After WTO Membership: Promoting Human Rights in Russia with the Magnitsky Act Ariel Cohen, Phd, and Bryan Riley

BACKGROUNDER No. 2687 | May 14, 2012

After WTO Membership: Promoting Human Rights in Russia with the Magnitsky Act Ariel Cohen, PhD, and Bryan Riley

Abstract n a few months, Russia will become Russia’s accession to the World Ia member of the World Trade Talking Points Trade Organization (WTO) will put Organization (WTO). U.S. businesses U.S. companies at a disadvantage will not be able to benefit from the ■■ Because of Russia’s imminent with their global competitors unless concessions Russia made to join the accession to the World Trade Organization (WTO), U.S. com- Congress first exempts Russia from WTO unless Congress first repeals panies could be placed at a severe the application of the Jackson–Vanik the Jackson–Vanik Amendment, a disadvantage in Russia due to the Amendment, a tool from the 1970s powerful tool that the U.S. success- continued application of the Jack- designed to promote human rights fully used to promote human rights son–Vanik Amendment. that no longer advances that goal. in Soviet Russia and other countries ■■ The U.S. should grant Russia per- Russia admittedly suffers from weak which restricted emigration dur- manent normal trade relations rule of law and pervasive corruption, ing the Cold War. Failure to repeal status, but only after updating its but Congress should pass new human Jackson–Vanik could place U.S. tools for protecting human rights rights legislation rather than try to companies at a disadvantage while in Russia by replacing the Jack- uphold Jackson–Vanik beyond its companies in other WTO members son–Vanik Amendment with the utility. Then, Congress should grant benefit from significantly increased Sergei Magnitsky Act. Russia permanent normal trade access to the Russian economy. ■■ Flush with revenue from energy relations status, which will promote Regrettably, the Obama exports, Russia has reemerged as transparency, property rights, and the Administration did not work with a major player on the world stage. Regrettably, Moscow’s ambition rule of law in addition to the expected Congress to resolve these issues and newfound wealth have also economic benefits for U.S. companies. before agreeing to Russia’s acces- facilitated the spread of its cor- sion to the WTO. Because acces- rupt domestic business practices sion of a new member requires the to the international community. unanimous assent of WTO mem- ■■ Extending PNTR to Russia would bers, the Administration could promote transparency, property This paper, in its entirety, can be found at easily have delayed Russian acces- rights, and the rule of law. http://report.heritage.org/bg2687 sion. Now, Russian accession will ■■ U.S. agencies should cooperate Produced by the Douglas and Sarah Allison put U.S. businesses at a disadvantage with Western allies to combat Center for Foreign Policy Studies in Russia until Congress repeals corruption, money laundering, The Heritage Foundation Jackson–Vanik. and other illicit activities. 214 Massachusetts Avenue, NE Washington, DC 20002 To avoid such a scenario, Congress ■■ Today, Russia, although authori- (202) 546-4400 | heritage.org should extend permanent normal tarian and corrupt, allows free Nothing written here is to be construed as necessarily trade relations (PNTR) to Russia emigration and has thriving Jew- reflecting the views of The Heritage Foundation or as an attempt to aid or hinder the passage of any bill and press for trade reforms that are ish communities. before Congress. in the best interests of the United BACKGROUNDER | NO. 2687 May 14, 2012

