atlantic Council.

Lipsky quoted by The Banker on the Bank for International Settlements’ withdrawal from the mBridge project

irosales — Fri, 15 Nov 2024 20:38:56 +0000

The post Lipsky quoted by The Banker on the Bank for International Settlements’ withdrawal from the mBridge project appeared first on Atlantic Council.

Donovan quoted by Reuters on how the incoming Trump administration could utilize sanctions

irosales — Fri, 15 Nov 2024 20:38:27 +0000

Watch the full interview here

The post Donovan quoted by Reuters on how the incoming Trump administration could utilize sanctions appeared first on Atlantic Council.

Lichfield interviewed by DW on the implications of Trump’s election for the war in Ukraine

irosales — Fri, 15 Nov 2024 20:37:45 +0000

The post Lichfield interviewed by DW on the implications of Trump’s election for the war in Ukraine appeared first on Atlantic Council.

Park quoted by the Wall Street Journal on the Russia-North Korea relationship

irosales — Fri, 15 Nov 2024 20:34:19 +0000

The post Park quoted by the Wall Street Journal on the Russia-North Korea relationship appeared first on Atlantic Council.

Ukrainian civil society leaders call for extension of Nord Stream 2 sanctions

Ukrainian civil society leaders — Thu, 14 Nov 2024 21:07:55 +0000

Members of Ukraine’s civil society have penned the following letter to the US Senate Foreign Relations Committee Chairman Ben Cardin and Ranking Member Jim Risch calling for the extension of United States sanctions on Russia’s Nord Stream 2 gas pipeline:

Dear Chairman Cardin and Ranking Member Risch,

We, Ukrainian civil society leaders, write to you as chairman and ranking member of the US Senate Foreign Relations Committee, longtime friends of Ukraine, and staunch advocates for anti-corruption and global human rights, to ask that the Senate Foreign Relations Committee support the extension of congressional sanctions on Russian President Vladimir Putin’s Nord Stream 2 gas pipeline. To ensure that these sanctions and the authority upon which they are based do not expire at the end of this year, we urge you to approve the renewal of the Protecting Europe’s Energy Security Act (PEESA) as part of this year’s National Defense Authorization Act (NDAA) conference.

Failure to extend the PEESA sanctions would allow commercial actors to cooperate with the Kremlin to one day restart the Nord Stream 2 pipeline. This pipeline, which was constructed by Moscow for the sole purpose of bypassing Ukraine and leaving it susceptible to Russian aggression, would reestablish the continent’s dependence on Russian gas, revive mechanisms for Russian corruption to be funneled into Europe, and hand back to Putin the capacity to blackmail Europe over its support for Ukraine.

Restarting the Nord Stream 2 pipeline would also hamper Ukraine’s vibrant civil society and demoralize Ukraine’s citizens. This would further Putin’s broader goal of erasing Ukrainian sovereignty.

Recognizing the consequences of failing to renew the PEESA sanctions, the leaders of the US Senate Banking and the US Senate Armed Services committees have reportedly agreed to the inclusion of a PEESA extension in NDAA. The Senate Foreign Relations Committee remains the sole committee of jurisdiction standing in the way of extending these critical sanctions against Russia’s Nord Stream 2 pipeline.

We, the signatories of this letter, are fighting for Ukraine’s democracy and reform. As allies of civil society and anti-corruption crusaders, we urge you today to stand with us, as you have throughout your storied careers, and support the extension of the PEESA sanctions as part of this year’s NDAA conference, thereby making it impossible for Russia to restart its Nord Stream 2 gas pipeline.

Sincerely,

Hanna Hopko, ANTS Network

Andriy Zagorodnyuk, Centre for Defence Strategies

Mykhaylo Gonchar, Center for Global Studies

Olga Aivazovska, Civil Network OPORA

Maksym Skrypchenko, Transatlantic Dialogue Center

Daria Kaleniuk, Anticorruption Action Center

Olena Tregub, Independent Anti-Corruption Commission NAKO

The importance of energy exports to the Russian economy is well documented. In 2023, for example, oil and gas revenues accounted for more than one-third of Russia’s federal budget. As the third anniversary of the full-scale invasion draws near, there are now mounting indications that Russia’s economy is under strain. To curb rampant inflation, Russia’s Central Bank recently raised interest rates to 21 percent. The growing costs of the war and the damage done by sanctions measures are adding to these pressures. If energy exports were further curtailed, Russia’s war effort could be severely impacted, with Vladimir Putin forced to choose between sustaining the invasion or avoiding economic collapse.

Stay updated

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

Since the onset of Russia’s full-scale invasion in February 2022, the most significant measure imposed on Russian energy exports has been the price cap. This step was intended to limit Russian revenues from oil sales without disrupting global supply by restricting the price Russia received per barrel. However, it has become apparent that the effectiveness of the price cap depends heavily on enforcement and targeting.

Moscow has been able to bypass Western restrictions by selling to major clients like China and India. To aid in this process, the Kremlin has developed a network of around 1,400 tankers operating outside of Western oversight. This is often referred to as Russia’s “shadow fleet.” Addressing the challenges created by Russia’s ability to navigate maritime restrictions will require considerable creativity and determination.

The tankers used by Russia are often registered with shell companies in countries with limited transparency, making it difficult to trace ownership and enforce sanctions. Oil is often also transshipped via third countries, where additional companies help to conceal the origin of the cargo. This lack of transparency, combined with uncoordinated global sanctions enforcement, complicates efforts to target Putin’s shadow fleet.

One option would be to sanction more ships directly. At present, only a handful of tankers from the shadow fleet are under international sanctions. If transporting Russian oil incurred sanctions on individual vessels, many ship owners may become reluctant to continue participating. The passage of tankers through the Black Sea and Baltic Sea could also be legitimately challenged on environmental grounds.

Additional steps could include introducing secondary sanctions targeting key Russian energy industry companies such as Gazprombank. This could potentially discourage many of Russia’s main energy customers in China and India. While some secondary sanctions are already in place, extending existing measures to include financial service providers in Russia could prove particularly effective. To maximize impact, Western countries could also look into the possibility of blacklisting potential intermediary financial institutions that facilitate Russian transactions.

Eurasia Center events

Historical observations of China’s economic statecraft

Drones, defense, and diplomacy: Negotiations and the battlefield in Ukraine

Conflict Defense Technologies Europe & Eurasia Politics & Diplomacy

When it comes to enforcing sanctions, Western governments consistently find themselves one step behind the Kremlin and are regularly forced to respond to Russia’s latest circumvention tactics. Secondary sanctions can certainly help limit Russia’s maneuverability, but further steps are needed. Streamlined decision-making processes and more comprehensive implementation could significantly tighten today’s sanctions regime and reduce the gaps that Russia currently exploits.

While a number of formats are already in place to facilitate cooperation between countries engaged in sanctioning Russia, it may be worth exploring the establishment of a dedicated sanctions coordination hub that could improve the agility and efficiency of sanctions measures. A new grouping of this kind could enhance communication among participating countries, allowing for sanctions to be developed, refined, coordinated, and implemented without delay. Closer cooperation would also make it easier to identify and target financial institutions and companies that facilitate indirect trade with Russia.

Establishing an effective international hub to coordinate sanctions against Russia would require considerable political will from all participating nations. It may need to be created within an existing framework such as the G7 group of nations or the European Union. The obvious model would be the Ukraine Defense Contact Group, which features more than fifty countries and helps coordinate military aid to Ukraine. If greater cooperation in the sanctions sphere could be achieved, it may prove a crucial step toward ensuring swift and effective responses to Russia’s evasion tactics.

