Russia’s political and business leaders were quick to chalk up last week’s summit with U.S. President Donald Trump as a victory for Vladimir Putin. Now some fear Putin may have overplayed a winning hand and are bracing for a U.S. sanctions backlash.
The rouble fell 1.2 percent on Tuesday after two U.S. senators said in a statement they had begun working on new sanctions that would, among other things, take aim at Russian sovereign debt. It later recovered most of its losses.
While the sanctions proposed by Republican Lindsey Graham and Democrat Bob Menendez were seen by most political risk analysts as unlikely in the near term, new curbs contemplated by other U.S. lawmakers targeting the energy and metals sectors are more realistic, they say.
“There was hope that dialogue would start after the talks between Putin and Trump. But the reaction inside the United States is blocking any dialogue,” said one billionaire included in January on a U.S. Treasury list of people deemed too close to the Kremlin, some of whom were later hit with sanctions.
“The threat of wider sanctions has grown,” the businessman told Reuters, declining to be named because of the subject’s sensitivity.
Russian business people had hoped the Helsinki meeting, the first between the two presidents, would pave the way for a possible thaw in relations and delay, if not stop, the preparation of more sanctions which have followed thick and fast since Moscow’s 2014 annexation of Ukraine’s Crimea.
Instead, anger about what some U.S. lawmakers saw as a too-deferential performance by Trump in Helsinki and his failure to publicly confront Putin over Moscow’s alleged meddling in U.S. politics may have made things worse.
In a country where state media portrays Putin as a seemingly infallible leader, even some of his supporters were fretting that he may have made an error by appearing to demonstrably take Trump’s side.
In Helsinki, Putin said for the first time that he had wanted Trump to win the 2016 U.S. presidential election and after the summit complained about political forces in the United States trying to undermine the meeting’s outcome.
Sergei Markov, a longtime Putin supporter and former lawmaker for the ruling United Russia party, wrote on social media after the summit that the Russian president had outplayed Trump in Helsinki “by a big margin”, but added:
“... In doing so he created a problem because he exposed his partner to fierce criticism in the United States.”
Putin should have given Trump the chance to tell U.S. media that he had extracted concessions from him in a “giveaway game”, staying focused on the longer-term goal of stabilizing ties between Moscow and Washington, Markov said on his Facebook page.
Instead, Putin appeared dominant while Trump was deemed by U.S. critics as overly friendly to Russia and possibly even treasonous when he gave credence to Putin’s denials of meddling in the 2016 election despite U.S. intelligence findings to the contrary. Many Republicans joined Democrats in criticizing Trump’s performance.
With an eye on U.S. mid-term elections in November, a bipartisan group of senators is pushing the “DETER Act” legislation putting Putin on notice that his country would be hit with more U.S. sanctions if Russia interferes in future polls.
It was unclear how quickly that and other proposals could advance with U.S. Congress’ summer recess looming.
But the business and financial community in Russia is still worried.
“The only outcome of this so far is that people are selling Russia,” said one state banker. “All liquid (Russian) securities are now hostage to geopolitics, which strongly depend on what goes on in the United States.”
Mitigating that risk would be tricky, business people said.
“You can’t keep your assets in roubles because the rouble is linked to the dollar and if there will be more sanctions the rouble will suffer,” said one businessman, asking not to be named because he didn’t want to be linked with sanctions risk.
“You can’t hold them in dollars because of sanctions. That leaves holding euros in private banks which is frightening (because Russian private banks can be unstable), U.S. Treasuries if you can get them, and other low risk assets,” he said.
“In short, nobody is expecting anything good to happen.”
Dmitri Trenin, a former colonel in the Russian army and director of the Carnegie Moscow Center, agreed it might have been better for Putin to have adopted an approach of “strategic patience” with the United States, but said it was not too late.
“The first détente in the hybrid war between Russia and the West was ... nipped in the bud by Trump’s behavior and the vehemence of his domestic critics. So be it,” Trenin wrote in an article published on the center’s website after the summit.
“Moscow’s strategy should now be one of patience, leaving America and Europe to their own devices and focusing on relations with countries far more relevant to its future: Asia and the Middle East.”
Additional reporting by Oksana Kobzeva and Tatiana Voronova; Writing by Andrew Osborn; Editing by Sonya Hepinstall