To Designate or Not? Russia and SST Status

As Ukraine implores the world to condemn Russia to pariah status, a live question is whether the  United States should designate Russia as a state sponsor of terrorism (SST). Proponents of the SST designation are compelled in part by the mounting accounts and images of mass atrocities and graves in Ukraine, while skeptics question if the designation could produce more secondary consequences than positive leverage. Policymakers supporting Ukraine face a sense of increased urgency to impair Russia’s ability to wage war in Ukraine or threaten its neighbors in the future as Russia employs increasingly aggressive tactics, including targeting civilians and energy infrastructure and issuing veiled threats of nuclear war. 

However, an SST designation is not the appropriate economic or diplomatic tool to use in this context. The United States should not designate Russia as a state sponsor of terrorism because the designation is a largely symbolic tool that provides minimum additional economic leverage beyond the sanctions and export controls already imposed and entails harmful consequences, such as prioritizing U.S. plaintiff access to frozen Russian assets and narrowing the diplomatic space globally. Instead, U.S. policymakers should create a new designation, such as “aggressor state,” to condemn Russia for its actions against Ukraine while circumventing harmful measures under an SST designation. Under a new aggressor state designation, the United States could leverage maximum diplomatic and economic tools, create a blueprint for coordination with partners, and have a mechanism to discuss a phased delisting. 

What Is an SST Designation, and What Are Its Effects?

In the United States, the secretary of state has the power to designate a country as a state sponsor of terrorism. The secretary will consider whether to designate a country if it has “repeatedly provided support for acts of international terrorism” under Section 1754(c) of the National Defense Authorization Act for Fiscal Year 2019, Section 40 of the Arms Export Control Act, and Section 620A of the Foreign Assistance Act of 1961. Collectively, these statutes invoke restrictions on foreign assistance from the United States, including requiring the United States to vote down loans from multilateral organizations where the United States holds membership—de facto stopping those loans due to U.S. voting power, as well as a ban on U.S. defense exports and sales and export controls over dual-use items. Downstream effects of implementing these statutes through an SST designation include a loss of country immunity in U.S. court proceedings and heightened security screening for citizens from a designated country entering the United States. Presently, four countries are designated as state sponsors of terrorism: Cuba, Iran, North Korea, and Syria. 

The United States has provided foreign assistance to Russia for years, with the top sectors being energy, conflict, peace, and security since the early 2000s. However, since Russia’s invasion of Ukraine in February, U.S. government agencies have cut their foreign aid to Russia in all sectors except for nuclear security, according to data published by the Department of State and the United States Agency for International Development. Though aid for the nuclear security sector continues, total aid is substantially less than in previous years. For instance, in 2020, U.S. agencies collectively provided $10 million in aid, with $5 million earmarked for nuclear security. Midway through 2022, the Department of Energy was the only U.S. agency that provided financial assistance to Russia, totaling roughly $2 million—minuscule compared to preinvasion amounts. The Department of Energy’s National Nuclear Security Administration Office of International Nuclear Security provided this aid strictly for nuclear infrastructure to “prevent threat and sabotage of nuclear materials and facilities.” The United States stopped providing all forms of military aid to Russia following the 2014 invasion of Crimea. Regardless of a formal designation, it is highly likely that U.S. financial assistance to Russia will continue to decline or stagnate through 2022 and that military assistance will remain frozen indefinitely. A blanket restriction of U.S. foreign assistance could dampen any remaining U.S.-Russian nuclear security cooperation, potentially heightening global insecurity.  

In terms of defense export and dual-use items controls, Russia was already under a U.S. arms embargo before the invasion of Ukraine this year and is now under a dual-use U.S. export control regime targeting Russia’s military-industrial complex. While arms and tech designated for military end use were already controlled, the Department of Commerce subjected all dual-use items to a policy of denial in a February 2022 export controls package. This set of rules imposed new controls on any item listed in any of the nine categories of the Commerce Control List, added numerous Russian entities to the Entity List, and applied the extraterritorial foreign direct product rule to all of these regulations. The United States formed a coalition with 37 like-minded nations that implemented similar export controls. The extent of these export controls and level of international coordination is unparalleled and, put together, effectively prevents the export of any meaningful technology and military-related items to Russia. Importantly, the state sponsor of terrorism designation does not mandate any new restrictions that are not already in place, nor does it provide the Bureau of Industry and Security with any new authorities to impose additional export controls beyond the Export Control Reform Act of 2018 or under the International Emergency Economic Powers Act (IEEPA) authorities. 