There can be little doubt that fresh approaches are needed in order to increase the pressure on Russia’s wartime economy. The Kremlin has proven itself highly skilled at circumventing sanctions, while Western policymakers have struggled to close loopholes or impose costs on Moscow’s enablers. By introducing additional sanctions on Russia’s economically vital energy industry and intensifying cooperation between sanctions partners, the West can undermine Vladimir Putin’s ability to wage war while also strengthening the global order against further acts of international aggression.

Oleksiy Zagorodnyuk is a Kyiv-based independent researcher focusing on Russia’s wartime economy.

Escalation scenarios

II. China’s strategy toward the G20

III. Three case studies of G20 countries responding to China’s economic statecraft

Conclusion

Executive summary

This report examines three case countries from the Group of Twenty (G20), Brazil, South Korea, and Indonesia, and their likely responses to both US and Chinese economic statecraft in several hypothetical scenarios related to the escalation of tensions and risks of conflict over Taiwan. This study is designed to assess the policy trade-offs that countries outside of the G7 and US alliance networks may face. The report assesses Brazil, South Korea, and Indonesia’s economic and financial linkages with China, alongside a review of historical sanctions policies, and insights from selected interviews with key stakeholders. The report then identifies China’s likely goals for interactions with G20 nations under a Taiwan contingency, as well as each case country’s respective economic and policy reactions.

US and G7 foreign policy goals and requests for these countries would likely be limited to the enforcement of economic and financial sanctions. They will likely include consensus building among G20 members to express political support for China to de-escalate. Beijing would have its own set of economic statecraft tools that could potentially be deployed, which are discussed in our previous report, Retaliation and Resilience: China’s Economic Statecraft in a Taiwan Crisis.

China is unlikely to deploy punitive or “negative” economic statecraft tools such as sanctions or export restrictions against non-G7 countries in a Taiwan crisis scenario. China’s past statecraft practice, its diplomatic strategy toward developing economies, and its existing economic influence over much of the G20 reduce the need for such punitive measures, as Beijing would have interests in portraying its economy as open for business as usual, even as political tensions increase. Obviously, these calculations may change for Beijing depending upon US or G7 outreach to any country with which Beijing had an extensive economic relationship, where China may see threats as a more useful tool.

For the purposes of this study, we used the same definitions of “moderate” and “high” escalation as defined in our previous report:

In a “moderate” escalation scenario in which limited US or G7 economic sanctions are applied, China will primarily seek to preserve business as usual with G20 countries and focus on obtaining diplomatic support, or at the very least neutrality, from countries like Brazil. Compliance with China’s legal assertions of sovereignty over Taiwan—via possible customs requirements or navigation restrictions—could also prove important. China has little need to augment its existing economic influence over the countries in this study with punitive statecraft such as threatened sanctions or export controls.
In a “high” escalation scenario of more widespread financial sanctions on China’s banks and the central bank, coercive economic statecraft against the three case countries is marginally more likely, but still a low probability. As G7 pressure on the rest of the G20 to enforce secondary sanctions increases, China may be willing to use more direct measures to forestall a wider, comprehensive response to changing conditions in Taiwan. Of the case countries, South Korea is most likely to be affected by any negative statecraft.

It is difficult to predict with certainty how G20 nations are likely to respond overall to both US and Chinese diplomacy during these scenarios, and this is true for Brazil, South Korea, and Indonesia specifically. As Taiwan is not a central diplomatic or political issue for any of the case countries, responses will likely be dictated by each nation’s own existing policies and declared self-interest, as well as their perceptions of the importance of preserving relations with either China or the United States.

G20 responses to Chinese and G7 economic statecraft

All G20 members—including the three case countries—will be affected by a Taiwan crisis by tighter global trade and financing conditions regardless of their foreign policy decisions. A Taiwan crisis will affect multiple variables in the global economy from freight and shipping costs to commodity prices. In terms of trade linkages, G20 economies are generally more exposed to China’s economic statecraft tools than the G7, with 13 percent of exports or $541 billion in annual trade volumes potentially subject to disruption.¹ However, G20 economies are less exposed to China’s punitive statecraft in terms of financial linkages, given lower volumes of foreign direct investment in China (around $149 billion in outward direct investment stock from G20 economies excluding the G7 in 2022)² or cross-border portfolio flows, along with China’s incentives to extend options for financing and trade facilitation outside of potential US and G7 sanctions.

Brazil is most likely to face little risk of punitive economic statecraft from China, given its economic ties to China and shared membership in the BRICS grouping of economies along with Russia, India, South Africa, and others. Past cases suggest Brazil’s financial sector will seek to comply with any sanctions on Chinese entities or secondary sanctions, but with little fanfare. Compliance will be implemented as necessary to avoid any legal entanglement with the United States. However, Brazil’s policy response will likely be influenced by the nature and extent of the international response to escalation in Taiwan.
South Korea represents the most complex case in this report. Korean decision-making in a Taiwan crisis is most likely to align more closely with the G7 (compared to the rest of the G20, especially under the Yoon administration). It is, therefore, more likely to elicit a coercive economic statecraft response from China. At the same time, South Korea’s economic linkages to China are extensive, and supply chains in automobiles and semiconductors are still tightly bound to Chinese entities, despite recent efforts to diversify. Memories of previous negative statecraft by China—such as Beijing’s limits on tourism flows and other economic interactions when South Korea deployed a US missile defense shield in 2017—may also produce a more muted response.
Indonesia is not likely to face a significant punitive economic statecraft response from China in a potential Taiwan crisis. Though Indonesia is indirectly linked to Taiwan via overlapping territorial claims in the South China Sea, China’s trade and investment weight provide strong incentives for Indonesia to maintain its foreign policy stance of nonalignment in a Taiwan scenario.

Where new economic statecraft (by China or the G7) might affect outcomes, it is likely to be via positive economic inducements such as investments or favorable trade arrangements well before any Taiwan scenario comes into play. Once a crisis is underway, even substantial promises of future economic benefit are unlikely to override established policies and perceptions of economic self-interest within G20 governments.

Against this backdrop, G7 asks of the rest of the G20 members are similarly likely to be modest. With the G7 likely fractured on questions about sanctions enforcement, the most likely requests will be to support G7 sanctions to the maximum acceptable extent and to avoid exports or transshipment (or even merely increased exports) of dual-use goods or critical technologies. Notably:

The G7 approach to G20 members that are US military treaty allies (e.g., South Korea, Australia) is more complicated, and the United States and G7 could ask for more substantive cooperation in these cases.
Requests for supportive statements calling upon China to de-escalate or reduce tensions would likely accompany any G7 request for sanctions compliance.
Coercive statecraft from the G7 related to sanctions compliance is unlikely, except as necessary to stop flows of critical goods, weapons, or technology to China in the event of escalation.

In a moderate escalation of tensions over Taiwan, maintaining economic ties with Beijing will be a lower-cost option for G20 economies, as China will have incentives to maintain the perception of business as usual and refrain from punitive statecraft tools. In a more extreme scenario, complying with US or G7 sanctions will likely be the lower-cost option for G20 economies given the more significant consequences to global trade and economic conditions that would unfold.

