The US surprised (and relieved) the market by not following through on a threat to impose even more sanctions on April 16, the day after western allies carried out limited missile strikes on suspected chemical weapons industrial targets in Syria. The US administration is split over how to react to Russia’s increasing aggression but both US President Donald Trump and Russian President Vladimir Putin were actively trying to dial back tensions on April 18.
US ambassador to the United Nations Nikki Haley warned that new sanctions that would target Russia’s defence industry and especially single out companies that were connected to the production of chemical weapons, without giving any details, at an Emergency UN Security Council (UNSC) meeting on Sunday April 15 called by Russia to protest the missile strikes. Haley then went on the Sunday US talk shows to say that new sanctions would be announced on Monday.
But it seems that she failed to check with her boss first. On Monday April 16 the US government said the new sanctions would be postponed to sometime in “the near future.” Markets opened flat on Monday as traders waited to hear the details of the new sanctions. Russian securities were walloped by the last round of sanctions announced on April 6 that targeted some of the country’s biggest companies and singled out oligarch Oleg Deripaska and his aluminium producer Rusal for special attention.
However, there seems to be some confusion at the top amongst US policy makers. A White House spokesman apologised and said that Haley “got ahead of the curve” and was probably “confused” when making her comments on the Sunday shows.
White House economic adviser Larry Kudlow told reporters on Tuesday that a final determination had not been made on whether to levy any further sanctions against Russia, the Guardian reported.
Haley hit back a few hours later saying on April 18: “With all due respect, I don’t get confused.”
Later the same day Kudlow apologised and said: “The policy was changed and she wasn’t told about it, so she was in a box.”
The back and forth highlights the lack of consensus in the US over how to deal with Russia. It also highlights the fact that the US State Department is increasingly making its own policy in lieu of clear leadership from Trump, who seems distracted and uninterested in the details of foreign policy.
“This is not about Nikki Haley. Trump had no idea the oligarch/crony sanctions or diplomatic expulsions would be far-reaching because McMaster didn’t fully explain them to him and Trump doesn’t read memos. Now that Trump has seen the Russian reaction, he’s putting on the brakes,” tweeted Michael Carpenter, a former foreign policy advisor for former vice president Joe Bidden in one popular take on what happened, referring to Herbert McMaster, Trump’s national security advisor.
No one is clear on what is going on, but clearly there has been a lot of diplomacy behind the scenes. In the days before the strike both Putin and Trump ran up the tensions in a series of statements that boiled down to “don't fire any missiles or we will shoot them down” and “the missiles are on the way” leading to fears of an imminent start to WWIII.
However, reports out of Moscow say that the Russian military high command was in “intense” talks with the US high command in the days before the attack. Ultimately the strikes themselves were very limited, with the Russians being told days in advance when and where the missiles would land. As a result the strike ended up being largely a symbolic show of strength on the part of the US, together with partners France and the UK, who believe it was necessary to make a strong gesture after Syrian President Bashar al-Assad was accused of using chemical weapons on the urban population of Douma a week before.
Now everyone is trying to walk the tensions back and both Trump and Putin have made peace offerings in an attempt to improve relations.
Trump had already invited Putin to a White House summit in the run up to the missile strikes, to the surprise of many US politicians. Now there are reports that the two men spoke on Monday night and a deal is in the offering.
New deal on the table?
Putin has reportedly ordered his media team to scale back their anti-American rhetoric, and a draft law imposing counter sanctions on the US and its businesses, submitted on Monday and due for a vote next week, has been abruptly withdrawn, reports Bloomberg.
“We will organise meetings with the business community, with companies,” Vyacheslav Volodin, speaker of the lower house of parliament, told reporters on Monday, announcing the initial vote on the plan would be delayed until May 15. He said the proposal will also be sent to the government and Kremlin for their views.
“The decisions that will be made will be very responsible,” he said, adding that goods would be banned only if there are local alternatives of equivalent quality, which excludes most of the products like pharmaceuticals and medical equipment that would actually hurt US imports to Russia.
Opponents of Putin’s administration have rejoiced at the news saying that Putin’s bluff has been called and when push comes to shove Putin knows that he can’t win a military confrontation with the US, and that the Russian economy is still far too exposed to financial sanctions on its securities and companies. So Putin is backing off.
“After the last set of devastating US sanctions against Russian oligarchs, it looks like Putin’s got the message. Now that the oligarch Rubicon has been crossed we could easily do it again and he’d be the biggest loser,” fund manager and anti-Putin lobbyist Bill Browder tweeted on April 18.