How Russian oligarchs are ducking US sanctions

Nations and governments who offend the American president can expect financial penalties. Trump does not believe in markets left alone. He does not believe in free trade; he promotes trade war. Trump does not believe in cooperation; he believes in sanction.

Even America's allies, such as Canada, have found so, as well as those countries Trump claims to want better relations with, such as China and Russia.

Chinese imports have faced repeated American tariffs; Russia's face sanction - notably in retaliation for what was likely an act of Russian chemical aggression in the United Kingdom's Salisbury early this year.

As part of its paradoxical policy toward Russia, the United States issued sanctions against Russian oligarchs close to the country's leadership in April. One of those rich men, Oleg Deripaska, has previous form with those close to the American administration. 

Deripaska made use of the services of Paul Manafort, who is now in jail but once, before the 2016 election, helped shape the Trump campaign's messaging and its policy proposals regarding Russia.

Manafort's fall from grace may have proven a blow to Deripaska. But the Russian tycoon has other connections, and other men willing to involve themselves in promoting his interests.

Deripaska's plan of settling in for a long fight appears to be bearing fruit

The New York Times details some of the efforts made on Deripaska's behalf to allow him to duck sanctions on Russia, on his companies, and on his person. The first part of this effort involves Deripaska's mounting legal challenges, which, The Times reports, look likely to minimise or make moribund sanctions the US Treasury has attempted to place on some of his companies.

But the second part is a more audacious undertaking, and it involves more legal cleverness. It is a bolder task, and more personal. Deripaska wishes to reduce the sanctions placed on himself. The job for his advocates to attempt is the wholesale laundering of his reputation.

The Times notes that Deripaska is effective at using people such as Lord Barker, a former British minister, as emissaries in western capitals.

John Gapper of The Financial Times wrote in May that Barker, the "Russophile chairman of EN+", Deripaska's vast holding company, which has been sanctioned by the US Treasury, "is staying in his job as others melt away, hoping to salvage something for the minority investors".

Barker has reportedly formulated a so-called "Barker Plan", which would see Deripaska relinquishing much of his overt control of EN+ and Rusal, an aluminium company also under sanction, in exchange for the lifting or decreasing of sanctions on these entities. Accordingly, Deripaska resigned from the boards of Rusal and EN+ in May.

But more than that, he has intervened personally, parlaying with the Irish minister of business, trying to get to the US through Ireland.

In the United States, Mercury Public Affairs, featuring Bryan Lanza, formerly of the Trump campaign, has signed a large deal with EN+ and registered as a foreign agent to advocate on behalf of Lord Barker.

Whether this campaign will entirely succeed remains to be seen. But Deripaska's plan of settling in for a long fight appears to be bearing fruit.

Rusal, for example, despite bearing the double burden of tariffs on levied on aluminium imports and the sanctions directly levied on the company and Deripaska, had a request for an exemption from tariffs granted in July - the twentieth such exemption it asked for, out of a total of more than 100 requests.

This is only one flaw with using punitive sanctions as the primary tool of aggressive foreign policy. The canny and the rich tend to escape the net. As with all business, there is always a deal to be struck.

But even these flaws are not the system's most glaring.

The canny and the rich tend to escape the net

The Trump administration has expressed consistent hostility towards Iran. On 5 November, new US sanctions came into force against Iranian oil production, the consequence of Trump's suspension of the 2015 nuclear deal between the United States, Iran and five other nations.

That the moment - and its bizarre Game of Thrones-themed spin war - gave Iran's generals space for grandstanding is regrettable. That it has prompted illegal and dangerous acts, such as Iranian ships, beginning in September, switching off their transponders and "going dark" in a bid to avoid detection and sanction.

More regrettable are the ways American sanctions are likely to prove less effective than intended. The United States has exempted several nations from its sanctions on Iranian oil. The fact that this list so far includes such vast consumers of oil as China, India, Greece, Italy, South Korea, Taiwan and Turkey suggests that Iranian crude stands a chance of doing rather better than the Islamic Republic's leaders may have feared.

The above nations no doubt lobbied hard for their commercial advantage. Other countries, such as Iraq, whose leaders likely tried just as hard but, in this case, unsuccessfully, no doubt feel dispirited and will suffer economically in consequence, as will ordinary Iranians. Once again, as with sanctioning Russian business, creeps in the possibility of partiality.

Levelling sanctions on Russia is necessary, but when they can be danced around or negotiated away, and when Russian and Iranian agents have done far worse than attempt to export aluminium and oil to the United States, a foreign policy built on financial sanction alone is insufficient.

Rather than relying on the transactional approach of the boardroom, the United States must think seriously about what behaviour in its adversaries it truly wishes to counter.

If America's concerns are purely economic, its leaders should say so directly, and accept all the partiality that style of thinking encourages. But if it wishes to deter and punish chemical attacks in Britain and Syria, it ought to say so, and adopt a manner of thinking and acting which looks a little further than the balance sheet.

James Snell is a writer whose work has appeared in numerous international publications including The Telegraph, Prospect, National Review, NOW News, Middle East Eye and History Today.

Follow him on Twitter: @James_P_Snell

Opinions expressed in this article remain those of the author and do not necessarily represent those of The New Arab, its editorial board or staff.