States while supporting the cause of human rights in Russia and around Countries Graduated from Jackson—Vanik the world. The Sergei Magnitsky Rule of Law Accountability Act Country Legislation Date Effective (S. 1039 and H.R. 4405) would accommodate Russian member- Hungary Section 2, P.L. 102-182 April 14, 1992 ship in the WTO, while signaling the Czechoslovakia (Split into the Czech Republic January 1, 1993 long-term American commitment to and Slovakia) the rule of law and human rights in Bulgaria P.L. 104-162 October 1, 1996 Russia and other countries.1 Romania P.L. 104-171 November 12, 1996 A Human Rights Tool Mongolia Section 2424, P.L. 106-36 July 1, 1999 Designed for a Different Time Albania Sections 301 and 302, P.L. June 29, 2000 During the Cold War, the Jackson– 106-200 Vanik Amendment was an important Kyrgyzstan Sections 301 and 302, P.L. June 29, 2000 tool for promoting human rights 106-200 in the Soviet Union and beyond. Attached to the U.S. Trade Act of Georgia Section 3002, P.L. 106-476 December 29, 2000 1974, the amendment restricts trade Armenia Section 2001, P.L. 108-429 January 7, 2005 with nonmarket economies that Ukraine P.L. 109-205 March 23, 2006 limit freedom of emigration and other human rights. It was the U.S. response to Soviet “diploma taxes” on Jews attempting to emigrate from “normal” trade relations under an business and economic practices, the communist state. annual waiver of Jackson–Vanik pro- such as Russian state-affiliated -offi Congress has since granted visions every year since 1992. Today, cials and business entities that are permanent normal trade status to Russia, although authoritarian and exporting corruption. 10 countries that were targeted by corrupt, allows free emigration and the Jackson–Vanik Amendment2 has thriving Jewish communities. Corruption and Human (see Table), but not Russia. Russia Russian Chief Rabbi Berl Lazar even Rights Violations in Russia remains on the dwindling list of asked President George W. Bush to In Russia, human and property countries subject to the Jackson– repeal the amendment.3 rights violations are undermining Vanik Amendment even though Any human rights violations the state and preventing investment it is no longer relevant in the 21st not part of the legislative intent and business development. Weak century. of Jackson–Vanik at the time of rule of law and pervasive corruption, In post-Soviet Russia, the circum- its adoption can and should be including the failing court system stances that prompted the Jackson– addressed in other, more effective and law enforcement, are at the Vanik Amendment no longer apply. ways. As Jackson-Vanik covered not heart of persistent rights violations. The U.S. government officially lifted just Russia, so should its successor Western and domestic investors and Russia’s status as a nonmarket econ- legislation. Furthermore, Congress Russian citizens face these chal- omy on April 1, 2002. The United has more effective ways of addressing lenges every day. President Vladimir States has also granted Russia legitimate concerns about Russian Putin, former president Dmitry

1. RIA Novosti, “Updated Magnitsky Act Introduced in U.S. Congress,” April 20, 2012, http://en.ria.ru/crime/20120420/172935614.html (accessed April 27, 2012). 2. Vladimir Pregelj, “Normal Trade Relations (Most Favored Nation) Policy of the United States,” Congressional Research Service Report for Congress, December 15, 2005, http://assets.opencrs.com/rpts/RL31558_20051215.pdf (accessed April 27, 2012). 3. Interfax, “Russian Rabbi Slams U.S. Refusal to Repeal Jackson–Vanik Amendment,” October 15, 2008, http://www.interfax-religion.com/?act=news&div=5261 (accessed April 19, 2012).

