Throughout the Cold War the U.S. Congress sought to penalize the Soviet Union for its human rights record. Legislation such as the Jackson-Vanik amendment became a long-term influence on bilateral trade between the two countries. That tradition was reinvigorated this past week, when the House Foreign Affairs Committee unanimously approved the Sergei Magnitsky Rule of Law Accountability Act, in a rare example of bipartisanship. This has potentially important implications for future of bilateral trade with Russia, which is expected to join the World Trade Organization later this year. Passage of the Act just prior to President Obama's meeting with President Putin in Mexico this coming week adds greater complexity to the cooling bilateral relationship between Russia and the U.S., and enhances the prospect of further deterioration.
The Act is named after Sergei Magnitsky, a lawyer representing Hermitage Capital Management, an investment fund and asset management company that was dismantled by Russian authorities after it was accused of tax evasion. Magnitsky implicated top officials in a $230 million tax refund fraud against the Russian government. In 2008 he was arrested and died in prison after spending a year in pretrial detention; the case against him is ongoing posthumously. The U.S. State Department issued visa bans on several dozen Russian officials in connection to the Magnitsky case in 2011. Russia imposed travel bans on several U.S. officials in response.
After the House Foreign Affairs Committee's approval of the bill, two additional committees (most likely the finance and judiciary committees since it deals with financial sanctions and criminal prosecution) must approve the bill or waive jurisdiction. Once passed in the House, the Senate is expected to introduce its own version of the bill for review.
The Obama administration has been opposed to the Act for two reasons, arguing that it will put U.S. businesses at a disadvantage in Russia, making it harder for them to compete, and possibly prompting the Russian government to favor non-U.S. suppliers or freeze U.S. corporate assets in the country. Adoption of the Act may also be inconsistent, if not oppositional, to another bill, which would grant Russia Permanent Normal Trade Relations (PNTR) as required under WTO rules.
The National Foreign Trade Council, and its sister organization -- USA Engage -- released a statement against the Magnitsky Act, arguing that the legislation would harm Russia-U.S. relations and jeopardize significant potential benefits arising from Russia's WTO accession. Similarly, representatives of the American Chamber of Commerce in Russia are worried that passage of the Act would hurt U.S. competitiveness in Russia.
The White House also worries that the Act will complicate its efforts to 'reset' relations with Russia, though many would argue the 'reset' is heading in exactly the opposite direction intended. While Russia's accession to the WTO is considered a key achievement in that regard, the increasingly bellicose rhetoric being adopted by elements in both governments -- and by Republican presidential nominee Mitt Romney -- has changed the dynamic. Fundamental conflicts on high profile foreign policy issues -- such as Iran and Syria -- have also contributed to a climate of confrontation between Russia and the U.S.
Russia has promised a retaliatory response to the Act, calling it "anti-Russian" and intrusive in the country's internal affairs. A few hours after his inauguration, President Putin signed a decree aimed at "preventing the introduction of unilateral extraterritorial sanctions by the United States against Russian legal entities and individuals." There can be little doubt that he was referring to the Act.
The House motion on the Magnitsky Act may be an opening salvo in what is a potentially stickier congressional debate over human rights and trade relations with the Russian Federation. While meant to replace the nearly 40-year-old Jackson-Vanik Amendment, the Act would allow U.S. companies to actively pursue their trade interests while highlighting America's long-term commitment to the rule of law and human rights. The Act's language suggests that it may establish a strong precedent for a reassertion of U.S. priorities on international human rights, while at the same time accommodating the granting of Russia PNTP status.
At this point in time, Russia and the U.S. seem destined to spar with each other along increasingly historical lines. The rhetoric coming from both sides sounds more Cold War-esque than oriented toward a reset, and makes us wonder just how far they have come in the more than 20 years since the Soviet Union collapsed. The U.S. is not about to stop preaching about human rights, and Russia is not about to stop trying to demonstrate it will not be pushed around. Now that that is settled, hopefully Messrs. Putin and Obama can get down to business in Los Cabos.
Kambiz Behi is a partner of Mostafavi & Associates. Dr. Behi's interests and expertise lie in comparative law, comparative constitutional law, international law and legal anthropology, teaching law and social sciences at universities in the US, Russia and Belarus. He holds a PhD in Social Anthropology and Masters in Regional Studies from Harvard University, and a Master of Laws (LL.M.) from University of Pennsylvania Law School.
Edsel Tupaz was a private prosecutor of the House prosecution panel in the recently concluded impeachment trial of Philippine Chief Justice Renato Corona. He is a graduate of Harvard Law School and Ateneo Law School, owner of Tupaz and Associates, and a professor of international and comparative law, based in Manila.
Daniel Wagner is CEO of Country Risk Solutions, a cross-border risk management consultancy based in Connecticut (USA), and author of the new book Managing Country Risk (www.managingcountryrisk.com).
Follow Edsel Tupaz on Twitter: http://www.twitter.com/edseltupaz
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