The Russia Sanctions Bill, Sanctions Coordination, & Getting Sanctions Right | The Trade Off

Today on the Tradeoff, we're talking about the Lindsey Graham Sanctioning Russia and Iran Act of 2026 and what it means for the future of US sanctions and export controls. >> [music] >> The Tradeoff is a show from CSIS where we work through the choices behind that trade headlines and what each one costs. I'm Kate Cullen, I'm the Deputy Director here at the Economics Program and I'll be your host today. I'm joined in the studio today by Brad Spiker. Brad was with us with the with the Economics Program for the summer. He's soon to be headed to the Harvard Kennedy School but will remain with the program as an adjunct fellow. And prior to being with us this summer, Brad worked supporting the State Department and Adelina with support for sanctions. And of course, joined by Dr. Phil Luck who is the Director of the Economics Program here and also previously worked at the State Department as a Deputy Chief Economist. Thank you both so much for being here today. >> Yeah, thanks a lot for having us. >> So, let's get right into it. Uh Brad, you've published several products recently about the changing dynamics and trends of US sanctions and export controls. Before we actually get into the Graham bill, can you take us through some of the trends, what's been happening, where are we right now? >> Absolutely. So, I'll start with higher level overview of how the Russia sanctions program has worked over the last couple years. So, starting in 2021, there was an executive order called Executive Order 14024 put out that authorized a very broad range of economic sanctions against multiple different sectors, industries, and different criteria of what people are involved in in Russia to be designated at the government's discretion. One of the main things that changed with this executive order was the opportunity for the government to pursue secondary sanctions in conjunction with all of those different criteria. And by secondary sanctions, we're just saying sanctioning those who are supporting in some sort of material way folks who are already on the sanctions list. Because of the unique sectors that were outlined in this executive order, a lot of the designations really pertained to different sorts of international trade supporting Russia's industrial base or their energy sector. And that created a program where there were thousands and thousands of designations much larger than any historical sanctions program going after each of these sectors and constantly updating to capture new entities and new evasion networks and new third countries that were involved across all of these sectors. This required constant attention from policy makers and was an ongoing process to continue adding folks to the list making sure all of those holes were closed. And what we saw is from the beginning of 2022 through the beginning of 2025, there were constant [snorts] rollouts of hundreds of entities and that ultimately stopped at the beginning of 2025. And so you'll see >> a chart from one of your recent products that'll help us visualize this right here. >> And so here you can see the breakout of the cumulative designations put into place by the US, the UK and the EU all side by side. So of course, you have a very large sort of increase in rapid designations that happened right after the invasion of Ukraine in 2022. And that that designation activity continuing through the beginning of 2025 for the US where it eventually flatlines with only then a couple designations happening after then. Whereas the UK and the EU have continued to pursue those designations throughout since 2025. >> This is a really interesting chart. You can see sort of this steady progression from both, almost this ladder progression, right, from the US. And I know I think we all remember being kind of part of that work and how exhausting that was. But even with that flatline, seeing how much higher the US number remains over, you know, the UK and the EU EU designation number. Despite despite the flatline. >> Absolutely. Yeah, the US program was much more expansive and took on many designations much more rapidly than the partner countries. But you see that that gap has been closing over time. Part of the problem that we see is because we were going after evasion networks and and trade trends. Ultimately, a lot of those networks start to age out in terms of the listings that are are sort of publicly available to the private sector. that ends up in a world where an older list, a a less updated list is ultimately less effective and less relevant. >> Yeah, I think that was part of the thesis of the next the next chart here and the product that came with that on the entity list additions, which also kind of flatlined. >> Absolutely. Yeah. And so we see very similar trends between both sanctions and export controls in the US. So in this case, you're looking at the number of entity list additions taken on by the US per month from 2020 through the present. One of the big things you see here is that there has been essentially a pause entirely in export control activity starting in October of 2025. Which really is quite a deviation from the the previous years. This is interesting because it pertains not just to Russia, but also to a number of different problem sets. So, if you think about Iran and and other sort of malign actors or sort of weapons of mass destruction, all sorts of different things would be covered by this list, but ultimately there has been a pause in the list since October. >> And so, in this graph here, I mean, we