A Taiwan crisis: Situating the G20, China, and Taiwan

In any scenario for escalation of tensions over Taiwan, China’s approach to the rest of the Group of Twenty (G20) is likely to be very different from its approach to the G7. China’s economic statecraft tactics generally incorporate country conditions and dependencies upon trade and capital flows, deploying tools opportunistically to maximize incentives to align with Beijing’s preferred policies and minimize costs to China’s economy. G20 countries that are not part of the G7 have very different economic exposures and linkages with China, necessarily changing the contours of potential economic statecraft they face. Trade stands as one example; while G7 countries are exposed to China through trade channels, with over $358 billion³ in annual exports exposed to potential disruptions from economic statecraft,⁴ G20 countries are even more dependent on China as a source of export demand. China absorbed nearly 13 percent of G20 exports (ex-G7) in 2023, compared to roughly 7 percent of G7 exports in the same period (see figure 1). Although China’s lack of effective financial statecraft tools (to date) places some limits on its leverage against the G7, its existing (and well-honed) trade statecraft tools have the potential to be even more effective against G20 countries.

Figure 1

In comparison, Taiwan’s relatively small share of G20 trade and investment flows does little to counterbalance China. This asymmetry allows China’s economic statecraft measures to serve as significant mechanisms to counter G7 objectives and obtain alignment from third countries in a Taiwan escalation scenario.

Escalation scenarios

This report adopts the exact scenario framework we deployed for our 2023 report on G7 sanctions, Retaliation and Resilience: China’s Economic Statecraft in a Taiwan Crisis, to evaluate China’s likely statecraft responses in scenarios of escalating military tension over Taiwan. This scenario framework encompasses both past cases of economic statecraft as well as China’s response to new developments and the potential intensification of a crisis. The scenarios are characterized not by the severity of the initial events behind a Taiwan escalation—for example, whether China launches military exercises—but by the G7’s response to those escalatory steps. As before, we consider two scenarios:

Moderate-escalation scenario: China responds to the United States taking an escalatory diplomatic action in the Taiwan Strait, such as a substantial deepening of the political relationship with Taiwan, a step change in military aid, or a limited sanctions package in response to Chinese aggression toward Taiwan. In this scenario, China reacts with economic statecraft measures targeting the United States designed to impose relatively higher costs on the United States than China. China’s willingness to use statecraft is constrained by the necessity to maintain a strong business environment amid high geopolitical tensions.

High-escalation scenario: China retaliates against a maximalist G7 sanctions package that includes full blocking sanctions on China’s major banks and the People’s Bank of China (PBOC), sanctions on senior political figures and business elites, and trade bans on products relevant to China’s military development.⁵ China adopts a much stronger and broader set of economic statecraft measures against the entire G7, with the intent to impose costs as high as possible on the sanctioning economies.

Both scenarios stop short of war or the initiation of kinetic conflict between China and the United States or other G7 countries. Rather, they are meant to provide a context to evaluate the potential use of China’s statecraft tools. We consider only economic statecraft responses in a Taiwan escalation scenario, although China is also likely to consider military and quasi-military actions that are outside the scope of this paper, such as undersea cable cuttings, cyberattacks, quarantines of commercial ships, or blockades.

Table 1. China’s response and economic statecraft under moderate- and high-escalation scenarios

Although the report does not focus on inciting events, we note that the most likely triggers would still come from China, or alternatively, US or G7 action toward Taiwan, rather than a third country (from a G20 member, for example) acting unilaterally against China or deepening engagement with Taiwan. None of the case countries are seeking to substantially increase political ties with Taiwan or provide defense aid at present, making them more likely to begin as observers in any escalation scenario.

Historical observations of China’s economic statecraft

Several factors are likely to affect China’s use (or nonuse) of economic statecraft to influence G20 countries in the wake of a Taiwan escalation scenario. Historically, China has deployed coercive economic statecraft more frequently against G7 competitors—and Taiwan—than emerging and developing economies, or members of the G20. Negative or punitive economic statecraft—including the tools described in table 2—carries reputational costs for China and undermines its attempts to present itself as a generous economic partner and neutral force supporting global development and win-win outcomes for the Global South.⁶ Chinese analysts also point out that economic statecraft such as trade retaliation conducted on national security grounds—presumptively allowed under World Trade Organization (WTO) rules—risks expanding the scope of national security claims in ways that might backfire on China, allowing the United States to use similar justification against Chinese interests.⁷

Table 2. China’s negative economic statecraft tools

More broadly, China’s foreign policy toward developing countries in the G20 and beyond presumes that China’s economic weight and active engagement with the Global South will effectively incentivize it to align with China and adopt its preferred policies. This prioritizes positive economic statecraft—in the form of aid, sovereign lending, investment, and other tools—over coercive measures. It is somewhat misleading to directly compare instances of China’s negative economic statecraft with “instances” of positive statecraft, which involve long-term framework agreements and flows over time. Nevertheless, the fact that China committed an estimated 21,000 aid, loan, and other assistance projects between 2000 and 2021, compared to roughly sixty isolated cases of negative economic statecraft in the same period, illustrates the weight of positive and negative tools in China’s economic diplomacy tool kit.⁸

At the same time, G20 membership does not inoculate a country against economic or strategic coercion by China. G20 member South Korea was subject to some of China’s most costly coercive measures to date in 2017, primarily targeting retailer Lotte and the nation’s tourism industry. China’s de facto trade ban against Lithuania— A country represented at G7 and G20 meetings via the EU’s participation, and which is clearly seen as part of the Western, G7+ bloc on sanctions against Russia—in 2021 and 2022 was even more severe, cutting off almost all exports from Lithuania to China for several months. These measures have caused substantial economic damage. Estimates of the fallout from measures against South Korea in 2017 run as high as 0.4 percent of gross domestic product (GDP); in Lithuania, central bank estimates suggested damage as high as 0.5 percent of GDP in 2022 and 1.3 percent of GDP in 2023.⁹ These might form lower bounds for the potential fallout of a “high” Taiwan escalation, should China feel compelled to override past strategic practice to impose severe coercive statecraft.

What might prompt China’s officials to deploy more aggressive negative statecraft against G20 partners? Taiwan already represents the most critical of China’s “core” security interests—alongside Hong Kong and Xinjiang—going to the heart of the Chinese Communist Party’s legitimacy. Past cases suggest China generally has several simultaneous goals when it deploys economic statecraft related to its core interests. These involve coercing a target country to change perceived offensive policies (compellence); demonstrate the potential costs to other countries (deterring or dissuading); and, importantly, express its disapproval and resolve to domestic audiences. But as described below, China’s existing economic leverage over the G20 already strongly incentivizes member countries to align with (or remain publicly neutral toward) China’s issues and policy positions. Import restrictions on specific agricultural goods, such as China’s notorious “pineapple ban” against Taiwan in 2016 or the “banana ban” against the Philippines in 2012 lie somewhere in between: Though they target sectors with extensive reliance on China and are thus intended to cause some harm to target states, they also minimize overall economic costs to China and the intended target.

This means that If China were to deploy economic statecraft against G20 countries, it would primarily be to dissuade other countries from following suit—in say, enforcing US-led sanctions—or to mollify domestic audiences. Past cases of economic coercion are informative, but not instructive, and any of the tools in table 2 might theoretically be deployed. However, China’s toolkit is generally less effective against G20 countries because they feature lower levels of foreign direct investment (FDI) and other investment by multinational companies (MNCs) in China, providing very narrow targets for disruption or expropriation. For example, Brazil’s total stock of FDI in China and Hong Kong stood at less than $1 billion as of 2022,¹⁰ compared to more than $400 billion in G7 FDI assets in China that our previous report identified as at risk in a Taiwan escalation.¹¹ Likewise, G20 nations such as Turkey and India have few high-profile brands in China that are susceptible to consumer boycotts. Of course, investment linkages exist that may still provide some leverage. Brazil’s Embraer pulled out of its only manufacturing investment in China in 2016, a joint venture manufacturing narrow-body aircraft.¹² But sales to China’s airlines are still critical to Embraer’s growth prospects and Brazil’s wider aerospace industry.