Regarding the loss of country immunity in U.S. court proceedings under an SST designation, a state is immune from the jurisdiction of the courts of another state under the principle of sovereign immunity. However, the United States waives this immunity under an SST designation. An SST designation would permit American victims of Russian-sponsored terror acts to sue the Russian Federation for material compensation or monetary damages. Only U.S. persons can bring forward a suit. In this event, if they win their cases, U.S. plaintiffs would have access to Russian assets frozen by the United States before Ukraine has the right to claim the funds for recovery and rebuilding efforts. Unlike the other measures described in this section, this is one penalty that is not substantially covered by existing financial punishments and export controls. This measure could strain diplomatic relations with Ukraine and the European Union if the number of U.S. citizens—and potential plaintiffs—injured during the invasion increases and Russian funds to rebuild the country diminish. This scenario could also damage the perception of the United States as a legitimate leader in global diplomacy. Low estimates predict that rebuilding Ukraine will cost $349 billion. The United States and its allies have frozen $330 billion in assets from Russian elites and Moscow bank funds. The people of Ukraine should be the first to access these funds after suffering years of military aggression and psychological warfare conducted by Russia. At the same time, it is unclear how viable any court cases would be should this measure come to pass, given that most of Russia’s actions (including those cited by Congress below) have not directly targeted U.S. persons.

When it comes to heightened security screening for citizens from a designated country, the State Department already enacted U.S. visa restrictions as part of its broader Russia sanctions strategy. In May, Secretary of State Antony Blinken announced visa bans on 2,600 Belarusian and Russian military officials, including those suspected of involvement in the Bucha civilian massacres. The State Department imposed visa restrictions on 910 additional persons, including individuals in the Russian armed forces, leaders in the Belarusian military, and members of Russian proxy forces operating in Russian-held areas of Ukraine. Additionally, some European countries have suspended visas and restricted immigration for Russian citizens. As the war continues, the United States and its allies will probably continue to expand visa and immigration measures notwithstanding a state sponsor of terrorism designation. Notably, the SST designation does not require any specific visa restrictions, only a heightened review of persons trying to enter the U.S. from that country. The U.S. is issuing a plethora of visa restrictions as part of the Russia sanctions packages. The U.S. already does this for any high-profile individuals from Russia, and expanding this requirement to include all Russian citizens would provide a minimal tangible benefit.

Identifying Russian Motivations and How to Counter Them Most Effectively

The U.S. House and Senate, respectively, passed a bill and a resolution earlier this year to increase condemnation on the Russian Federation and pressure the State Department to designate Russia a state sponsor of terrorism. Both pieces of legislation identified five areas where Russia’s actions weigh in favor of an SST designation. These include mounting a campaign of terror, utilizing brutal forces, and targeting civilians in Chechnya and Georgia; providing support for separatists in the Donbas region of Ukraine; engaging in the Syrian civil war, targeting civilians, and providing material support to the government of Syria; spreading terror and instability globally using proxy forces (most notably the Wagner Group); and organizing acts of international terrorism, including poisoning Sergei Skripal in the United Kingdom. Nevertheless, there is scant political support from the White House or the State Department to label Russia as an SST. President Biden has firmly stood by his resounding “no,” notwithstanding calls from President Volodymyr Zelenskyy to designate Russia. The State Department signaled its belief that the present actions against Russia amount to effectively similar penalties under the SST designation while avoiding the negative political consequences of the designation. 

Current U.S. and partner financial and export control measures extend beyond the monetary punishments under an SST designation as well. Thus far in 2022, the Biden administration has added 15,647 individuals and entities to the Specially Designated Nationals and Blocked Persons (SDN) list in coordination with the EU and Group of Seven (G-7). Targeted individuals and entities include the Duma; Russian elites; Russian banks, including the Central Bank of Russia; and defense companies. The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) also expanded restrictions this year on dealings in sovereign debt from those previously sanctioned under this measure following the 2014 invasion. More than 30 countries have similar sanctions regimes against Russia. 

