Business to the (late) rescue?

Last Thursday, the U.S. House of Representatives Foreign Relations Committee approved the so-called Magnitsky Bill (H.R. 4405), a piece of legislation that would impose visa bans and asset freezes on Russian officials involved in “gross human rights violations in Russia.” More specifically, the bill targets about 60 individuals – already banned from visits to the U.S. by the Department of State — believed to be responsible for the 2009 death of Sergei Magnitsky, an anti-corruption lawyer in Moscow. The hearing was preceded by the habitually incomprehensive statement by Ileana Ros-Lehtinen (R-FL), whom the Congress’ arcane seniority rule had propelled to the Committee Chairmanship, a position she so blatantly misfits.

The Committee decision clears the way for the bill to be taken up by the full House. The fate of the similar Senate bill, S. 1039, is less certain. Just a couple of months ago, it was widely expected that the Senate Foreign Relations Committee, headed by John Kerry (D-MA), would hold similar hearings early May. However, sensing the signals emanating from the White House, Kerry postponed the hearings until June 19.

Enter Max Baucus (D-MT), Chairman of Senate Finance Committee. Baucus’ Committee is in charge of passing the legislation granting Russia permanent normal trade relations (PNTR) status, something the U.S. has to do given Russia’s upcoming entry to the World Trade Organization. Failure of granting Russia the PNTR status will inevitably hurt interest of U.S. multinational corporations who would lose their business in Russia to their European and Japanese competitors. Standing, however, in the way of the PNTR bill is the Jackson-Vanik amendment, the notorious relic of the Cold War that still deprives Russia of the PNTR status as a punishment for restricting Jewish emigration in the 1970s.

And here things get complicated. The Senate Republicans refuse to just repeal the Jackson-Vanik amendment; they insist that something else should be put in place to hold Moscow accountable for what they routinely describe as “human-rights abuses.” Addressing their concerns, Baucus proposed to link both bills and pass the PNTR legislation – while simultaneously repealing the Jackson-Vanik amendment – along with passing the Magnitsky bill. This approach looks increasingly promising after Baucus secured support of Sen. John McCain (R-AZ), the leading anti-Russian voice in the Senate.

The Obama administration initially opposed the Magnitsky bill, arguing that it would negatively affect U.S.-Russia relations. However, sensing that it can’t win this fight, the White House changed the track and instead put pressure on the bill’s sponsor, Sen. Ben Cardin (D-MD). This has worked: recently, Cardin came up with a modified version of the bill addressing some of the administration’s concerns. In particular, the updated version makes it more difficult to add names to the list of human right violators that the bill would create.

Last week, the criticism of the Magnitsky bill was finally articulated by the supposedly most interested party: the American business groups. The National Foreign Trade Council (representing major U.S. exporters such as Boeing, Microsoft and Caterpillar) and USA Engage (a broad coalition of 670 member companies and trade associations) argued that the Magnitsky bill “was seriously flawed.” They also warned that that the bill would make it even more difficult to get Russia’s cooperation on issues vital for U.S. national interests.

The lateness with which U.S. business groups came to the discussion could be explained by their unwise focus on the repealing the Jackson-Vanik amendment and granting Russia the PNTR status. Apparently, they underestimated the potential damage that the supposedly “political” Magnitsky bill could inflict on U.S.-Russia economic and trade relations. Besides, the danger became real that the Magnitsky bill will move through Congress on a faster track than the PNTR legislation, as it might well be the case in the House of Representatives.

Unfortunately, this effort seems to be too little, too late.

In recent days, Moscow repeatedly warned that the Magnitsky bill will have serious consequences for the future of U.S.-Russia relations. However, as the adoption of the bill looks virtually inevitable, it’s time for the Kremlin to put together a list of practical retaliation measures it will undertake. The Russian president Vladimir Putin will have a chance to present this list to his American counterpart during the G20 summit in Mexico next week.

About Eugene Ivanov

Eugene Ivanov is a PMI-certified Innovation Management Consultant who helps organizations increase the efficiency of their internal and external innovation programs.
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18 Responses to Business to the (late) rescue?

  1. Dear Eugene,

    Another fine post. Your coverage of the repeal of the Jackson Vanik amendment/Magnitsky list has been nothing short of outstanding.

    Russia has to take some of the blame for all of this and specifically for the fact that the warnings from the US business community as to the dangers posed by the Magnitsky list have been so belated. It should have lobbied strongly with US business groups to persuade them to make their voice heard much sooner. Patrick Armstrong says that part of the trouble is that Russia is simply too proud to lobby in its own interests in this way and that may very well be right. The simple reality of US politics is that lobbying is an integral part of how they work and ignoring this reality is counter productive and in the end delusional. There are always going to be powerful voices in the US that will oppose any sort of rapprochement with Russia but there are also powerful groups that could in theory be mobilised to support such a rapprochement. It is Russia’s persistent failure to mobilise such groups that explains why all attempts at a long term rapprochement are still born.