only go back to 2020, but this is the longest gap in like over a decade, right? >> Mhm. Yeah. >> Yeah, it's 2008. Yeah. >> 2008. >> Yeah, this is just to give a sense of like just how extreme this this gap is, yeah. >> Right. Yeah. All right. So, building on that, Phil, do we see the impacts of you know, these changes, this the flatlining in sanctions, the cessation of entity listings? Is that showing up in the world? Are there impacts of that that we can see? >> Yeah, absolutely. And both of these graphs, like kudos to you and to Brad for putting this excellent work out there. I think the the one thing we want to note here, and we've talked about this all the time when all three of us were, you know, dealing with this problem on on the inside of government, is that, you know, if you're not doing anything, if you're standing still, you're actually moving backwards, right? Because as Brad was mentioning, these are essentially circumvention networks, these are basically routes of trade that to try to get around these measures. You know, they're once you shut them down, people are immediately working to find workarounds to set them up again. So, it's not as though people just sort of hold pat at that point. And you know, we we spent a lot of time in a lot of different countries trying to convince jurisdictions to take this problem seriously. And that's that work is largely stalled in the last year or so. I mean, you were just in Tajikistan a little while ago, you know, doing this great work, but the but the government's not doing it quite as robustly as it was. And you know, not unexpectedly, you're starting to see that those early efforts wane a bit. we go to the next graph here, this is a really good example, I think, of sort of early challenges, early progress, and then challenges coming back. So, we have here basically as the blue line is what we're basically calling sort of excess exports to this is Kazakhstan um, what we're calling the sanctioning coalition. So, this is, you know, we're not doing anything overly fancy here, but it's basically just saying like, are there imports to Kazakhstan that are above and beyond what we might normally expect? Uh, and this is for, uh, some networking devices. So, uh, transistor equipment. Um, and as you can see, this basic pattern we saw across the world after the invasion, uh, of the full-scale invasion of Ukraine, there was huge influxes of exports from countries like the United States and our and our partners to these, uh, entrepot, uh, countries. They're essentially things were getting transshipped on to Russia. Um, this was a big focus, um, of the US, uh, you know, before the last of the end of the last administration, also of our European partners, the UK, Japan and others. Um, and as you can see here, we we bent the curve in the sense of we started to reduce our exports to them, and as you can see in the red graph there, the red line there, uh, Kazakhstan's exports to Russia of these same goods also declined. So, this was, you know, in our sense, this was good progress. Unfortunately, as you might expect, is you're not, uh, you know, monitoring these networks, if you're not sort of, you know, playing the game of whack-a-mole, that's not always the most, uh, fun, but is necessary, we're starting to see again that the excess exports, uh, to Kazakhstan and the excess exports to Russia from Kazakhstan are back on the on the rise. So, you know, this is one example of a pattern that we think is sort of evolving around >> in many different different jurisdictions. >> Mhm. So, as I understand it, the Lindsey Graham Sanctioning Russia and Iran Act is meant to sort of reinvigorate, you know, US actions in this space, both in you what we're talking about here, but in a much broader sense as well. Uh, Brad, can you take us through the legislation a bit? You know, it's very lengthy. I think it's, uh, well over 60 pages. What does it actually contain and have in it? >> Absolutely. So, the legislation is broken up into a few different parts. Some of that is authorizing new sanctions, and some of that is expanding beyond the scope of Executive Order 14024 in the first place. Um I'll start with what's new here, and the top line there is the act authorizes tariffs against a number of different countries. Um so, to start, it authorizes up to a 500% tariff on products coming directly from Russia. It also authorizes a 100% tariff on products uh coming from countries that are significant uh purchasers of Russian energy products. And within Russian energy, they've defined that as uh oil and gas. It also authorizes up to 100% on countries known to be facilitating circumvention of Russian energy sanctions. Uh and then also contains a carve-out within these broad tariff authorities for certain countries, mostly aimed at the European Union, who make up less than 15% of Russia's total natural gas sales, uh and have made significant efforts to reduce um reduce their consumption of Russian gas. Um in in essence, these tariffs apply to China and India. There's some discussion as to whether other countries would be covered by it. Uh and depending on how you measure it, it does seem to be somewhat unclear, but certainly China and India would be covered by that. Um but once again, all of these tariffs are at the discretion of the executive branch, uh so there will be additional considerations before they're used. Uh another interesting aspect of the legislation that is new is it changes the designation requirements for certain vessels that are involved in the shadow fleet. This is coming from a prior piece of proposed legislation