U.S.-Russia Business Climate Likely to Change Under Trump Presidency

November 23, 2016

Donald Trump’s election has the potential to significantly reshape U.S.-Russia relations, but whether any change occurs will depend largely on his willingness to offer Russia a clean slate and whether the U.S. Congress imposes legislative constraints on President-elect Trump’s ability to unilaterally lift sanctions. As discussed below:

  • President-elect Trump has made various statements over the last few months which could indicate a major shift in relations between Russia and the United States.
  • President Putin has expressed the hope that he and President-elect Trump will work together to “end the crisis” in Russian-American relations.
  • The Russian stock market gained as much as 7% in the immediate aftermath of the election.
  • Since 2014, the United States and the European Union have applied a range of sanctions on Russian individuals and companies, particularly in the financial services, energy and defense sectors, arising out of the situation in Ukraine, while Russia has imposed counter-sanctions on U.S. and EU produce. These measures have not only affected trade with respect to the sanctioned entities, but they have had a chilling effect on investment and trade generally.
  • Under U.S. law, the President has the ability to terminate current sanctions against Russian and Ukrainian companies and individuals by executive order. However, this could be complicated by opposition from the U.S. Congress and/or the European Union. The Russian President also has the ability to immediately and unilaterally terminate sanctions.
  • In the wake of sanctions, the Russian Government has focused its efforts on ways to increase local production, particularly in the food and pharmaceutical sectors and has encouraged business to increase ties with Asia (the so-called Asia pivot) with mixed success.
  • A rapprochement with the West could have a very positive impact on investment in Russia, which may be further boosted by Russia’s plan to carry out major privatizations of state-owned companies in 2017 and other recent changes to Russian law and business regulations which have helped Russia to move up on the World Bank's "Ease of Doing Business" list.

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