    The business community is an obvious lobby that could be mobilised on Russia’s behalf and given the reality of how US politics works if it were mobilised in this way it would be decisive. Nothing however seems to have been done, as ought to have been done as soon as it became clear last autumn that the WTO negotiations were going to be successfully concluded. No attempts for example seem to have been made to attract US businessmen with marketing opportunities or proposals for co production agreements. No invitations were extended to US trade delegations to Russia to discuss mutual trade and investment opportunities and to try to dispel some of the myths about the supposed difficulties of working in Russia. No senior Russian politicians took the trouble to tour the US to get to know and win over US businesspeople in the way that Deng Xiaoping and other Chinese leaders did in the 1980s. Nor did strong Russian trade delegations visit the US to meet businesspeople there to get to know them and to do the same thing.

    In the absence of that kind of effort the field was again conceded in advance to the usual assortment of anti Russian publicists and ideologues, with all their usual axes to grind, who were left to do all the running. Now it is too late.

    • Eugene says:

      Dear Alexander,

      I can’t agree with you more that Russia hurt itself profoundly by not lobbying its interests in the US. I wrote about this extensively in the past and should have obviously repeated it here one more time.

      Patrick Armstrong is one of my favorite Russia watchers. But in this particular case, I disagree with him. What he calls pride, I call ignorance, arrogance and plain stupidity. It also reflects the unfortunate reality that so few people in Russia — both in the economic and political elites — take long-tern approach; instead all they try is to snatch short-term gains and park them off-shore. Naturally, such approach requires no lobbying, which by definition is building long-term relations.


  2. Alex says:

    Hi, Eugene

    What you describe is an interesting part of the “reset”, isn’t it? (no wonder – the “reset” button usually returns a device to the factory set programming)

    IMHO, the Russians won’t achieve much by creating their own official list – US business is not sufficiently exposed in Russia for that to be meaningful. I would just ignore this 🙂 -i.e. issue them a formal and equally (i.e. openly) offensive & poisonous dip. note – and then wait for the opportunity to eat their own medicine in some non-related area (and we can leave to McFaul to explain on his seminars what sort of “reset” this bill (and many other USG initiatives towards Russia) is/are).
    BTW, can the ownership of some of the US assets of the Russians due to be frozen (in US) under the bill, be transferred to the Russian Government? If one is so worried about being “just” , than precisely the return of the stolen fortunes to the rightful owner – Russia as represented by its Government,- is the best way to ensure that the justice is served, isn’t it? 🙂


  3. Eugene says:

    Hi Alex,

    Let me start with the “reset.” Obviously, it means different things to different people. To me, the “reset” means the New START and civil nuclear cooperation (“123”) agreements plus cooperation on Afghanistan. For as long as these are in place, the “reset” is (OK, was) real. The other thing that it didn’t go further due the missile defense, Iran, Syria etc.

    The Magnitsky bill is meaningless for Russia: obviously, guys who are to be targeted had enough time to move their money from the U.S. (if they had it there in the first place) and can live without going to Disneyland. The problem is the precedent that will be created and followed by Europe. Now, if these Russians will be prohibited from visiting Europe and keeping there money there too, what is left for them? Dubai?

    By the same token, Russian “response” is harmless to Americans for the reasons you mentioned. But harsh response will send a message to Europeans: don’t go after us or you face consequences. And, naturally, Europeans have more to lose in Russia than Americans.

    That’s my explanation of the Kremlin’ strong reaction to the bill.


    • Alex says:

      what is left for them? Dubai? I’d sincerely recommend Kolyma.
      followed by Europe? well, they would if they could already.

      The derogatory nature & clearly offensive intent of this Bill – that is where something should be done. While I am sure Lavrov is quite capable of handling the appropriately worded response, maybe the Russians should try to open a new direction in international diplomacy? – just express the Russian opinion of USG & A Typical American Senator , in plain, mostly four-letter English (more elaborate language would be preferable, but most of their staff and advisers will probably not be able to understand it ).


      • Eugene says:

        I totally agree: the bill has nothing to do with Magnitsky and human rights in Russia. It’s yet another attempt to humiliate Moscow.

        I’m not sure Lavrov is capable of anything — paraphrasing you, he would already if he could — besides cheap shots like not taking HRC’s calls. Yet, I can’t exclude that Putin will him a scapegoat when the bill is adopted.