China’s strategy toward the G20

In a scenario of escalating tensions over Taiwan, China’s goals in its approach to G20 countries would naturally depend on the conditions behind that escalation, as well as the response of G7 countries individually and collectively. As our previous report argued, China is likely to attempt to split or divide G7 countries to forestall a collective response, and limit the scope, duration, and intensity of that response. Nevertheless, some form of US or G7 response involving sanctions or other economic statecraft is likely, and the G20 will be key to China’s attempts to counteract or circumvent those measures. G20 countries are potentially valuable to China as sources of diplomatic cover, but also as economic nodes and alternative economic partners that will be necessary for China to minimize the damage to its own economy, whether from the market reaction to a Taiwan escalation, explicit G7 or G20 foreign policy, or other factors. The ways in which China might be expected to solicit G20 support in a Taiwan escalation, including in our case countries, are detailed in table 3.

Table 3. China’s asks in a Taiwan crisis

Although some of these asks are economic in nature, diplomatic support is also crucial. In the event of escalation over Taiwan, the United States and G7 will likely seek out statements of support for de-escalation and calls for China to reducing the resulting tensions, including from G20 members. China would also seek statements of neutrality or asking countries to respect Chinese sovereignty claims over Taiwan, while avoiding diplomatic engagement with Taiwanese officials that might imply greater recognition of Taiwan’s sovereignty.

Normative or legal compliance could be a tricky area as well for G20 countries, as China would likely request acknowledgements or acceptance of air defense identification zones and exclusion areas that may implicate commercial and trade traffic from G20 members. These are decisions that have significant implications for China’s sovereignty claims but require little cost for G20 members to implement.

China would have ample opportunity to deploy some of these economic statecraft tools against developing economies as part of an overall strategy to improve its economic and political position under a scenario of escalating tensions over Taiwan.

Three case studies of G20 countries responding to China’s economic statecraft

To explore G20 economic statecraft dynamics, this report examines three country case studies: Brazil, South Korea, and Indonesia. Each country represents a different category of potential exposure to China’s economic statecraft tools. Brazil is a robust commodity exporter. South Korea has an advanced economy with strong technological and manufacturing links to China. And Indonesia is a rapidly developing economy, deploying investment and other financing from China to drive an economic transformation, while at the same time actively contesting China’s territorial claims in the South China Sea.

For each country, the report outlines:

Existing and historical policy toward Taiwan and foreign conflict;
Economic relations between each country and China, including the composition and share of trade and investment flows;
The extent of sovereign finance from China to the country;
Supply chain interconnections and other economic factors;
Past sanctions practice and alignment, with either China or G7 countries. This includes recent international sanctions against Iran, Russia, North Korea, and Venezuela (where applicable).

We synthesize these data sources to identify China’s most likely asks of each country in “moderate” and “high” escalation scenarios, respectively, as well as each country’s most likely policy outcome(s). Where available, we supplement policy and data analysis with interviews of policymakers, former officials, and experts from each country.

Brazil’s experience with China is affected both by its robust trade relationship with and increasing trade dependence on China, which would likely ensure Brazil’s public neutrality in the event of a Taiwan-related scenario. However, its financial sector and strong linkages to global commodities markets provide incentives for Brazil to comply—overtly or quietly—with potential G7 sanctions.

In the case of South Korea, any Taiwan scenario—and Seoul’s reaction to both China’s and the G7’s economic statecraft in the wake of a Taiwan scenario—will be heavily colored by the prospects of wider regional conflict that might involve North Korea. Tightly interconnected value chains and the legacy of China’s measures in the wake of a 2017 dispute over a US missile shield (i.e., Terminal High Altitude Area Defense, or THAAD) deployed in South Korea would heavily impact Seoul’s response.¹³

Lastly, Indonesia’s robust trade and investment relationship with China—and its opportunistic approach to previous international sanctions regimes—suggest it would offer only moderate support for any G7 measures in the wake of a Taiwan escalation. But its own history of maritime disputes with China, as well as its burgeoning military partnership with the United States, might complicate that picture.

Brazil

Overview

Brazil is unlikely to embrace strong G7 measures against China in the wake of any Taiwan-related crisis. China’s economic ties with Brazil are extensive and incentivize Brazil to maintain neutrality. Accordingly, China is not likely to deploy punitive statecraft tools against Brazil.

But this economic relationship is more complex than is commonly understood, extending beyond commodity trade in soybeans and oil. Despite ties with China via the BRICS organization and widely publicized agreements to increase renminbi-denominated trade—a likely ask of China in a Taiwan escalation scenario—Brazil’s cooperation with China does have practical limits.

Brazil’s financial sector will likely comply with G7 secondary sanctions; greater degrees of alignment with either the G7 or China will likely depend on the scenario and the global response in emerging markets and the Global South.

Brazil is unlikely to actively support high-level G7 sanctions or economic statecraft in the wake of a Taiwan crisis, but also remains unlikely to accede to China’s political requests either. Brazil’s long-standing pursuit of neutrality in most international conflicts, the peripheral nature of the Taiwan issue to domestic policymakers, and its strong reliance on China as a trade and investment partner all would influence Brazil’s response to a Taiwan escalation and mute Brazil’s diplomatic and policy reaction. But discussions with Brazilian analysts and policymakers also suggest that Brazil would still enforce US secondary sanctions—if only to preserve smooth functioning of its financial sector—and would not seek to amplify China’s already-outsized influence in emerging-market blocs such as the expanded BRICS.

Stated positions on Taiwan

Taiwan is simply not a major foreign policy issue in Brazil. Since establishing diplomatic relations with the PRC in 1974, Brazil has professed adherence to the “One China” principle (distinct from the US description of a one China policy), and explicitly reaffirmed support for the principle in 2022 and 2023.¹⁴ More broadly, Brazil has pursued a global foreign policy based on neutrality, especially when it comes to extra-regional conflicts including Ukraine,¹⁵ although it has also been critical of Israel’s response in the wake of Hamas’s attack of October 7, 2023.¹⁶

Economic interaction with China

Economic and financial ties with China—and the latent dependence on China that those ties represent—would also likely incentivize Brazil to adopt a muted response to any Taiwan-related escalation. Brazil is a unique case among the G20: Although China is Brazil’s largest trading partner, like many other G20 countries (and BRICS countries, too), it is one of the few that runs a trade surplus with China.¹⁷ Brazil’s economy is thus highly exposed to China, which absorbs more than half of Brazil’s total exports (see figure 2) and a plurality of its top three exports: soybeans (70 percent), crude oil (40 percent), and iron ore (60 percent).¹⁸

This reliance has helped and hurt Brazil in the past. While Brazil was hit hard by China’s growth slowdown in 2015-2016, China’s outperformance in 2020 during its COVID-19 lockdown phase helped Brazil maintain export and current account performance. Brazil’s trade with China extends beyond commodities and primary inputs to metal ores and even aircraft (from Brazilian plane maker Embraer). This exposes Brazil to broader change in China’s investment and property market conditions, on top of its commodity exports.¹⁹ Importantly, despite a 2023 agreement meant to expand RMB-denominated trade and discussions of a new BRICS currency, much of Brazil’s trade with China is still transacted in US dollars.

China is also a substantial source of FDI for Brazil. Brazilian industry analysis estimates total investment by China in Brazil totaled $73 billion between 2007 and 2023, with three-quarters of that value going to FDI projects in electricity or oil. Chinese companies have ownership of 10 percent of Brazil’s national energy-generation capacity and about 12 percent of energy-transmission capacity.²⁰ Likewise, most Chinese loans to Brazil between 2010-2021 funded projects in the energy and mining industries (figure 2).