on the shadow fleet that was incorporated into the bill. Uh and one of the the most important aspects of that is incorporating prima facie evidence as a reason to designate. Uh, basically what this means is just, uh, if the European Union or the United Kingdom has a certain vessel designation, that the US can take that designation on its face and implement it within the United States. There are a number of other provisions of the bill, uh, but most of these are not, uh, net new to the authorities that the government maintains against Russia. So, the bill goes through and outlines a lot of the same sectors that are in the prior executive orders. It outlines, uh, a number of entities explicitly in the law that would be sanctioned. Uh, most of those, of course, are already sanctioned under current, uh, executive orders. Uh, and then outlines a number of sectors as well, very similar to previous authorities. Um, so, at the end of the day, these would still have to be designations while they are described as mandatory in the act. They, uh, would have to be implemented by the executive branch, uh, through the process of finding the entities that meet those criteria, uh, and moving forward with those designations. At the same time, every provision [clears throat] in this law is subject to waiver by the executive branch. Um, so, the the White House could say in writing that as part of a national interest certification to Congress, uh, that either certain designations are going to be, uh, foregone in the future. Um, so, that is kind of the overview of what the the law does. A lot of it is not really changing what's available to the government, um, really except for that piece on tariffs. >> Very interesting. So, the gives it one new authority with tariffs, and the rest is sort of reinforcing what's already available, but doesn't actually strictly require, uh, there's an option to not take up those Well, either authority really, right? The old or the new. Um so, it's a a strong push, but not a a guarantee uh of any continued movement in these directions. Is that correct? >> Yeah, absolutely. And there's a lot of discretion involved in finding sanctions evasion networks in the first place. Um so, depending on the countries that are being prioritized, uh you may not necessarily see a full revival of enforcement depending on the analytical practices being used, depending on where people are looking, and what the product and third country priorities are. >> Mhm. Interesting. Um Do you For both of you, uh what do you think about this? Do you think, you know, assuming that the bill is passed into law, like, what do you think this is going to do? What what impact will it have? >> Uh well, I'll say a few words, but I'd love your thoughts as well on this. I mean, I think Look, I think there's as Brad sort of incredibly rightly pointed out, like, a lot of this is essentially putting a congressional stamp on what authorities the administration already has. I think I mean, first, I would note two things. One, this waiver authority, that's always there in all of these provisions. So, like, it's it's not as though that's a new thing that this administration has or that this Congress is giving the administration here. Um it would though, I mean, this does mean that the administration would have to put in writing waivers it wants to put in, which again, is not nothing, right? That's that is potentially helpful as well. Um and I think, you know, more generally, I think the the shadow fleet that Al's point is a really important one. Um you know, it's it's a lot of work to do these designations, and our ability to harmonize our controls and and our sanctions with our partners, you know, this to me is kind of a no-brainer, and that's helpful. So, that's good. Maybe not the most impactful thing in the world, but like, important to do. And the last I would just say is like, look, this does send a pretty clear message that there's still congressional support. Um and and that is really important here. Um again, in some ways I would say it's even more impressive that Congress is potentially going to pass this given that it does give the president new tariff authorities. >> [laughter] >> Cuz you know, that's not the most popular thing these days. Uh, you know, we're all learning almost every day as a trade economist I'm learning over almost every day about new authorities the president has. Um, so the fact that you had this pass the Senate um, giving these authorities, you know, would which are relatively broad and and and allow for 100% tariffs which are which are not nothing. Um, I think that's a a positive sign even though there might be some uh, consternation about that use. But I I'd love your thoughts on this. >> Yeah, I think it's really interesting. You know, in terms of before we were considering like, okay, tariffs is a an option to use against Russia, it seemed not to have a lot of, you know, weight behind it because the US does not import almost anything from Russia. But using that as a an action to deter other countries, which certainly in, you know, the oil and energy areas have really become that's become the key issue uh, is the other countries, you know, importing of, you know, Russian oil um, and and keeping the Russia revenue up through that. Uh, it is a really interesting way of getting at that problem that I can see having some real weight behind it and having some real impact behind it. I think we've got another chart on this. >> Yeah, absolutely. I'd love to I'm just jumping to say one thing about this first. This is a really important point that I