How Putin's American Fixers Keep Russian Sanctions Toothless

Russian President Vladimir Putin at the 2009 World Economic Forum in Davos. Photo via Flickr user World Economic Forum

As the crisis in Ukraine has unfolded, exacerbated by the downing of a Malaysian commercial airline jet late last week courtesy of Moscow-friendly rebels, Western countries have been unable to muster any serious sanctions against Russia. The eastern European power thrives on partnerships with American and multinational corporations, but the last round of Obama administration sanctions against Putin's allies (targeting the Russian oil industry) were so weak that the Moscow-based gas company Rosneft is still permitted to go ahead with extremely lucrative drilling plans in collaboration with ExxonMobil and other US-based businesses.

Sanctions against Russia thus far have largely targeted individuals and certain US-based assets of Russian figures close to President Vladimir Putin. These individuals, including Putin’s close political advisors, are barred from visiting the US or owning American assets. The Russians responded with an equally meaningless ban on political figures like Speaker John Boehner and Senate Majority Leader Harry Reid. The latest and strongest round of sanctions only go so far as to block some Russian companies from accessing US markets for long-term debt, but do not ban Russian firms from doing business with Americans—a move that simply means Russian firms will use Chinese markets for financing while continuing to make money from their American counterparts.

In other words, as political leaders talk tough and carnage continues throughout Ukraine, oligarchs in both the US and Russia are still happily doing business together. But how does Putin keep his economic interests chugging along pretty much unscathed?

New disclosures suggest that third-party business lobbying groups active in US politics have closer ties to Putin than previously known.

Ketchum, a public relations firm that has represented the Russian government and Gazprom, the Russian oil behemoth, just filed its latest 6-month disclosure form with the US Department of Justice. Under the Foreign Agents Registration Act, a law signed by President Franklin Roosevelt to regulate international lobbying, agents of foreign governments are required to report a significant amount of their activities to the public. The disclosures show a number of media contacts on behalf of the Russian government, including with the New York Times, AP, Bloomberg, the Washington Post, Politico, CNBC, CNN, and PBS.

The form also shows that Ketchum has corresponded closely with two trade groups that have been pivotal in beating back sanctions against Russia since the revolution in Ukraine: the US-Russia Business Council and the American Chamber of Commerce in Russia, a Moscow affiliate to the US Chamber of Commerce known as an AmCham. Both groups are funded by companies with a stake in the US and Russia, including CitiGroup, BP, GE, GM, and Caterpillar.

But the most important business link between the two countries is ExxonMobil. The oil giant has multiple deals with Rosneft worth upwards of $1 trillion, including plans to drill in the Arctic, throughout Siberia, and in Alaska. Are US-based companies representing American foreign policy interests? Simply being based in one country or the other can be misleading; as the Ketchum disclosure shows, the business lobbies, which have battled Obama administration attempts at sanctions, have a cozy relationship with Putin's government. The forms make clear that the US-Russia Business Council even receives funds from the Putin government by way of Ketchum.

These groups play both a public and private role in setting American foreign policy. The Russian AmCham supported efforts by its parent organization, the US Chamber, along with the National Association of Manufacturers, to sponsor advertisements in national newspapers denouncing strong sanctions against Moscow—claiming that doing so would endanger American jobs and investment. Both business groups, which are funded by corporate donors with extensive dealings in Russia, including Caterpillar and ExxonMobil, have made their case against sanctions with major media outlets. The US-Russia Business Council has also met with White House officials, along with member companies, to dissuade Team Obama from enacting meaningful sanctions.

The influence extends to Republicans as well. Richard Burt, a former Reagan White House official who now works at the lobbying firm McLarty Associates, serves on the US-Russia Business Council board. According to the Wall Street Journal, Burt, who has argued against unilateral sanctions against Russia, regularly advises Kentucky Republican Senator Rand Paul on foreign policy. The combined lobbying efforts have achieved PR coups for the Putin regime beyond just limiting sanctions. The Obama administration implored US business leaders to abstain from attending the St. Petersburg International Economic Forum, a Russian summit. Several companies complied, but major firms went anyway. ExxonMobil shrugged off the call from the White House and even used the event, which took place in May, to stage a photo-op with Putin—while signing yet another partnership with Rosneft. The Ketchum disclosure makes clear that the American PR firm was key to the Forum’s success.

In an update posted on the US-Russia Business Council's website, the group boasts that it used the Forum as a chance to mobilize American business lobbyists. The executives were asked to "gather information on Congressional activity related to Russia, to share perspectives regarding the value of the business community’s long-term relationship with Russia and to continue to offer ourselves up as a resource regarding the impact of sanctions."

Thursday morning, the Associated Press reported that Ukrainian Prime Minister Arseniy Yatsenyuk is resigning. The political chaos in the region continues, then, but business between the US and Russia moves ahead smoothly.

Lee Fang, a San Francisco–based journalist, is an investigative fellow at the Nation Institute and co-founder of Republic Report.