Beyond regular returns, the power sector has the most developed regulatory framework of all Brazilian sectors, which has contributed to new Chinese investment, particularly following a pullback in developed market investment after several corruption scandals in Brazil (e.g., the 2014-2021 task force probe called Lavo Jato, or Car Wash).²¹ These investments slowed during the Bolsonaro era in Brazil from 2019 to 2022, even as Bolsonaro‘s criticisms of Chinese economic engagement in critical Brazilian industries became more moderate after his election.²² Even though Brazil is one of the only countries in Latin America to receive significant new sovereign loans from Chinese banks since 2020, major loans to Brazil have similarly declined since 2016.

These economic relations remain in flux. Newly reelected President Luis Ignacio Lula da Silva has reemphasized bilateral ties and signed fifteen bilateral agreements with China totaling around $10 billion during his 2023 visit. But Brazil also launched trade investigations into Chinese imports, most notably steel and chemicals.²³

Figure 2. Snapshot of China-Brazil ties in exports and loans

As Brazil is a major supplier of commodity exports to China, should China attempt to stockpile soybeans and crude oil (as might be expected before a high-escalation scenario). Brazil’s trade exposure to China would only be expected to spike.

Past sanctions alignment

Brazil has grudgingly complied with previous US and United Nations (UN) sanctions regimes, including specially designated nationals (SDN)—the individuals/entities controlled, owned, or acting for or on behalf of targeted countries—designations related to Russia and Iran. The threat of secondary sanctions also has influenced Brazil’s defense relationship with China. This reflects Brazil’s status as a regional financial hub—including Latin America’s five largest banks by total assets—which would be squarely threatened by the imposition of strong secondary sanctions.²⁴ Brazilian authorities routinely collaborate with US and UN officials on sanctions targeting money laundering and transnational criminal groups.

Table 4. Brazilian cooperation with domestic and international sanctions (select cases)

However, US or G7 sanctions squarely targeting Brazil’s relationship with China would likely be much more fraught. The risk of negative or punitive economic statecraft against Brazil from China is low, as Brazil’s likely neutrality will probably suit China’s preferences in a Taiwan contingency. Several Brazilian foreign policy experts have argued that neutrality would be most strategically optimal for Brazil in a Taiwan escalation,²⁵ lessening the need for China to apply coercive leverage in a moderate or even high scenario. China would also likely be more reluctant to target a fellow BRICS member, especially during a tentative rapprochement between China and Brazil after Bolsonaro’s exit. Recent BRICS communiqués have explicitly condemned “unilateral trade measures” and perceived violations of the WTO system.²⁶

Brazil in a Taiwan escalation scenario

Table 5. Brazil’s anticipated activity by escalation level

The prospects of Brazil joining with the G7 to enforce strict sanctions in a “high” escalation scenario are also remote, though Brazilian financial institutions would still be strongly incentivized to enforce US secondary sanctions and retain access to US dollar clearing markets. The proportion of RMB-denominated trade and overall foreign exchange turnover between Brazil and China has risen in recent years (see figure 3),²⁷ but Brazil still overwhelmingly transacts and denominates its trade in US dollars.²⁸ In a Taiwan crisis, China might request that Brazil complete more transactions in RMB, as it has done in workaround trade with Russia since 2022. But the likelihood that China would limit global RMB liquidity during an escalation, in order to defend the stability of the currency, puts a ceiling on the volume of transactions that can be processed. China’s bilateral swap lines also are unlikely to come into play (see adjacent box).

Figure 3

Even in a moderate-escalation scenario, and absent any coercive trade actions by China, Brazil’s exports could be affected by disruptions to shipping lanes. For example, most soybean exports proceed either past the Cape of Good Hope in South Africa or through the South China Sea; only a small volume is shipped via the Panama Canal. During a moderate- or high-escalation scenario, this would leave Brazilian shipping exposed to the same higher costs (and possible diversions around the South China Sea or Taiwan Strait) facing European shippers.

In a high-escalation scenario, trade disruptions are likely to be even more severe in the form of increased shipping costs and route diversion. Under such conditions—especially if precipitated by military action or a blockade of Taiwan—China will likely have already stockpiled significant quantities of crude oil and soybeans. Though it would naturally seek to maintain trade flows, this would provide it with little need or desire to deploy coercive trade tools against Brazil. Instead, Brazil’s priorities would likely include keeping the BRICS grouping out of the explicit conflict and counterbalancing likely overt Russian support for China. Compared to other BRICS countries, Brazil would be more amenable to stricter international sanctions packages, though Brazil’s preference for UN sanctions authorization may be an insurmountable hurdle to supporting expanded trade and financial restrictions.

Box 1: China’s bilateral swap lines

China has signed several bilateral currency swap deals with its trading partners starting in 2010, designed at first to insulate China’s trade from risks of tightening US dollar trade finance during the global financial crisis. China’s first swap line with Brazil was signed in 2013 for a total of 190 billion yuan or 60 billion reals, designed to facilitate trade financing. Most of these swap lines were used very sparsely in their early years, and there are no available records of the swap line between China and Brazil being utilized over the past decade (although it may have occurred).

China and Brazil only proceeded to deepen their financial relationship with a memorandum of understanding to set up clearing arrangements for China’s currency in Brazil in February 2023.²⁹ In March 2023, the financial relationship expanded with an arrangement to trade directly in RMB or Brazilian real, bypassing the US dollar for settlement. The RMB became the second-largest component of Brazil’s foreign exchange reserves as of the end of 2022, at 5.3 percent of reserves or $17.4 billion, likely a result of the rising use of RMB payments by Chinese importers from Brazil.³⁰

Technically, trading with China in RMB is more feasible in Brazil than in other markets because Brazil runs a trade surplus with China, receiving more RMB as payments for its exports. China runs trade surpluses with most of its trading partners, making it difficult to facilitate trade in RMB (as countries would need to pay in foreign currencies for Chinese exports). The expansion of trade between China and Brazil in RMB can continue as long as Brazilian firms, banks, and the central bank are willing to accept the currency risk of holding RMB-denominated assets, which will involve more direct investments back into China’s financial markets.

Indirect data measures from the Bank for International Settlements (BIS) indicate that the proportion of Brazilian real currency trading relative to the US dollar is still around 95 percent of the total, with similar proportions for RMB trading against the dollar.³¹ Trading activity between the BRL and RMB was too small to be measured in the BIS Triennial Survey, but will probably have picked up marginally starting in 2023.

For economic statecraft purposes, the net effect of the currency swap arrangements and direct trading in China’s currency or the Brazilian real is minimal. The swap lines could be withdrawn, or Brazilian assets in Chinese markets could be frozen or immobilized, but US dollar trading remains highly active in Brazil. China’s leverage over Brazil is much stronger in terms of influence over trade activity and flows, given that China is Brazil’s largest export market.

South Korea

Overview

Escalation of tensions over Taiwan would likely move South Korea closer than other G20 partner countries to alignment with G7 priorities, but South Korea will likely prefer to comply with G7 regulations rather than implement complementary regimes nationally that directly target China, and will continue seeking exemptions for key industries for as long as possible.

South Korea will prioritize managing security risks posed by opportunistic attacks from North Korea and the potential for increasing China-North Korea cooperation. This will temper South Korea’s willingness to impose economic restrictions on China, but will increase South Korea’s reliance upon and acceptance of a US security presence in the Indo-Pacific region.