think that Brad made this a fantastic chart and this is a minute analysis that he's done. That I think the the best outcome in some sense for these tariff authorities and this is true of any sort of course of tariff is is the stick's big enough that you don't have to use it, right? Um, in an ideal world that we we already have of course an oil shock in the global economy. So the idea of really pulling a lot of Russian oil off the market is probably not something that the administration or politicians more generally in the US are really looking to do. So So some sense I think the ideal outcome is a version of the oil price cap in some sense, which was a situation where we didn't want to reduce we wanted the oil to get to the market, but we wanted to have it come at a lower price. So if we can have if the administration has a little more leverage to talk to India and China and lower the give give them better bargaining position to get a better discount, that gets less revenue to the Russians while keeping oil flowing to the global economy. Um so I just want to say that and basically set up this graph and do you want to explain what this is here? >> Absolutely. Um so you'll see on this chart a notional relative price that we've constructed for what China is paying for both Russian and Iranian oil compared to what China is paying its other major suppliers for that oil. So once again here, we're not trying to construct an exact estimate or projection of how much that oil costs or what the exact discount was, but if you look in China's international customs statistics, you can compare the price that it's paying for Russian oil versus the price it's paying for oil maybe from Saudi Arabia. So in this case, the one thing you do really see quite clearly is immediately after sanctions related to the Russian invasion of Ukraine were implemented, the price of both Russian and Iranian oil relative to other suppliers in China did drop by quite a bit. And that was a a sustained drop in price that eroded over time and and prices eventually started to converge back to the world benchmark here, but ultimately that would have deprived quite a bit of revenue from both the Russian and the Iranian causes. And one thing I will call out here is sort of the reason why you see Iran's oil price a in this as well. It seems almost like it would be unrelated or something that you one wouldn't necessarily expect. And the intuition here is that because both Russian oil and Iranian oil have become less desirable on the world market that ultimately those two suppliers have to compete with one another to sell their product to China. In the case of Iran, China is really its only major buyer and in the case of Russia, China is one of few major buyers. So ultimately what you see is China ultimately having a certain negotiating hand to be able to demand a certain discount in exchange for really risking secondary sanctions in purchasing this oil. >> Yeah. >> I'm really curious looking at this chart as it as new as new data comes in, it'll be fascinating to see through 2026 how you know the going the goings-on in the Syria four moves and with the the Iran conflict are impacting this as well. But this is this is really interesting. Anything else either of you want to talk about in terms of the tariffs, secondary sanctions, other impacts of the bill? >> One thing I'll hit you just to double double tap on this for what Brad said is like so I mean again the reason this discount is large and sort of correlated is because of you know individuals and countries basically not wanting to get in trouble with the US and its allies in some sense, right? And again this shows that if we can put more pressure on folks to not buy Russian oil, it will do double duty, right? It will not only reduce revenue to the Kremlin. It will also if this relationship holds, it would reduce the it would increase the ability of those same parties to get a bigger discount on Iranian oil, right? So and in some sense you can't solve one problem without the other at the same time in the same way. So I think this is really good analysis showing how much these these problem sets are linked in important ways. >> Yeah. And one thing I'll add here as well, when we think about tariffs and trying to kind of recreate the the effect that we saw with the implementation of the broader Russia sanctions program in 2022, is that ultimately a tariff would be moving through a different economic pathway than a secondary sanction. So, if you think about a company that's based in China or India and is choosing to purchase Russian oil and that's something that could be designated under Russian secondary sanctions, ultimately that company is taking a risk as the company itself. That legal person is what's putting itself at risk. When we talk about using tariffs to try and achieve the same thing, the pathway is a little bit more modeled, right? Here we're talking about putting tariffs on an entire country based on the behavior of the firms that are moving within that country. So, ultimately that pathway would likely have some more indirect consequence and it'll be interesting to see how it plays out if those tariffs do go into effect. >> Yeah. So, I guess what we'll be waiting in to see first if you know the the act becomes law and then if they're if the tariffs are taken up or if the threat of them alone is enough to move this line back further down. >> Mhm. >> Absolutely. >> Yeah. Well, thank you both so much for being here. That is the trade offer today. Really enjoyed talking with you. I learned a lot and we'll see you next time. >> [music]