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Russian Lawmakers Draft Bill On 'Aggressor Countries'

July 29, 2014
by Tom Balmforth

Russian lawmakers have reportedly drafted amendments that would brand states that impose sanctions on Russia as 'aggressor countries.'

The pro-Kremlin daily 'Izvestia' reports that the legislative proposals would create a mechanism for restricting their companies' operations in Russia.

The legislative proposals come as the Kremlin searches for ways to threaten and hit back at the European Union and United States, which are expected soon to unveil a fresh round of sanctions against Moscow for allegedly supporting separatists in Ukraine.

The 'Izvestia' report quoted Yevgeny Fyodorov, a deputy from the ruling United Russia party, as saying the far-reaching proposals would allow the Russian government to restrict auditing and consulting companies registered in 'aggressor countries' in their operations in Russia.

Fyodorov, who is advocating the amendments, named six major international auditing and consulting firms -- including Deloitte, KPMG, Ernst and Young, Boston Consulting Group, and McKinsey -- that the government would be able to restrict.

The lawmaker said he would submit the draft document to the government and to the State Duma for review on July 30.

According to an extract from the draft document quoted in the Russian press, the bill would give 'the government the right to approve a list of aggressor countries in order to defend the foundations of constitutional order, to ensure the state's defense and security, to protect the domestic market of the Russian Federation and the development of the national economy.'

The document describes as an 'aggressor country' a state that has 'imposed sanctions on the Russia Federation, Russian citizens, or Russian companies.'

Such legislation would mark a significant escalation in Moscow's response to sanctions, although analysts are skeptical the Kremlin would pursue such an initiative, as they say it would hurt Russia and isolate Russian companies.

Tim Ash, the chief emerging-markets economist at Standard Bank, called the threat 'menacing,' adding that 'I doubt that Russia really will want to go down this path.'

'Freezing international auditing companies out of the Russian market will just backfire and further hurt Russia,' Ash told RFE/RL.

'Many Russian companies need to be audited by these companies to meet conditions attached to various bond/equity covenants,' he said. 'If they go down this path they could be in breach of these, which could shut them totally off from international capital markets and provoke a brutal market reaction.'

The United States and European Union have imposed three rounds of sanctions on Russia, aiming to put pressure on the country's sputtering economy and coerce the Kremlin into abandoning its support for separatists in eastern Ukraine.

More sanctions look imminent with suspicions widespread -- particularly in the West -- that pro-Russian separatists were responsible for downing a Malaysia Airlines passenger airplane in eastern Ukraine on July 17.

With reporting by 'Izvestia'


Copyright (c) 2014. RFE/RL, Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave., N.W. Washington DC 20036.

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