Extensive ties in critical technology supply chains that are at the forefront of current US technology restrictions continue to pose high costs and barriers for South Korean compliance on export and investment restrictions. Some industries are slowly decoupling, but are also slow to restructure.

Nonstrategic but high-revenue industries, such as consumer goods, will attempt to stay in the Chinese market for as long as possible and pose a continued risk for retaliatory statecraft.

Heightened risks of operating in the Chinese market under US restrictions will drive some decoupling and eventually reduce the costs posed by China’s economic statecraft.

South Korea’s stated positions on Taiwan

South Korea stands apart from US G7 allies for its historically more flexible and reserved position on cross-strait relations. South Korea does not maintain official diplomatic relations with Taiwan, yet it has never officially acknowledged the One China principle and maintains unofficial working dialogues with Taiwan through the Taipei Mission in Seoul. Recent South Korean presidencies have shifted closer toward a US-aligned position. In a 2021 joint statement, President Moon Jae-in stated South Korea’s intentions to work closely with the United States on preserving “peace in the Taiwan Strait,”³² and, in 2023, President Yoon Suk Yeol characterized cross-strait relations as a global issue, similar to North Korean relations, and stated his opposition to the use of force to change the status quo.³³ These statements, along with Taiwan’s participation in the 2024 Third Summit for Democracy, hosted alongside the United States in Seoul,³⁴ are a departure from South Korea’s passivity toward strategic balancing in the Indo-Pacific region and show initiative for consensus building among partners. At the same time, South Korea maintains a preference for rhetorically minimizing China’s role and relationship with Taiwan, and for approaching cross-strait relations collectively to reduce the risk of targeted repercussions.

Economic interaction with China

South Korea is a global leader in several industries that are covered by current or proposed US export and investment restrictions on China. Compared to other partners, South Korea’s compliance with US regulatory actions has a greater significance to the G7’s ability to restrict China’s access to advanced technology in sectors such as semiconductors, high-performance computing, and EV batteries. However, South Korea’s economic integration with China is significant, not only in terms of the magnitude of overall economic activity but also for its strong ties in critical goods supply chains. These economic ties pose steep costs for South Korean compliance with restrictions on these sectors.

China is South Korea’s largest export market, accounting for around 20 percent of total exports in 2023, although this share has declined since the 2010s. Two-way trade links in intermediate goods for electronics manufacturing supply chains are substantial, and South Korea depends on Chinese imports for a significant share of critical inputs to its industrial sectors (see figure 4). Electrical machinery and equipment, including finished electronics and semiconductors, is by far the largest class of goods for two-way trade, amounting to $53 billion in exports in 2023 and $50 billion in imports.³⁵ Semiconductors are the most significant component of the bilateral trade relationship, and the industry is an important source of revenue for the South Korean economy. China also is a large market for many nonstrategic South Korean export industries, such as processed plastics, cosmetics, and tourism, and for large consumer-goods MNCs, like Lotte, with substantial sales through affiliates in China. However, intrafirm transfers account for a large portion of China-Korea trade (see figure 4). Barriers to diversification are lower for this proportion of trade. A large share of intrafirm trade is between semiconductor MNCs, Samsung’s and SK Hynix’s manufacturing branches in China, and their domestic counterparts. Intrafirm trade is declining as these and other firms localize more of their operations.

South Korean investment in China is also extensive, particularly when including Hong Kong, and is largely dominated by investments in semiconductor manufacturing. In 2023, new South Korean investments in China dropped substantially, driven by record lows in semiconductor investment. As it becomes more challenging for these firms to equip their fabrication facilities in China, disinvestment may accelerate. However, manufacturing assets in China that rely on access to covered products contribute significantly to South Korea’s economy and require intensive capital investment to derisk, which will pose high costs for alignment on restricting these sectors. The South Korean government recently pledged $29 billion in subsidies over the next five years to help electric vehicle (EV) battery makers move their supply chains out of China to comply with US Inflation Reduction Act EV tax credits that prohibit sourcing from Chinese and other covered countries’ input suppliers.³⁶ This is a positive sign for South Korea’s willingness to invest in long-term access to the US market at the expense of diversification from China.

Figure 4. Elements and impact of China-South Korea trade

Past cases of Chinese economic statecraft have targeted nonstrategic South Korean industries that generate high revenues from the Chinese market, but where restrictions create minimal costs and risks to the Chinese economy (see box). In an escalation scenario, nonstrategic industries will be more likely to maintain their connections to the Chinese market because replacing the scale of Chinese demand with other markets is challenging and these industries are not the primary recipients of government support for diversification from China. These industries will present continued vulnerabilities to China’s economic statecraft tools.

Box 2: China’s economic coercion punished South Korea for deploying THAAD

South Korea was the target of one of the largest-scale cases of China’s economic coercion after its deployment of THAAD in 2016. China targeted South Korea’s tourism and entertainment industries and corporations based in China, and orchestrated national boycotts of South Korean goods from 2016 to 2017. Estimates of 5 to 12-month losses of revenue from the tourism industry alone range from $6.8 to $15.6 billion, while Lotte reported $1 billion in lost revenues from sales in the Chinese market (as shown below). The Bank of Korea estimated that these disruptions reduced South Korea’s GDP growth by as much as 0.4 percentage points.³⁷

Past alignment with US and G7 sanctions

Commercial interests limited South Korea’s initial response to G7 actions following the 2014 Russian invasion of Crimea. However, by 2022, South Korea adopted wide-ranging financial restrictions against Russia, in line with G7 sanctions packages (table 6). This was due, in part, to national security concerns over Russian support for North Korea. South Korea has ostensibly complied with relevant US restrictions on China but has sought carve-outs that limit the de facto results of South Korean cooperation. In 2024, South Korean semiconductor makers received an indefinite exemption from US export controls on the export of chips and semiconductor manufacturing equipment to China.

Table 6. South Korea’s alignment with the United States in past cases of sanctions

The Yoon presidency has been more willing to expand the use of economic security tools compared to previous administrations, expanding the scope of restrictions against Russia and North Korea. However, the current administration continues to avoid directly targeting China and future administrations may revert to a more conservative use of economic security tools. In an escalation scenario, South Korea is more likely to signal compliance with US sanctions, as seen in its belated chip alignment, while seeking carve-outs and exemptions that limit impacts on key industries and continue to avoid targeted restrictions on China.

South Korean in a Taiwan escalation scenario

South Korea’s significant economic ties to China in strategic and nonstrategic, high-revenue industries pose high costs and constraints for compliance with G7 actions. However, South Korea’s proximity to the escalation zone and exposure to Chinese economic coercion necessitate safeguards against the risks of a retaliatory and economically weakened China. Anxieties over an opportunistic North Korea and widespread regional supply chain disruptions are also likely to push South Korea closer to G7 alignment than other G20 members, yet South Korea will likely resist partner requests for complementary national restrictions.

Table 7. South Korea’s anticipated activity by escalation level

In a moderate- to high-escalation scenario, South Korea will prioritize mitigating national security risks posed by North Korea and preventing cross-strait tensions from spilling over into regional conflict. South Korea would seek to limit the risks of China mobilizing North Korea and be wary of passing its own economic restrictions that directly target China or conveying direct support for US military mobilization. South Korea’s official position is that it does not maintain a security dialogue with the United States on cross-strait relations. Under a scenario in which the US deploys troops from South Korea, Seoul may quietly provide support services and funding and may seek to expand its technology and security alliances, such as by joining AUKUS, the alliance of Australia, the United Kingdom, and the United States.