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Medvedev, and other Russian leaders and have negative implications for government to the press on several have bitterly complained about the the security of Europe’s energy sup- occasions. Browder was subsequent- state of affairs, but have done little to ply.6 Moscow’s ambition and new- ly expelled under the pretense that improve things. found wealth have spread its corrupt he posed a threat to national secu- Russia’s economic prosperity domestic business practices to the rity, although the Russian govern- under Vladimir Putin helped Russia international community. ment has not disclosed any details. reemerge as a major player on the This wave of corruption should Police raided the Moscow office of world stage. Russia’s gross domes- make gathering actionable intel- Hermitage Capital on June 4, 2007. tic product (GDP) increased from ligence on questionable Russian In the course of his work, Sergei approximately $250 billion after activities and punishing the culprits Magnitsky, a 37-year-old Firestone the 1998 crisis to $1.8 trillion 10 a priority for the U.S. and its allies. Duncan attorney representing years later, before the world finan- Hermitage Capital, uncovered a giant cial crisis. Increased oil and natural THE KREMLIN HAS ALSO USED scheme involving the embezzlement gas exports—Russia has the seventh ENERGY EXPORTS TO EUROPE AS of $230 million from the Russian largest oil reserves and the larg- treasury by law enforcement and tax est gas reserves in the world and is A FOREIGN POLICY TOOL, MOST officials. Magnitsky was conveniently the leading exporter of oil and gas— NOTORIOUSLY THROUGH THREATS detained in 2008 and died in isola- coupled with the higher prices for TO DISRUPT OIL AND GAS EXPORTS tion at a Russian prison in November other Russian commodity exports, TO COUNTRIES THAT OPPOSE 2009. have largely driven this economic An investigation ordered by then- RUSSIA’S PERCEIVED NATIONAL comeback. Russia uses the revenue President Dmitry Medvedev and from energy exports combined with INTERESTS. the Russian Presidential Council revenue from arms sales, metal on Human Rights determined that exports, and foreign investments, The Magnitsky Case. The death Magnitsky died after he was denied including in the mining and energy of Sergei Magnitsky has come to medical care and beaten by the sectors, to extend Russian influence symbolize the systemic and often guards. However, those involved worldwide.4 violent corruption pervading the have not been punished, but have The Kremlin has also used energy Russian state. Magnitsky died in jail remained in power, and some have exports to Europe as a foreign policy awaiting trial on fabricated charges even been decorated or promoted. In tool, most notoriously through of tax evasion and tax fraud. He April 2012, Russian state prosecutors threats to disrupt oil and gas exports was jailed after he accused Russian dropped charges against the chief to countries that oppose Russia’s officials of a sophisticated swindle doctor at the prison after the statute perceived national interests. Russia to obtain a $230 million tax rebate of limitations expired. The physi- has also acquired or is acquiring from the Russian treasury. cian had been accused of negligence energy companies and infrastruc- The Magnitsky story began with in Magnitsky’s death.7 Other officials ture, including pipelines, refiner- the expulsion of U.S.-born inves- implicated in Magnitsky’s death have ies, and other assets in more than tor William Browder from Russia not been punished to date. a dozen other European countries. in 2005. Browder, a British citi- In late July 2011, the U.S. This economic expansion is rife with zen, was co-founder of Hermitage Department of State placed 64 corruption and influence peddling.5 Capital, once the largest hedge fund Russian officials involved in Russia’s geo-economic ambitions in Russia. Hermitage had leaked evi- Magnitsky’s death on a visa blacklist, cover the entire former Soviet area dence of corruption in the Russian prompting protests from the Russian

4. Ariel Cohen and Lajos F. Szaszdi, “Russia’s Drive for Global Economic Power: A Challenge for the Obama Administration,” Heritage Foundation Backgrounder No. 2235, January 30, 2009, http://www.heritage.org/research/reports/2009/01/russias-drive-for-global-economic-power-a-challenge-for-the-obama- administration. 5. Ibid. 6. Andrew Osborn, “Vladimir Putin’s Eurasian Union: Excerpts,” The Daily Telegraph, October 5, 2011, http://www.telegraph.co.uk/news/worldnews/europe/ russia/8806748/Vladimir-Putins-Eurasian-Union-excerpts.html (accessed April 27, 2012). 7. Nataliya Vasilyeva, “Russia Drops Charges in Lawyer’s Prison Death,” ABC News, April 9, 2011.

