Significant Changes Are Imminent in the Russian-U.S. Relationship under Trump

Michael Harms © Committee on East European Economic Relations

The United States is an important point of reference for Russian policy. Signals sent earlier by the U.S. administration pointed towards a rapprochement between the two countries; the lifting of U.S. sanctions seemed to look more likely for a while. But the recent domestic and foreign policy developments in the United States have destroyed these hopes for the time being. A strengthening of the WTO’s authority would be important for German business ties with Russia; however, such a development is unlikely under the Trump administration, emphasizes Michael Harms, Managing Director of the Committee on East European Economic Relations.

Twenty-five years after the collapse of the Soviet Union, the U.S. superpower is still the most important international point of reference both for Russian policy and for the Russian people. The desire to stand alongside the United States as an equal not only drives President Putin; it is also deeply rooted in the Russian population.

During his election campaign and in the beginning of his presidency U.S. President Donald Trump has stressed many times that he would like to put the U.S.-Russian relationship – which recently sank to a low point – on a new footing. That intention was underscored by the fact that he nominated ExxonMobil CEO Rex Tillerson, who is held in high esteem in Russia, as new U.S. Secretary of State. Trump has announced that "a couple of good deals" will be made with Russia and appeared ready to ease U.S. economic sanctions. In a poll conducted by Bloomberg in January, 55 per cent of analysts surveyed said they were already reckoning with the dismantling of U.S. sanctions. In such an event, the EU (and Russia) would come under pressure to ease sanctions too.

Estimates by the Committee on East European Economic Relations suggest that since the imposition of sanctions in 2014, Europe as a whole has sustained economic losses that have reached the high two-digit billion euro mark. So any easing of the embargo would be good news initially – provided that a reasonable solution is found to the conflict in Ukraine. Ukraine must no longer be a pawn of superpower ambitions. However, the latest domestic and foreign policy developments have given a considerable damper to these initial hopes. There are allegations that members of the Trump campaign had close and secret contacts with Russian officials before the election. In addition, there is suspicion that Russia has interfered in the U.S. election campaign. Therefore, the new U.S. administration seems to be reluctant to make concessions towards Russia. Foreign-policy differences between the United States and Russia have recently become more severe, especially concerning Syria and North Korea. In Moscow itself there is disillusionment with regard to a rapprochement between Russia and the United States. In a recent survey of the east forum Berlin 2017, three-quarters of respondents expect a relaxation of the sanctions against Russia by 2018 at the earlies.

Threat of International Protectionism Increases

While political détente between the United States and Russia looks unlikely for the foreseeable future, the simultaneous threat of increasing protectionism looms large. Russia has already demonstrated reluctance to abide by the agreements negotiated with the WTO. Dismantling tariffs in line with the adopted WTO accords is progressing only slowly, and domestic industry is frequently favoured over foreign investors. Even in case of an U.S.-Russian rapprochement it is difficult to imagine that Putin in association with the free trade critic Trump would be more cooperative vis-à-vis the WTO in the future. But for their part, German companies would benefit from strengthening the WTO’s authority.

Michael Harms is Managing Director of the Committee on East European Economic Relations.