The recent imposition of sanctions by the United States against two large Russian companies because of their alleged trade with Iran in proliferation-sensitive products attracted very close attention in Russia and generated a strong, if short-lived, burst of anti-American sentiment in the Russia government and media. According to Russian media reports, sanctions were imposed on July 28, 2006, but not announced at the time by the U.S. State Department; the action became publicly known in Russia on August 3, through a special statement by the Russian Foreign Ministry, a day before the public notice of the sanctions was published in the United States. Washington’s silence was interpreted as a desire to minimize the negative impact of the sanctions on U.S.-Russian relations, especially given the sensitive negotiations at the time on the Iranian nuclear program and the then ongoing conflict in Lebanon. [1]

The sanctions, required under the 2000 Iran Nonproliferation Act, were imposed against two Russian companies: Federal State Unitary Enterprise RosOboronExport and Sukhoi Holding. They are accused of transferring “equipment and technology controlled under multilateral export control lists (Missile Technology Control Regime, Australia Group, Chemical Weapons Convention, Nuclear Suppliers Group, Wassenaar Arrangement) or otherwise having the potential to make a material contribution to the development of weapons of mass destruction (WMD) or cruise or ballistic missile systems” to Iran. The sanctions include a ban on procurement of goods from the companies by the U.S. government and a ban on U.S. strategic
dual-use goods and arms sales and transfers to them. [2]

A statement issued by the Russian Foreign Ministry called the sanctions “an unacceptable attempt to force foreign companies to abide by U.S. internal rules” and declared that the reason for the imposition of sanctions was “false.” [3] The Foreign Ministry declared that trade between Russian companies and foreign states “follows norms of international law and Russian legislation, including Russia’s obligations on nonproliferation and export control.” Specifically, there are no “international legal impediments or limitations” on trade with Iran, and Russia limits itself in arms trade with that country to “defensive weapons incapable of destabilizing the situation in the region.” The statement concluded with a thinly veiled warning that sanctions against RosOboronExport and Sukhoi “cannot but affect the quality of cooperation” between Russia and the United States.

Vice-Premier and Russian Minister of Defense Sergey Ivanov was more definitive in his reaction. He declared that the U.S. sanctions “had no relationship whatsoever” to WMD nonproliferation regimes. [4] An anonymous source in the Kremlin quoted by the Russian daily Kommersant was even more outspoken, calling the sanctions “a silly and irresponsible action” that would “hurt the entire spectrum of our cooperation.” The conclusion of that official was that “the Republicans’ affairs are apparently bad and maybe hopeless,” referring to the party of President George W. Bush. [5]

The companies affected by the sanctions immediately announced that they were not guilty of the American accusations of making WMD- and/or missile-related transfers. A press release by RosOboronExport emphasized that its trade with Iran was limited to defensive weapons that are not restricted by international regulations and that NATO allies of the United States are known to have engaged in similar arms transfers. Sukhoi has also rejected the American accusations, stating it has not sold aircraft to Iran for years. [6] Instead, it insisted it has exercised caution in its dealings with Iran and pointed out, for example, that although the Iranian military was extremely interested in acquiring S-300B anti-aircraft systems (which are more effective than the S-300PMU systems that Russia routinely sells abroad) and were prepared to pay cash for immediate delivery, Sukhoi rejected its bid. [7]

The virtually unanimous opinion of Russian experts and commentators was that sanctions were motivated by Washington’s irritation with the recent contract between RosOboronExport and Sukhoi and Venezuela. That $3 billion contract includes Sukhoi-produced aircraft, helicopters, Thor-M1 anti-aircraft systems, and other weapons. [8] Only a very few commentators noted that the sale of Thor-M1 anti-aircraft systems to Iran would almost inevitably lead to sanctions under the 2000 Iran Nonproliferation Act and that Sukhoi was not completely candid when it said it did not sell aircraft to Iran: actually, it signed, at the end of July, a contract with Iran to modernize the Su-24 aircraft which had been previously sold to that country. [9] These more moderate voices were lost, however, in the outburst of anti-American sentiment and appeared only in relatively marginal media sources.

Another widespread opinion in the Russian media was that American sanctions will not affect either company because they do not depend on trade with or investment from the United States. The major exception is a pending Sukhoi-Boeing project to build and market a regional passenger aircraft, the RRJ; several other American companies (Hamilton Sundstrand and Honeywell) are also participating in the project. Commentators argued, however, that if the U.S. sanctions led to the cancellation of the RRJ project, it would hurt Sukhoi and Boeing, equally. [10] Some even suggested that sanctions were inspired by Boeing, which was concerned about possible competition by Sukhoi civilian aircraft. [11]

The possibility of a strong Russian response to the American sanctions received considerable attention in Russian media, at least in the days immediately following the early August disclosure of the sanctions. It was suggested, for example, that Boeing and other U.S. companies might find themselves without Russian titanium because the main Russian producer of titanium, AVISMA, was soon to be bought by RosOboronExport. [12] Some anticipated that the Kremlin would also prevent Aeroflot from buying Boeing-made passenger aircraft. It was speculated that Aeroflot might shift the purchase to Airbus Industries. [13]

A group of business and political figures polled by Kommersant, however, took a far more cautious view of the likely Russian response to the U.S. sanctions against the Russian companies. Their prediction of the Kremlin’s line varied from Moscow’s offering “no response whatsoever” to its using “soft diplomacy” with the United States to have the sanctions lifted. While none acknowledged any guilt on part of RosOboronExport or Sukhoi and all denounced the U.S. action against the two firms, the poll results indicated that all of those surveyed clearly wanted the Russian government to steer away from a confrontation with Washington. [14]

Their prediction of a cautious Russian response proved correct. Only days after the peak of the political uproar, a delegation from Boeing came to Moscow to sign an agreement creating the titanium-producing joint venture with AVISMA – which, as noted, is widely expected to become part of RosOboronExport. A representative of Boeing clarified that this joint venture would not violate the sanctions announced by the State Department several days earlier. This visit was also widely expected to clear the path for the purchase of 22 Boeing-787 long-range passenger aircraft by Aeroflot. [15] In late September 2006, Aeroflot announced a decision to buy both Boeing and Airbus aircraft. The purchase of 22 Boeing aircraft worth approximately $3 billion will be implemented in 2010-2012 and the contract was reportedly in the last stages of preparation; purchases of the same number of aircraft from Airbus will be implemented after 2012. [16]

Although it appears that Russia will likely refrain from any significant response to the U.S. sanctions, the irritation and anger they caused is likely to linger for some time, judging by the intensity of the initial reaction of high-level Russian officials and the strong – if short-lived – anti-American backlash in the media. After the direct and public challenge from the United States, moreover, the Kremlin will likely seek to avoid the impression that it is bowing to U.S. pressures regarding its ties to Iran, a factor that could well harden its opposition to U.S. efforts to impose sanctions against Tehran at the UN Security Council. For the same reason, it appears highly unlikely that Moscow will modify its arms deals with Iran or Venezuela.

For the United States, publicizing differences with Moscow always carries risks, and, given the astringent Russian response in this instance, whether U.S. nonproliferation goals will ultimately be advanced by the July 2006 sanctions, despite the difficult environment they created, remains to be seen.

Nikolai Sokov – Monterey Institute Center for Nonproliferation Studies