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Analysts have overlooked the significant economic impact on the Russian economy if the United States designates Russia a state sponsor of terrorism. The latest actions by Russia, including its attack on a shopping mall in Ukraine, have increased pressure on the United States to declare Russia a state sponsor of terrorism.
What Is A State Sponsor Of Terrorism Designation? “The United States currently designates as state sponsors of acts of international terrorism the governments of Syria, Iran, North Korea and Cuba,” according to the Congressional Research Service (CRS). “A terrorism designation is but one part in the bilateral relationship between the United States and each of these governments.”
The Secretary of State is authorized to “designate a foreign government for repeatedly providing support for acts of international terrorism, and to curtail aid or trade to that country as a result,” notes CRS. The three statutes that provide this authorization are 1) Section 620A of the Foreign Assistance Act of 1961, as amended; 2) Section 40 of the Arms Export Control Act, which, as amended, which “prohibits exports, credits, guarantees, other financial assistance, export licensing overseen by the State Department, and general eligibility related to providing munitions under the act,” according to CRS; and 3) Section 1754(c) of the Export Controls Act of 2018.
What Would Be The Economic Implications For Russia Of Being Designated A State Sponsor of Acts of International Terrorism? “The impacts would be quite severe,” said Jason M. Blazakis, professor of practice at the Middlebury Institute of International Studies at Monterey, in an interview. “It would likely expand the types of materiel that could not go to Russia. Dual-export restrictions are a key aspect of the SST [State Sponsor of Terrorism] regime.
“Second, and perhaps even more important, adding Russia to the State Sponsor of Terrorism regime would have implications for every government that continues to engage in any exchange, especially defense-related, with Russia. The SST listing would have secondary effects for countries engaged in such exchanges and they would become a target of secondary sections unless the President issued a waiver to exempt the activity.”
Blazakis served as director of the U.S. State Department’s Counterterrorism Finance and Designations Office in the Bureau of Counterterrorism from 2008 to 2018. “I know firsthand from experience that this is a reason why countries are not often added to the SST list—it complicates these second-order relations,” he said. “Yet, in the case of Russia, adding it to the list is important for this very reason. The U.S. government should want to complicate every aspect of another country’s relationship with Russia. It is pretty clear to me that the balance has shifted again in Russia’s favor and that they have withstood sanctions to date, and while sanctions require time to have impact, that impact is unlikely to be achieved by the winter unless a much more significant sanction is imposed—the listing of Russia as a state sponsor of terrorism.
“It would also have the added benefit of getting more companies to de-risk from Russia. That would likely include U.S. and non-U.S. companies. Businesses don’t like operating in countries that are state sponsors of terrorism. This is why Sudan pushed so hard to come off of the SST list during the Trump administration.”
Major Litigation Risk For Russia If Designated A State Sponsor Of Terrorism: “I believe that if Russia is designated a state sponsor of terrorism, that will significantly enhance the ability of aliens to sue Russia in U.S. courts,” said Charles H. Camp, a Washington, D.C.-based international attorney who has represented foreign and domestic clients in international litigation and debt recovery.
Camp points to the U.S. Supreme Court’s 8-0 decision in Opati v. Republic of Sudan. “It has been over two decades since al Qaeda operatives detonated bombs outside the U.S. embassies in Kenya and Tanzania, killing over 200 people and injuring thousands more,” writes Amy Howe for SCOTUSblog. “The victims and their family members later filed a lawsuit in federal court in Washington, D.C., seeking to hold Sudan responsible for its role in providing support for al Qaeda. The trial court awarded them billions of dollars, but a federal appeals court cut that award in half. It ruled that the plaintiffs could not recover punitive damages from Sudan because Congress did not authorize such damages until 10 years after the bombings. [The] Supreme Court unanimously (with Justice Brett Kavanaugh recused) threw out that ruling, setting the stage for billions of dollars in punitive damages to be reinstated.
“Although foreign governments normally cannot be sued in U.S. courts, the plaintiffs brought their lawsuit under the Foreign Sovereign Immunities Act, which governs immunity for foreign countries and includes several exceptions to the general bar on lawsuits. One such exception is the ‘terrorism exception,’ enacted in 1996, which allows foreign countries that have been identified as ‘state sponsors’ of terrorism to be sued in U.S. courts for supporting terrorists.” (Emphasis added.)
One can only speculate at how large the damages, including punitive damages, a U.S. jury would award Ukrainian victims who sue the Russian government in U.S. courts.
“Once the United States finally designates Russia as a state sponsor of terrorism, Russia will be stripped of any immunity under the U.S. Foreign Sovereign Immunities Act,” said Camp in an interview. “This will result, most importantly, in litigants being able to obtain not just compensatory damages, but punitive damages against Russia. In my view, such judgments that will be able to be entered against Russia will be nearly infinite in amount and will cripple Russia’s ability to operate financially outside of Russia for decades to come, inflicting more financial suffering upon Russia than any sanctions currently being imposed or sanctions that would be imposed upon Russia when it is designated as a state sponsor of terrorism.”
There is bipartisan support for the designation. House Speaker Nancy Pelosi (D-CA) and Senate Minority Leader Mitch McConnell (R-KY) agree on one thing: The United States should declare Russia a state sponsor of terrorism. Ukraine President Volodymyr Zelensky concurs, citing a Russian missile striking a shopping mall in Kremenchuk and stating “the Russian state has become the largest terrorist organization in the world.” Leaders of the G7, including U.S. President Joe Biden, called the missile strike on the mall an “abominable attack.”
What would be the economic impact on Russia if the United States declared Russia a state sponsor of terrorism? The impact would be significant and could burden the Russian economy for decades.