The G-7 is negotiating a Russian-origin crude oil and petroleum products price cap to increase economic pressure on Russia by targeting its largest revenue source. The U.S. Treasury Department expects that when implemented, the price cap could effectively “prohibit the provision of services that enable maritime transportation of such oil and products unless purchased at or below a price level.” Such a price cap would augment existing sanctions and inflict greater damage on the Russian economy by severing its central lifeline: oil and gas revenue. Policymakers anticipate that the price cap will take effect by early December 2022. 

The United States already has full authority to impose secondary sanctions as a heightened measure at any moment without any connection to terrorism. The current (primary) sanctions target entities or individuals engaged in activities that have a U.S. nexus, which are subject to U.S. jurisdiction. In contrast, secondary sanctions target normal commercial activity that “does not involve a U.S. nexus and may be legal in the jurisdictions of the transacting parties” by giving foreign companies the choice of either engaging in that activity or maintaining access to the U.S. market. The president can impose secondary sanctions through an executive order on non-U.S. entities that engage in certain activities if those activities have a nexus to U.S. national security. U.S. policymakers typically use secondary sanctions to strengthen unilateral sanctions when allies are unwilling to implement multilateral sanctions—as was the case when the United States withdrew from the Iran nuclear deal—or to deter advisory states from coordinating to evade sanctions. Roughly 90 percent of existing secondary sanctions are levied on Iran and North Korea, with a mere 5 percent targeting Russian entities engaged in activities restricted by the Countering America’s Adversaries Through Sanctions Act and Protecting Europe’s Energy Security Act. Both sets of secondary sanctions target investments in Russian energy pipelines and oil projects and transactions with Russian defense and intelligence sectors. 

The United States is unlikely to expend its political and financial resources to impose additional secondary sanctions as part of its Russia sanctions regime because many countries already have their own set of sanctions levied against Russia. It would be counterproductive for the United States to impose secondary sanctions on entities that are already implicated by their own country’s sanctions regime. A U.S. Treasury official ruled out secondary sanctions to enforce the oil price cap, even though senators called on the Biden administration to utilize secondary sanctions in this context. The Treasury Department’s hesitation to implement secondary sanctions is likely a recognition that the geopolitical risks are too great for the United States to levy secondary sanctions on corporations based within major powers, such as China and India, that have not imposed sanctions on Russia. 

The U.S. may not want to risk overusing secondary sanctions on Russia due in part to the size of Russia’s economy and global integration. The General License No. 13C released by the Treasury Department on Nov. 21 indicates that U.S. policymakers find it beneficial for the United States to continue promoting commercial activity and providing clarity to actors engaged in transactions with Russian entities. The primary focus within the U.S. and its partners’ sanctions regimes on Russia is to eliminate the potential for military material support and the potential for sanctions evasion. Even if levied, a state sponsor of terrorism designation does not mandate nor authorize secondary sanctions. In the past, U.S. presidents have implemented secondary sanctions as a separate package to an SST designation. For example, Iran and North Korea are the only SST-designated countries that also have SDNs subject to secondary sanctions. 

U.S. policymakers have effectively utilized available tools in conjunction with international enforcement to weaken the Russian economy without designating it a state sponsor of terrorism. The United States and its partners effectively cut Russia from the global financial system through similar sanctions regimes imposed by partners. The scale of these actions is unprecedented, and the full effects of coordinated economic statecraft targeting an economy of Russia’s size and global integration are yet to be actualized and understood.

Recommendations

The secondary consequences of an SST designation greatly outweigh the symbolic benefits. In addition to the financial consequences, designating Russia could close diplomatic and humanitarian space within Ukraine and globally. The United States, and many partners, have scant diplomatic relations or communication with state sponsors of terrorism. In a U.S. context, this increased hostility could most immediately affect the numerous U.S. citizens detained in Russia, including former U.S. Marine Paul Whelan and WNBA star Brittney Griner. An SST designation would dramatically decrease the ability of the United States to negotiate their release, or the release of any future Americans detained. 

A terrorism label often complicates negotiations partly due to international norms that discourage negotiating with terrorists and restrict possible concessions. This dynamic could specifically impede negotiations in Ukraine, where Russia is a conflict party. While imperfect, the United Nations engaged in negotiation directly with Russia to open humanitarian corridors and grain exports. It is important that Russia is incentivized to continue participating in multilateral diplomacy. Russia markets itself as a critical power broker, facilitating peace processes in the Central African Republic, Libya, Syria, and elsewhere. Although the Russian form of mediation is highly coercive, it may be within U.S. national security interests to cooperate with Russia in stabilization and peace-building efforts in these theaters in addition to Ukraine. Finally, coordinating and implementing an eventual delisting of the SST designation with input from partners would be a complicated and lengthy process given the political dynamics involved, meaning Russia could be barred from the international system for a considerable period.