South Korea’s calculus for coordinated economic restrictions against China will place greater weight on commercial outcomes in a moderate-escalation scenario in which national security risks are marginally less severe. Yet even in a moderate scenario, under unilateral US actions, South Korean trade with China and affiliate firms in consumer goods industries are likely to face significant disruptions. Financial restrictions will cause a drop in China’s consumption and restrict a large portion of China’s trade finance, shrinking Chinese demand for South Korean industrial output. The declining prospects of the Chinese market will eventually reduce the opportunity costs of decoupling and risks of retaliatory statecraft, but these costs are still likely to remain at levels high enough to require any South Korean government to balance these economic and security risks.

Indonesia

Overview

China’s existing economic influence and engagement in Indonesia—especially its investments in infrastructure and mineral mining and processing—provide strong incentives for Indonesia to avoid alignment with the G7 in any scenario in which sanctions were imposed on China. Indonesia’s long-standing principle of foreign policy neutrality is also determinative. Indonesia is unlikely to execute complementary restrictions on China.

Indonesia’s derisking efforts are burgeoning and cooperation with the United States and other G7 partners is increasing, signaling a desire to rely more on the G7 for economic relations. Indonesia is likely to accelerate derisking from China to reduce entanglement in US/G7 sanctions networks, as well as quietly comply with secondary sanctions. However, Indonesia’s derisking efforts are more limited than other G20 partners, and co-investments with China and G7 countries in critical energy and infrastructure sectors would be directly exposed to G7 sanctions.

Indonesia is unlikely to face substantial punitive economic statecraft from China in the wake of a scenario in which tensions over Taiwan escalate.

Indonesia’s stated positions on Taiwan

Indonesia has consistently advocated for the maintenance of the status quo in the Taiwan Strait, for both practical and principled reasons. As China-Indonesia economic relations have deepened, Indonesia has consistently reiterated support for the PRC’s One China principle in public comments and diplomatic agreements.³⁸ Though Indonesia’s diplomatic and strategic priorities remain in Southeast Asia and within the Association of Southeast Asian Nations (ASEAN), Taiwan’s status has indirect implications for Indonesia’s own territorial claims against China in the South China Sea, as well as for other ASEAN claims.³⁹ As cross-strait tensions have increased since the Democratic People’s Party (DPP) took power in Taiwan in 2016, according to domestic media reports, Indonesian policymakers have begun developing contingency plans for a potential armed conflict.⁴⁰ Around 300,000 Indonesian nationals reside in Taiwan, primarily domestic workers;⁴¹ depending on the scenario, these nationals might require evacuation from Taiwan. At the same time, Indonesia’s foreign policy, like Brazil’s, follows principles of nonalignment.⁴² As a practical matter, Indonesia seeks to balance its relationship between China and the United States, pursuing close US defense cooperation and a strategic counterbalance to China in the Indo-Pacific region.

Economic interaction with China

Against this diplomatic backdrop, China’s economic influence in Indonesia is substantial, with China serving as Indonesia’s largest trading partner—by both imports and exports (figure 5)—and as a major source of foreign investment.

Figure 5. China-Indonesia trade ties

China’s FDI to Indonesia began with investment in low-skilled manufacturing sectors and raw materials in the 2000s and early 2010s, and shifted to tap Indonesia as an ASEAN production base, a valuable consumer market for Chinese automotives and tech firms, and expanded investments related to batteries and EV supply chains.⁴³ China’s firms have made major investments in coal, critical minerals, and infrastructure, such as Indonesia’s first high-speed railway and hydropower and geothermal generation projects. The most strategically important investments are likely those in aluminum and nickel supply chains, where Chinese firms have complied with Indonesian policy to use downstream processing in Indonesia (figure 6). Competition from cheap Chinese imports has prompted officials to moot heavy tariffs on certain products, including textiles, though the tariffs have not been implemented since they were first announced in July 2024.

Figure 6. The predominance of Chinese investment and processing in Indonesia

These economic ties are durable, as China’s investment base in Indonesia also relies on technical experts and skilled labor from China, especially related to mineral and metal processing.⁴⁴ Foreign labor and allegations of double standards in workplace safety and pay have been politically controversial in Indonesia.⁴⁵ Nevertheless, these workers play critical roles in metal mining and processing that may be affected in a Taiwan scenario.

Indonesia in a Taiwan escalation scenario

China’s outsized economic influence would likely limit Indonesia’s capacity and willingness to align with the most expansive G7 sanctions in a moderate- or high-escalation scenario, prioritizing trade continuity and minimizing economic disruption and spillovers elsewhere in the Indo-Pacific area. Yet Indonesia would also be reluctant to accede to China’s most significant consequential asks, especially if China requests that Indonesia fully ignore the potential impact of G7 or US secondary sanctions.

Table 8. Indonesia’s anticipated activity by escalation level

Indonesia’s past practice in response to political developments in Taiwan—such as high-level US legislative visits—has been to call for neutrality and de-escalation while nominally professing adherence to China’s concept of the One China principle. In a moderate-escalation scenario, this is the most likely outcome. Indonesia’s sanctions compliance is far from certain in this scenario, given the scope of trade finance and other two-way trade ties—especially if China’s state-owned mineral companies are placed on the sanctions list. Complicating the picture is Japan’s close economic relationship with Indonesia; Japan ranks second in FDI stock within the country, and Japanese firms are active in Indonesia’s infrastructure funding and the automotive industry. Japanese firms are also significant co-investors—with Indonesian and Chinese partners—in large nickel and critical mineral joint ventures in Indonesia, including investments in one of the country’s largest industrial parks, Indonesia Morowali Industrial Park (IMIP). If Japan and the rest of the G7 decide to comply with or directly implement complementary sanctions, this could directly strike Indonesia’s next-generation investments.

Despite Taiwan’s attempts to build closer ties with Indonesia and Southeast Asia as part of its New Southbound Policy, Taiwan simply does not have as much economic or political heft as China in Indonesia.⁴⁶ Any bilateral engagement with Taiwan thus would likely be done discreetly to avoid inflaming tensions with China, especially in a high-escalation scenario.

In a high-escalation scenario, where the G7 might sanction China’s major private banks and policy, stress on Indonesia’s stock of external debt to Chinese creditors—private and official—would become more acute. Indonesia’s external debt to Chinese creditors stood at $21.2 billion as of July 2024, with an additional $17.4 billion to Hong Kong-based entities.⁴⁷ This debt is not likely to be an effective tool of coercive statecraft for Beijing. There are no known cases where China has used the threat of debt acceleration effectively to force countries to adopt its preferred foreign policy positions. Moreover, China’s loan agreements allow for default to be declared only under certain circumstances, and even if successful, such efforts would likely do nothing but saddle the lending bank with sizable nonperforming loans that it would be unable to collect. These debts are more relevant as a source of G7 or unilateral US pressure. If G7 sanctions targeted major Chinese banks, Indonesia may not be legally permitted to service Chinese debt, which could have implications for its global creditworthiness and its relationship with China’s financial system.