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government. Blacklisting the offi- control other oligarchs that might and Representatives Ed Royce (R– cials may have been an attempt consider disobeying the Kremlin.9 CA), Chris Smith (R–NJ), and Jim by the Obama Administration to Amnesty International has recog- McGovern (D–MA) in the House preempt and undermine support for nized Khodorkovsky as a political of Representatives, would “impose the Sergei Magnitsky Rule of Law prisoner. sanctions on persons responsible Accountability Act of 2011.8 Fighting Russian Corruption. for the detention, abuse, or death of The Khodorkovsky Case. In Intelligence is critical in gathering Sergei Magnitsky, for the conspiracy 2004, Mikhail Khodorkovsky was the evidence necessary to secure to defraud the Russian Federation of Russia’s wealthiest man and the convictions in courts of law. Such taxes on corporate profits through chairman and chief executive officer intelligence includes, for instance, fraudulent transactions and lawsuits of the Yukos Oil Company. In 2003, Russian banks providing credit against Hermitage, and for other he was arrested on charges of tax card support for child pornography gross violations of human rights in fraud, and in 2005, he was sentenced websites. The U.S. should lead in the Russian Federation.”12 to nine years in prison, which was expanding international cooperation While named after Magnitsky, the later reduced to eight. In a second among law enforcement agencies to bill would target human rights abus- show trial in December 2010, he was prevent and stop complex transna- ers around the globe by denying U.S. sentenced to 14 years in prison to run tional crimes, such as money laun- visas to individuals guilty of massive concurrent with his first sentence. dering and other crimes involving human rights violations and freezing After Khodorkovsky’s conviction, current or former Russian govern- all of their assets within the purview the Russian government auctioned ment officials, oligarchs with close of the U.S. government. The legis- off Yukos Oil at a sharply discounted ties to Russian political leaders, lation could also apply to the case price to Rosneft, Russia’s state-run intelligence operatives, and persons of Mikhail Khodorkovsky, whose oil company in 2006, effectively with ties to organized crime. When Yukos Oil Company was expropri- expropriating without compensation Russian entities violate the law,10 the ated by the state for trumped up tax the investments of Yukos sharehold- U.S. and its allies should aggressively violations and its assets sold to the ers, including many American small prosecute the offenders, confiscate Rosneft national oil company. investors and mutual funds. illegally laundered funds and proper- The Magnitsky bill has promi- In reality, Khodorkovsky ran ties acquired with illegally procured nent supporters, including David J. afoul of the Putin administration funds, and deny visas to govern- Kramer, president of Freedom House because of his calls to curb corrup- ment and business figures who are and former Assistant Secretary tion and because some Putin associ- involved in illicit activities.11 of State for Human Rights in the ates coveted parts of this lucrative George W. Bush Administration. He company. The repeated political and The Sergei Magnitsky Rule testified that the Magnitsky bill, even financial prosecutions of Russia’s of Law Accountability Act before passage, has already “done wealthiest man, his partners, and The Sergei Magnitsky Rule of Law more for the cause of human rights his shareholders have lacked any Accountability Act, introduced by [in Russia] than anything done by substantial legal basis. The show Senators Ben Cardin (D–MD) and the Obama Administration … or by trial served to intimidate and John McCain (R–AZ) in the Senate the Bush Administration.”13 Seven

8. Sergei Magnitsky Rule of Law Accountability Act of 2011, S. 1039, 112th Cong., 1st Sess., http://www.gpo.gov/fdsys/pkg/BILLS-112s1039is/pdf/BILLS- 112s1039is.pdf (accessed April 17, 2012). 9. Khodorkovsky & Lebedev Communications Center, “Khodorkovsky & Lebedev Communications Center,” http://www.khodorkovskycenter.com/ (accessed March 28, 2012). 10. These include the PATRIOT Act, especially Section 312 (proceeds of foreign corruption); the Foreign Investment and National Security Act of 2007; the Defense Production Act of 1950; money laundering laws; the Foreign Corrupt Practices Act; and the similar laws of U.S. allies. 11. Cohen and Szaszdi, “Russia’s Drive for Global Economic Power.” 12. Sergei Magnitsky Rule of Law Accountability Act, preamble. 13. David J. Kramer, “The State of Human Rights and Rule of Law in Russia: U.S. Policy Options,” testimony before the Subcommittee on European Affairs, Committee on Foreign Relations, U.S. Senate, December 14, 2011, http://www.freedomhouse.org/article/state-human-rights-and-rule-law-russia-us-policy- options (accessed April 19, 2012).

