What Trump Means For Russia ETFs

February 07, 2017

Russian stocks jumped almost 1% on Thursday of last week after news broke that the U.S. Treasury Department had tweaked some of the sanctions on the Russian intelligence agency―the Federal Security Service (FSB).

According to a statement released on its website, the Treasury Department now "authorizes certain transactions with the Federal Security Service (aka FSB) that are necessary and ordinarily incident to requesting certain licenses and authorizations for the importation, distribution, or use of certain information technology products in the Russian Federation."

The news was immediately latched on to by some investors, who speculated this could be the Trump administration's first step in easing sanctions on Russia. But experts said that was not the case, and that Trump had nothing to do with it at all.

"Our understanding is that this is not the start of sanctions easing," Ian Bremmer, political scientist and president of consulting firm Eurasia Group, told CNBC. "It's a rule change clearing up a problem with the sanctions regime that prevented U.S. exporters of nonsanctioned electronic devices from complying with both U.S. and Russian law. The problem was identified by the Obama administration, and this appears to be the response to address it."

Sanctions Relief Possible, But Faces Resistance

While last week's "technical fix" (as Sen. John McCain called it) may not have been the start of sanctions easing for Russia, many still expect that President Trump may eventually reduce or completely lift the penalties, which were imposed by his predecessor, President Obama, in response to Russia's annexation of Crimea in 2014.

Trump has consistently expressed his desire for warmer relations with Russia and his admiration for Russian President Vladimir Putin. In response to a question about whether lifting sanctions was on the table, Trump senior adviser Kellyanne Conway told Fox News on Friday that “all of that is under consideration.”

Standing in the way of any potential easing of penalties is Congress, including much of Trump's own party.

“I’m against lifting any sanctions on the Russians. These sanctions were imposed because of their behavior in Crimea, eastern Ukraine and now we know they’ve been messing around in our elections as well,” Senate Majority Leader Mitch McConnell told Politico. “If there’s any country in the world that doesn’t deserve sanctions relief, it’s Russia.”

If Trump attempts to lifts the sanctions―which were put in place by executive order―Congress could reimpose them through legislation. Republicans in Congress say that the sanctions on Russia should only be removed once the country stops meddling in Ukraine.

“The only reason we should ever lift sanctions on Putin is if he meets conditions of sanctions [and] ends violations of Ukraine sovereignty,” tweeted Sen. Marco Rubio.

 

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