Trump Unlikely to Lift Russia Sanctions Right Away, Former OFAC Director Says
The U.S. probably won't immediately lift a broad range of Russia sanctions when Donald Trump enters the White House next month, the former director of the Office of Foreign Assets Control said this week, despite the president-elect’s campaign promises to end the war between Russia and Ukraine during his first day.
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John Smith, a lawyer with Morrison Foerster who led OFAC in 2018, said immediately lifting sanctions against Russia would cede “all of the leverage” Trump would have in trying to convince Russia to end the war. A more likely scenario may involve an “incremental” loosening of restrictions over time.
“So we do expect at some point we'll see some removal of Russia's sanctions, but not at the start,” Smith said during a webinar hosted by his law firm, “because we do expect that we're going to see some push to try to figure out a solution to that war.”
Smith said the issue of how Trump will handle Russia is one of the top questions he’s been getting from clients. The expansive set of Russia-related sanctions and export restrictions imposed by both the U.S. and many of its trading partners have forced a range of companies to cut business ties in the region or invest heavily in compliance to avoid costly government penalties or reputational risks (see 2411080001, 2410040014, 2408270021 and 2403270007).
Smith added that any U.S. move to remove sanctions from Russia, if not coordinated with allies, would “complicate” the sanctions landscape even further, especially if the U.S. lifts certain trade controls that are still imposed, for example, by the EU. “Simply removing U.S. sanctions won't be enough to give Russia the sanctions relief that it wants,” he said.
“We do expect that it will take some time for President Trump to be able to follow through on his goal of ending the war in a way that satisfies the United States goals, those in Europe, as well as, of course, Ukraine and Russia.”
Trump is also legally constrained from lifting certain Russia restrictions. Smith said certain sanctions on Russia are codified in the Countering America’s Adversaries Through Sanctions Act, and those measures can’t be removed without congressional review. He also said the recently enacted Rebuilding Economic Prosperity and Opportunity for Ukrainians Act, or Repo Act, doesn’t allow certain sanctioned Russian sovereign assets to be unblocked unless the president certifies that hostilities between Russia and Ukraine have ended and Russia has fully compensated Ukraine (see 2407240011).
“We don't expect that that's going to happen anytime soon,” Smith said.
Smith said U.S. companies may continue to see more sanctions against Chinese firms helping Russia evade Western restrictions against Moscow. They should also expect Trump to frequently use sanctions to target China for other reasons, including for “aggressive actions in the Pacific” or in response to human rights concerns.
That could include more additions to Treasury's Chinese Military-Industrial Complex Companies List, Smith said, which places certain investment restrictions on listed companies. Trump could adjust "that program to further bar Western investment in China,” he said.
Brandon Van Grack, a Morrison Foerster lawyer and former senior DOJ export controls and sanctions prosecutor, said he believes the U.S. over the next few years will continue to focus heavily on new trade and other restrictions against China.
"A theme that you've seen in this administration that is likely to carry over is specifically targeting China in legislation and executive orders. Terms like 'countries of concern,' [and the] nomenclature and terminology where China is specifically targeted -- I think we'll see more of that."