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CHART 1 U.S. Trade With Russia: Exporting Machinery, Importing Energy U.S. EXPORTS TO RUSSIA, FY 2011 Value Sector (millions) 0% 10% 20% 30% 40% 50% Machinery (except electrical) $2,424.0 29.3% Transportation equipment $1,554.3 18.8% Chemicals $1,086.3 13.1% Food manufactures $888.1 10.7% Computer and electronic products $753.5 9.1% Electrical equipment, appliances, and components $220.9 2.7% Agricultural products $208.2 2.5% Miscellaneous manufactured commodites $185.2 2.2% Other fabricated metal products $165.3 2.0% Other animals $117.4 1.4% Plastic and rubber products $102.2 1.2% Miscellaneous (merchandise not listed above) $580.1 7.0% Total $8,285.5 100.0%

U.S. IMPORTS FROM RUSSIA, FY 2011 Value Sector (millions) 0% 10% 20% 30% 40% 50% Petroleum and coal products $16,794.6 48.6% Oil and gas $8,596.3 24.9% Primary metal manufacturing $4,924.6 14.2% Chemicals $2,769.0 8.0% Fish and other marine products $268.3 0.8% Transportation equipment $210.3 0.6% Nonmetallic mineral products $149.7 0.4% Used (second-hand) merchandise $140.4 0.4% Miscellaneous manufactured commodities $135.6 0.4% Other fabricated metal products $127.7 0.4% Wood products $105.3 0.3% Miscellaneous (merchandise not listed above) $350.8 1.0% Total $34,572.6 100.0%

Source: U.S. Department of Commerce, International Trade Administration, TradeStats Express, http://tse.export.gov/TSE/ChartDisplay.aspx (accessed April 25, 2012). B 2687 heritage.org

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Bout, an arms trader known as the CHART 2 “Lord of War.”15 However, such retali- U.S. Foreign Direct Investment in Russia Wanes ation would need to pass the straight face test both at home and abroad. $19.9 $20 billion $19.8 Protection of international criminals like Bout would be met with jeers.

$15.0 $15 Russian WTO Membership Later this year, Russia will finally $11.4 join the World Trade Organization $10 $9.4 $9.9 (WTO). This is a positive development for Russia, which is the largest nation $6.1 that is not a member of the WTO. It $5 has the world’s sixth largest economy, $2.5 but ranks only 23rd on the list of U.S. 16 $1.1 $0.9 $1.1 trade partners, placing it just below $0 Thailand and Nigeria. Russia is also 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 the only member of the G-20 group

Source: U.S. Department of Commerce, Bureau of Economic Analysis, International Data: Direct outside the World Trade Organization. Investment and MNC, http://www.bea.gov/iTable/iTable.cfm?ReqID=2&step=1 (accessed April Of the 50 largest economies of the 25, 2012). world, the Islamic Republic of Iran B 2687 heritage.org is the only other country that is not a member.17 According to WTO reports, about 95 percent of world trade leaders of Russia’s pro-democracy in Russia, nor for the economic takes place between members. After movement have also called for the interests of its people. … [M]uch Russia joins the WTO, that percent- U.S. to replace Jackson–Vanik with more effective are targeted sanc- age will jump to 97 percent.18 As noted the Magnitsky bill: tions against specific officials in a 2006 Congressional Research involved in human rights abuse, Service report, “Russia’s motivation We, leading figures of the Russian like those named in the Senator for and progress toward accession political opposition, strongly Benjamin Cardin’s list in the to the WTO are directly related to stand behind efforts to remove Sergey Magnitsky case.14 efforts to dismantle the Soviet eco- Russia from the provisions of nomic system of central planning and the Jackson–Vanik Amendment. Russia has threatened to retaliate replace it with a more market-based Jackson–Vanik is not helpful in “asymmetrically” if Congress passes economy.”19 any way—neither for promotion the bill. It has already banned entry Russia officially began working on of human rights and democracy to U.S. officials prosecuting Viktor its WTO accession package on June