Instead of an SST designation, the U.S. Congress could pass legislation to create a new designation for categories of states like Russia, such as an aggressor state label. The aggressor state designation would delegitimize the brutal and imperialistic actions of the Russian Federation in Ukraine and serve as a global condemnation. Lawmakers could bundle existing financial sanctions, export controls, travel restrictions, and potential escalatory measures, such as a price cap on the most profitable sector of a country, under the aggressor state label. The statute could also stipulate that the United States will hear cases against aggressor states brought forth by U.S. persons after funds are allocated for reparations to or rebuilding of the nations or persons primarily targeted. The Senate or House could include the legal authority for this designation as an amendment in the National Defense Authorization Act for Fiscal Year 2023, similar to SST authorities.

As the International Working Group on Russian Sanctions argues, some SST punishments were created haphazardly, partly because lawmakers attempted to tailor the consequences to the designated country and shaped the legislation over the span of 58 years. When the SST designation has been implemented in the past, lawmakers have circumvented portions of the designation, most frequently related to diplomatic engagement, as was seen in the cases of continued diplomatic engagement with Iran while negotiating the Joint Comprehensive Plan of Action and President Trump’s meeting with Kim Jong Un in North Korea. Furthermore, the SST authority is spread across three statutes that were created between 1961 to 2019, which can make it difficult to enforce and for entities to comply with the law if they wish to continue commercial or diplomatic activity—and can legally do so. These adjustments to the SST designation indicate that it is a blunt tool that often needs to be refined, which can slow down its implementation and enforcement and render it susceptible to partisan politics. It would be useful to create a new, refined designation that can be used quickly to counter Russia and future aggressors. 

U.S. policymakers could encourage international partners to adopt an aggressor state designation to increase the ethical and moral rebuke of Russia on the global stage. This label would provide a vehicle for policymakers to begin discussing under what conditions Russia would qualify for delisting and how to phase sanctions removal. Lawmakers could tie phased sanctions and export control easing to confidence building and negotiation benchmarks to identify a potential pathway to peace talks. An aggressor state label would allow the U.S. and its partners to establish protocols and channels to quickly implement robust diplomatic, financial, and export control measures against a state that qualifies in the future. The Treasury Department could hold enforcement power of financial measures while the Department of Commerce could oversee export controls and the State Department could provide ad hoc input through an established channel on diplomatic and negotiation issues. 

An aggressor state designation could also serve as a blueprint for partners to create a similar designation. The recent designation of Russia as a state sponsor of terrorism by the European Parliament and individual states—including Estonia, Latvia, Lithuania, and Poland—indicates that European partners are keen to adopt measures that increase scrutiny on Russia. While these designations might catch news headlines, they are merely symbolic because the European Union and individual member states do not have legal frameworks to implement and enforce such a designation. The United States could urge European lawmakers to mirror the U.S. legal framework for an aggressor state designation if passed as part of the multilateral effort to counter Russia. Such a legal framework might appear more attractive to European counterparts because it would offer a refined tool that could provide a pathway to negotiations and be used in future scenarios. 

In parallel, the United States and its partners ought to continue strengthening economic penalties on Russia by adding implementing countries or ensuring that countries continuing to buy Russian oil in 2023 purchase it at or below the price cap. Evidence indicates that “Russia is struggling to repair, replace, and replenish its arms stockpiles.” Sustained economic pressure and restrictions on critical technology industries will degrade Russia’s ability to sustain military aggression. Providing additional financial and military aid to bolster weapon pipelines to Ukraine could increase the likelihood of a Ukrainian victory over Russian forces and support long-term efforts to equip NATO nations on the eastern front.

Ultimately, diplomacy is required to end the war. The United States should work with partners in Ukraine and NATO to prepare for negotiations to seize the moment when the opportunity is ripe. Such measures could include working with an inclusive set of stakeholders to identify acceptable confidence-building measures for Russia, negotiation terms, and a coordinated phased Russian sanction delisting, among other interests. 

The author would like to thank Emily Kilcrease and Eddie Fishman for their feedback and support for this commentary