US sanctions: Washington's leverage targets Russia's buyers
The US House of Representatives has passed a far-reaching Russia package. What matters are possible tariffs on energy buyers – and the President's broad latitude.
The new US sanctions are meant to hit Moscow, but their sharpest lever targets Russia's customers. The US House of Representatives passed the sanctions package on Wednesday by 262 votes to 159. It now rests with the President. The administration had already announced that it would recommend that Donald Trump sign it.
The political success for Ukraine is therefore not yet a completed economic blow. How strongly the package works depends on which countries Washington targets, how high it sets the tariffs – and how generously the President makes use of his exemptions.
Not only Russia, but its buyers
The text of the law provides for tariffs of up to 500 percent on goods coming directly from Russia. Economically more significant is a second provision: additional tariffs of up to 100 percent are to be levied on all imports from states that rank among the five largest buyers of Russian crude oil or natural gas and continue buying after the law enters into force. The same applies to five states that Washington classifies as the most important helpers in circumventing oil sanctions.
Which countries these are is not stated in the law. The US Trade Representative must justify its selection and review the lists every 180 days. The tariff rate is also not prescribed: it must be above zero, but may remain well below 100 percent.
Congress thus creates less an automatic sanctions hammer than a powerful negotiating instrument. Large energy buyers are to weigh Russian oil against access to the US market. Whether they reduce their purchases, obscure supply routes or take countermeasures cannot be predicted in any serious way.
A bipartisan yes with an unusual pattern
The majority sounds broad, but was politically skewed. 203 Republicans and 58 Democrats voted in favour; 152 Democrats rejected the bill. The point of contention was less support for Ukraine than the transfer of far-reaching tariff powers to the President.
The Democratic foreign policy expert Gregory Meeks warned that the secondary tariffs could raise consumer prices and serve as a pretext for trade conflicts. His motion to strike this part failed in the Rules Committee by three votes to seven. Supporters counter that only the prospect of losing access to the US market can move large buyers of Russian energy to rethink.
The criticism hits a decisive point: the President may suspend sanctions and tariffs if he declares this to be in the national interest of the United States and informs Congress. After a peace agreement accepted by Ukraine, he can also end measures. The law increases pressure – but it binds the executive less tightly than the imposing maximum rates suggest.
Why Swiss companies must look closely
Switzerland does not automatically adopt American sanctions. Under the Embargo Act, the Federal Council decides on the adoption of EU measures; the law does not provide for autonomous Swiss sanctions. The new US package would therefore not immediately change the legal situation here.
Commercially, however, it can quickly become relevant. Sanctions are envisaged against foreign financial institutions that conduct significant business with the Russian Central Bank, Sberbank, VTB, Gazprombank or other state-controlled banks. Insurers, operators and service providers of ships that transport Russian energy or circumvent sanctions can also be covered.
For Swiss banks, access to the dollar area and correspondent banks in the US are central. Commodity traders, in turn, must examine payment routes, beneficial owners, ships and insurance. The State Secretariat for International Financial Matters itself notes that internationally active commodity firms in practice comply with US sanctions regardless of their location. The Confederation counts around 950 companies with roughly 10,000 employees in Switzerland as part of the commodity sector.
Particularly broad is the definition of sanctions circumvention: a state can be taken into account if companies are based, active or founded there that knowingly support circumvention transactions. In theory, the behaviour of individual firms could thus become relevant for the classification of their home country. At present, however, there is neither an official US country list nor any evidence that Switzerland ranks among the five most important circumvention locations.
The effect is decided after the signature
Kyiv is counting on economic pressure prompting Russian companies to demand an end to the war from the Kremlin. But sanctions do not work through their announcement, and they do not replace negotiations. Switzerland can above all provide the table – not force the breakthrough. What matters are controls, cooperation with allies and the question of whether Washington is prepared to bear the costs of a conflict with major trading partners.
For Swiss companies, this follows neither alarmism nor all-clear. They should watch three steps: the signature, the first country list together with the tariff level, and the practice on exemptions. Only then will it become clear whether the package remains primarily negotiating capital – or actually reorders trade and financial flows.
Sources
- US House of Representatives: vote on H.R. 5334
- GovInfo: text of the law passed by Congress
- White House: statement on the sanctions package
- House of Representatives: amendments and committee votes
- US House Foreign Affairs Committee: opposing position on the secondary tariffs
- SECO: how Switzerland adopts and enforces sanctions
- SIF: significance of the Swiss commodity trade