14. Sergey Aleksashenko et al., “Remove Russia from Jackson–Vanik!” Blog Vladimira Milova, March 14, 2012, http://v-milov.blogspot.com/2012_03_01_archive. html (accessed May 7, 2014). 15. Thomas Grove, “Russia Draws Up Tit-for-Tat U.S. Visa Bans: Report,” Reuters, August 10, 2011, http://www.reuters.com/article/2011/08/10/us-russia-usa- idUSTRE77922V20110810 (accessed March 27, 2012). 16. U.S. International Trade Commission, The Year in Trade 2010: Operation of the Trade Agreements Program, July 2011, http://www.usitc.gov/publications/332/ pub4247.pdf (accessed March 27, 2012). 17. Daniel Griswold and Douglas Petersen, “Trading with the Bear: Why Russia’s Entry into the WTO Is in America’s Interest,” Cato Institute, December 16, 2011, http://www.cato.org/publications/free-trade-bulletin/trading-bear-why-russias-entry-wto-is-americas-interest (accessed March 27, 2012). 18. David Jolly, “W.T.O. Grants Russia Membership,” The New York Times, December 16, 2011, http://www.nytimes.com/2011/12/17/business/global/wto-accepts- russia-bid-to-join.html (accessed March 27, 2012). 19. William H. Cooper, “Russia’s Accession to the WTO,” Congressional Research Service Report for Congress, July 16, 2006, http://www.usembassy.it/pdf/other/ RL31979.pdf (accessed March 27, 2012).

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16, 1993, but progress has been diffi- will become a member 30 days after extends PNTR status to Russia, U.S. cult. For example, in 2009, President ratification.23 businesses will not benefit from the Putin announced that Russia was no Upon ratification by the Russian concessions Russia made to join longer interested in individual WTO Duma, the United States and other the WTO. In that case, companies membership, suggesting instead that WTO members will benefit from in every other WTO member would the customs union of Belarus, Russia, improved access to Russia’s mar- have an advantage over U.S. firms. and Kazakhstan should be accepted ket, while Russia will benefit from The 1992 Bilateral Commercial together. This approach, later aban- economic liberalization. The Index of Agreement would continue to apply, doned, delayed the country’s mem- Economic Freedom, published by The but companies in other countries bership until 2011.20 Heritage Foundation and The Wall could gain benefits not available to In October 2011, Speaker of the Street Journal, shows that countries U.S. firms, such as in services exports, House John Boehner (R–OH) sug- with low trade barriers have the intellectual property protection, and gested that the U.S. should take strongest economies.24 In the long dispute resolution.26 into account the dispute over term, Russia also stands to gain sig- Currently, the U.S. grants Russia Georgia’s border with Russia: “The nificantly from foreign investment annual waivers to Jackson–Vanik to Administration should resolve this and exposure of corrupt business maintain “normal” trade relations. stalemate in a manner that respects practices. According to one study, However, when Russia joins the the territorial integrity of Georgia. WTO membership could increase WTO, the practice of granting annual Then—and only then—will move- Russia’s GDP by up to 11 percent.”25 waivers in lieu of granting perma- ment on the WTO question be worth nent normal trade relations, as the considering.”21 This final stumbling The Risk to U.S. Businesses U.S. has granted to all other WTO block was removed on November 9, WTO membership is granted on a members, would negate the ability of 2011, as Georgia and Russia reached consensus basis, meaning that WTO U.S. firms to benefit from the conces- an agreement allowing Russia’s WTO members must unanimously agree to sions Russia made in order to join bid to move forward.22 grant membership to a new country. the WTO. U.S. businesses engaged On November 10, 2011, the WTO’s Ideally, the Obama Administration in commerce with Russia could be Working Party finally adopted should have worked with Congress put at a disadvantage compared with Russia’s accession package. At the to address human rights issues and companies in other WTO member ministerial conference on December the Jackson–Vanik question before countries. 16, 2011, the trade ministers of the agreeing to Russia’s membership. The Obama Administration WTO members approved Russia’s bid Regrettably, the Administration would like to extend permanent to join the World Trade Organization. agreed to Russia’s WTO membership normal trade relations to Russia. Russia has 220 days after the without first getting congressional Granting PNTR combined with approval to ratify accession, and it buy-in. Unless the United States implementation of new, targeted