Transit through Indonesian territorial waters could also become more crucial for international shipping—if ships needed to be routed well around Taiwan. The question of transshipment is also an open one. Indonesia is within reasonable sailing range of China, and its ports could, in theory, be used for sanctions evasion in the event of G7 measures against China. However, direct cargo routes between Indonesia and ports in mainland China are few, with most shipments routed through Singapore. Recently, China’s purchases of Russian crude oil in evasion of G7 sanctions were routed mostly through Malaysia, rather than Indonesia.⁴⁸

Table 9. Indonesia’s alignment with domestic and international sanctions (select cases)

Indonesia has approached past international sanctions efforts gingerly, particularly when dealing with unilateral US sanctions. As Indonesian officials were themselves targeted by US sanctions and travel bans during the Suharto era until 1998—including current President Prabowo Subianto—the use of sanctions remains controversial.⁴⁹ Indonesia has not been an unswerving supporter of G7 sanctions efforts. Indonesian entities have been placed on the US SDN list for allegedly transacting with Iran in drone parts.⁵⁰ Moreover, Indonesian officials have occasionally adopted a neutral and entrepreneurial approach to international sanctions against Russia. A circular from Indonesia’s trade ministry in 2014, following Russia’s invasion of Crimea, identified “opportunities to increase exports” and argued the country should take advantage of foreign trade bans to fill Russian trade needs.⁵¹ After Indonesia increased trade credit and export insurance, Indonesia achieved a trade surplus with Russia in 2020 for the first time since 2016 though the benefits were short-lived after a crash in global palm oil prices in the second half of 2022. Indonesia also did not support the expansion of sanctions against Russia as host of the G20 summit in Bali in 2022, instead calling merely for G20 “unity.” On China, however, media reports suggest Indonesia has complied, albeit in a limited fashion, with US economic statecraft threats to restrict trade if Indonesia’s navy followed through on plans to source patrol boats from a Chinese supplier in 2020.

Conclusion

Scenarios of escalating military tensions over Taiwan are already difficult to contemplate, given the enormous economic costs that would result for virtually every national economy. Political positioning for G20 governments is complex. Most have assiduously tried to avoid the perception that they are deliberately choosing sides between the United States and China in a Taiwan crisis scenario. Given China’s central position within global manufacturing supply chains, most G20 economies have significant economic ties with China that their governments will be loath to sever over early signs of rising tensions. Nonetheless, both the G7 and Beijing will have their own diplomatic interests at stake during any conflict scenario and will be actively soliciting cooperation and political support.

This report has outlined some of the economic and political factors that would inform those choices in three countries: Brazil, South Korea, and Indonesia. These three countries were selected because they all have different types of distinct economic linkages to China and are potentially vulnerable to different economic statecraft tools from Beijing. Importantly, their relations with G7 countries are also distinct. South Korea is a political and military ally of the United States. Indonesia is strengthening political and military cooperation with the United States and the G7. Brazil’s financial system and its access to US dollars remain vitally important for both Brazilian and other Latin American economies.

In contemplating scenarios of potential escalation over Taiwan, ambiguity about the economic costs and the eventual scale of escalation will likely introduce caution among G20 governments, including our examined case studies. But as that ambiguity fades and escalation continues, conditions become clearer that aggregate economic costs will rise, and demands from Beijing and the G7 for more concrete alignment will increase. A moderate escalation scenario naturally imposes fewer hard choices upon G20 governments and permits them to avoid conflicting entanglements.

However, in a scenario of significant military escalation over Taiwan and extensive financial sanctions on China, economic actors in all three countries would likely comply with US sanctions or reductions of trade to China to some extent, due to concerns about secondary sanctions risks. In a moderate escalation scenario, the scope of any compliance would likely be more limited, given that all of these economies maintain significant trade relationships with China subject to potential disruption from Beijing. All three countries will experience some immediate economic consequences from disruptions to China’s economy and capacity to maintain international payments. None would likely offer public expressions of support for economic sanctions, but rather defer to previous diplomatic statements related to Taiwan’s political status. South Korea would likely provide the highest level of cooperation or support for any US actions, given the countries’ military alliance.

Given the three countries’ economic relationships with China, this report argues that Beijing would have a limited interest in pursuing punitive or negative economic statecraft tools against Brazil, South Korea, or Indonesia. In the event of US or G7 sanctions, Beijing would have an incentive to maintain regular trade and financial transactions wherever possible, encouraging third countries to continue current levels of economic engagement with China despite their potential exposure to secondary sanctions risks. Beijing could also offer additional economic carrots or incentives to G20 countries to maintain economic engagement, such as additional concessions on market access, new investment, or credit via bilateral swap lines.

Nonetheless, the intersection of these two sets of competing forces in the event of escalating tension over Taiwan will create significant political pressures for all G20 governments. China’s economic statecraft tools have been deployed in the past against South Korea, Lithuania, Australia, and other economies, and any restraint from Beijing could be viewed as temporary or contingent based on cross-strait developments, given the centrality of Taiwan to Beijing’s political interests. The uncertainty of China’s response may have a chilling effect on G20 willingness to act or align with US consensus-building measures as they wait for China’s response or for more significant decoupling progress in key industries to manifest.

Similarly, no trade-oriented G20 economy could afford to see any major bank lose access to US dollar clearing facilities in the event of secondary sanctions from the United States, even if there are clear limits to the American usage of these tools. Access to US financial markets, financial market infrastructure, and transactions in US dollars are important gateways to the global economic system, and access to them is important enough to secure at least nominal compliance on US actions.

Yet as scenarios of military tensions over Taiwan have passed from the realm of the unthinkable to the potentially imaginable, G20 governments will be forced to weigh the significant economic costs of choosing between competing demands from Washington and Beijing. Publicly highlighting these costs and the political dilemmas they will inevitably create may help to reinforce a multilateral consensus to prevent escalation before it occurs, as well as develop pathways to ease tensions in the event an unfortunate scenario materializes.

download pdf

About the authors

Matthew Mingey is an Associate Director with Rhodium Group, focusing on China’s economic diplomacy and outward investment, including development finance. Matthew is based in Washington, DC. Previously, he worked on global governance issues at the World Bank. Matthew received a Master’s degree in Global Business and Finance from Georgetown University’s Walsh School of Foreign Service and a Bachelor’s degree from the University of Pennsylvania.

Laura Gormley is a Research Analyst with Rhodium Group’s China Projects Team, focusing on China’s innovation ecosystem and external economic engagement. Prior to joining Rhodium, she was a research assistant with the Global Development Policy Center – Global China Initiative at Boston University, where she contributed to the Center’s work on China’s development finance and decarbonizing the Belt and Road Initiative. Laura holds a Master’s degree in Global Policy from Boston University’s Pardee School of Global Studies and a Bachelor’s degree from McGill University.

Logan Wright is a Partner at Rhodium Group and leads the firm’s China Markets Research work. He is also a Senior Associate of the Trustee Chair in Chinese Business and Economics at the Center for Strategic and International Studies. Previously, Logan was head of China research for Medley Global Advisors and a China analyst with Stone & McCarthy Research Associates, both in Beijing. Logan holds a Ph.D. from the George Washington University, where his dissertation concerned the political factors shaping the reform of China’s exchange rate regime. He graduated with a Master’s degree in Security Studies and a Bachelor’s degree in Foreign Service from Georgetown University. He is based in Washington, DC, after living and working in Beijing and Hong Kong for over two decades.

Acknowledgements

This report was written by Matthew Mingey, Laura Gormley, and Logan Wright in collaboration with the Atlantic Council GeoEconomics Center. The principal contributors from the Atlantic Council GeoEconomics Center were Josh Lipsky, Benjamin Lenain, Charles Lichfield, Jessie Yin, Ananya Kumar, and Kimberly Donovan.
The GeoEconomics Center and Rhodium Group wish to acknowledge a superb set of colleagues and fellow analysts who shared their ideas and perspectives with us during roundtable research sessions and helped us strengthen the study in the course of these discussions. Our gratitude goes to Emily Kilcrease, John Hughes, Howard Shatz, Adam Tong, Charlie Vest, Reva Goujon, Agatha Kratz, Hugo Bromley, Eyck Freymann, Timothy Heath, Dan Rosen, and Richard Danzig.

At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.