        • Alex says:

          Lavrov did (not)? How funny – he probably, got tired of the necessity to listen to and say the same 60 year old set of lies re. now Syria … And tomorrow she is going to ask Obama to demand Lavrov’s dismissal from Putin? You think there is someone better than him? Although, maybe Lavrov will be better off playing on the background – depends what he prefers too.

          • Eugene says:

            Alex, please!

            You and I and zillions of people around the world do unpleasant things for work because this is their work. And for some unknown to me reasons, Lavrov likes to pick up fights with U.S. lady Secretaries of State: with Condi Rice on Georgia, and with HRC on Syria. I’m not a fan of Freud, so I let it to others to guess his motifs.

            Yes, a couple of years ago, I argued that Lavrov had to be replaced with Matvienko. But, regardless, this is the case when change for the sake of change is a virtue. Lavrov is tied and spent. He needs to be replaced with ANYONE.


            • Alex says:

              Hi, Eugene
              Yes, we did discuss Lavrov on several occasions. previously. IMHO, your best argument against him (previously) was that he is mentally “locked” on US and Russia needs to shift from this exclusive focus. IMHO – it does not look like he did very bad (as a diplomat) with Syria so far. (Freud or not, but something happens to the US females when they get to a SoS-mode. Perhaps, this position, when taken by a female in that country triggers in their brains the worst the feminism has to offer, while largely suppressing the common sense. Perhaps, to deal with this explosive combination of hormones, traditional cultural biases, the feminists willies & the subconscious exaggerated need to assert themselves, one needs a carefully balanced mix of traditional male roughness and sex appeal. I am not a female, so It is hard for me to judge about the latter of Lavrov – or if he can keep the balance “right”. (my guess is that nobody can when one has to deal with Feminists – especially , the politically active ones). But – here is what Rhodes said recently “Rhodes: “weve always said its an interest-based relationship..we werent going to have a relationship that depended overly on personalities.”(via McFaul).
              Going back to the first question – in light of suddenly increased US activity world-wide, especially in SE Asia and Africa, it seems there should be many possibilities to play off their new exposure doing it together with China and/or India. These are new opportunities for the Russian FP and maybe new people would be appropriate. The question is whether such people still exist. Eg. continuous dismissal & replacement with new of police generals still did not reveal the “right” people – looks like inbreeding depression of the entire (UR) sample. In any case, it does not mean that the old expertise & experience should be completely dismissed. IMHO.


            • Ali says:

              rel= nofollow /b /strong/ppBuynow /pdiv class=”reply”a rel=’nofollow’ class=’comment-reply-link’ href=’/?p=355 retocpoylm=445#respond’ onclick=’return addComment.moveForm(“div-comment-445”, “445”, “respond”, “355”)’Reply/a/div

        • website says:

          Dag nabbit good stuff you whippersnappers!

  4. Eugene says:


    I definitely enjoyed the part of your comment concerning Feminism…

    Well, it’s difficult to deal with Putin’s style of management. He uses and reuses the same people all over again, and you can’t really say whether this is because he picked up the very best and doesn’t want to part with them — or because no one else can enter this exclusive club.

    Is it possible that there is no substitute to Lavrov? Perhaps. Have we already witnessed “changes” that brought about no changes at all? You bet. That’s why I propose Matvienko: smart, diplomatic, intrinsic member of the team, and yet having a “flavor’ of novelty just by being a woman. What do you see in Lavrov that Matvienko lacks?


    • Alex says:

      >he picked up the very best and doesn’t want to part with them
      Yes,. Both. But they were the best of the worst..

      >What do you see in Lavrov that Matvienko lacks?
      want me to answer? 🙂

      Actually, I don;t know anything about her talents (Okhra Tower? )- unless you mean that what is happening in Greece is her doing 🙂 Otherwise, being the part of the “team” & UR IMHO is not the best recommendation. Maybe, VVP should send her to less warm & accommodating countries first e.g. to Poland or Finland & then see how she is faring? (but you did mention the same thing I was thinking too – in fact, I agree that it might be a good idea to try)


  5. Eugene says:

    Being the part of the team might not be the best recommendation, but without that, you can’t get to the top. Again, I’m not saying that Matvienko is good and Lavrov is bad. What I’m saying is that I see a reason to try something else, and there are people who IMHO won’t do worse than Lavrov.

    • Alex says:

      You know, with all these jokes, I forgot to say what I was going to:Russian foreign policy needs someone with the talents of de Richelieu. The skills will come with experience, it is the aptitude which matters 🙂


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