US sanctions against Russia: import ban on vodka and diamonds

The US wants to impose more sanctions on Russia. US President Biden announced that he would withdraw the country’s status as “most favored nation”. In addition, the import of alcohol, fish and diamonds will be banned.

The US government, in coordination with Western partners, wants to initiate further punitive measures against Russia because of the Ukraine war. US President Joe Biden announced that, among other things, he wanted to work with Congress to suspend normal trade relations with Russia. The United States and its allies would also strip Russia of its status as “most favored nation,” Biden said.

That would pave the way for higher tariffs on Russian goods and further trade restrictions. A ban on the export of luxury goods to Russia and import bans on Russian goods such as vodka, seafood and diamonds are also planned. In addition, further sanctions are to be imposed on Russian oligarchs.

“Most Favored Nation” status revoked

The so-called most-favoured-nation treatment is a central principle in international trade policy and essentially states that a country is granted the same advantages as other trading partners. Within the framework of the statutes of the World Trade Organization (WTO), for example, each member undertakes to grant the same trade privileges that it grants to one country to all others. Stripping Russia of MFN status would allow trading partners to impose higher tariffs on Moscow to penalize Russian exports.

As a rule, tariffs cannot be arbitrarily set higher for a specific country. One of the exceptions is national security. The provisions state that countries can take measures “which they deem necessary to protect their essential security interests”, such as “in time of war or other serious crises in international relations”.

Russia cited precisely this provision a few years ago after restricting the movement of Ukrainian goods through Russia. Ukraine appealed against it. The WTO Dispute Settlement Committee concluded that it was Russia’s right to invoke this paragraph.

Russia in line with Cuba and North Korea

Now the United States and its partners want to invoke this passage to suspend trade relations with Russia. Biden pointed out that the US was taking these steps together with the G7 partners and the EU. From a US foreign trade perspective, if normal trade relations were suspended, Russia would now fall into the same category as, say, Cuba or North Korea. Moscow can challenge this measure before the Dispute Settlement Committee.

Although trade relations between the USA and Russia are limited, direct US trade with Russia is comparatively small. According to the US government, Russia was the 20th largest supplier of goods to the United States in 2019 and therefore mainly supplied oil and gas, metals and chemicals.

However, the White House pointed out that this, combined with the measures taken by the other western partners, would deal another serious blow to the Russian economy.

Sanctions in coordination with the EU

Since the start of the war in Ukraine, the US, in coordination with the EU and other allies, has already imposed very tough sanctions on Russia, including on the largest banks and the Russian central bank. These are already affecting the Russian economy. Just a few days ago, the US also issued an import ban on oil from Russia. In addition, many American companies have closed or at least temporarily suspended doing business with Russia.

The EU also wants to impose further sanctions on Russia. “We will now propose a fourth package of sanctions,” said EU Commission President Ursula von der Leyen after an EU summit in Versailles, France. This will further isolate Russia from the global economic system. In addition, it will further increase the cost of the Russian invasion of Ukraine.