20. Sergei Guriev, “WTO Club May Boost Russian GDP by over 3%,” November 7, 2011, http://blogs.ft.com/beyond-brics/2011/11/07/guest-post-wto-club-may- boost-russian-gdp-by-over-3/ (accessed April 19, 2012). 21. John Boehner, “Reasserting American Exceptionalism in the U.S.–Russia Relationship,” Heritage Foundation Lecture No. 1198, January 10, 2012, p. 4, http:// www.heritage.org/research/lecture/2012/01/reasserting-american-exceptionalism-in-the-us-russia-relationship. 22. Margarita Antidze, “Georgia Says Russia WTO Deal to Be Signed Nov. 9,” Reuters, November 4, 2011, http://www.reuters.com/article/2011/11/04/russia- wto-georgia-idUSL6E7M43UO20111104 (accessed April 19, 2012). 23. World Trade Organization, “Working Party Seals the Deal on Russia’s Membership Negotiations,” November 10, 2011, http://www.wto.org/english/news_e/ news11_e/acc_rus_10nov11_e.htm (accessed April 17, 2012). 24. Bryan Riley and Terry Miller, “Global Trade Freedom Needs a Boost,” Heritage Foundation Backgrounder No. 2614, October 7, 2011, http://www.heritage.org/ research/reports/2011/10/global-trade-freedom-needs-a-boost. 25. Jesper Jensen, Thomas Rutherford, and David Tarr, “Economy-Wide and Sector Effects of Russia’s Accession to the WTO,” May 26, 2004, http://siteresources. worldbank.org/INTRANETTRADE/Resources/Topics/Accession/Jensen-Rutherford-Tarr_effectsaccession.pdf (accessed April 19, 2012). 26. Office of the U.S. Trade Representative, “Implications for the United States and U.S. Companies of Non-Application,” http://www.ustr.gov/sites/default/files/ Implications%20for%20the%20US%20and%20US%20Companies%20of%20Invoking%20Non-Application.pdf (accessed May 7, 2012).

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human rights measures would rights, to respect the rights of gross violations of individual benefit both Russia and the United their citizens. rights, including property rights, States.27 Replacing Jackson–Vanik and in promoting the values of with the Magnitsky Act and grant- ■■ Cooperate with Western bank- the U.S. and its allies in the 21st ing PNTR to Russia could double ing regulators, intelligence century. U.S. exports to Russia over the next services, and law enforcement five years according to an estimate agencies to track human rights Conclusion from the Peterson Institute for abusers, as well as Russian Russia’s membership in the WTO International Economics.28 However, state and oligarch money laun- is a historic event that will greatly the Obama Administration views dering activities, corruption, benefit Russia and the entire world the Magnitsky bill and other human and unfair competition prac- economy. However, this is not the rights legislation as threats to the tices. The Obama Administration only U.S. foreign policy concern. Administration’s “reset” policy should prioritize gathering and America should not ignore the weak toward Russia. acting on intelligence on question- rule of law in Russia or its connec- able Russian activities. The U.S. tion to violations of individual rights GRANTING PNTR TO RUSSIA COULD should lead an international effort and human rights and the spread DOUBLE U.S. EXPORTS TO RUSSIA among law enforcement agen- of corruption and organized crime. cies to prevent and stop complex Congress should take action against OVER THE NEXT FIVE YEARS transnational crimes.29 those tyrants that systematically vio- ACCORDING TO AN ESTIMATE FROM late the natural rights of people, not THE PETERSON INSTITUTE FOR ■■ Replace Jackson–Vanik with just in Russia, but around the globe. INTERNATIONAL ECONOMICS. the Magnitsky Act. This would The Senate version of the provide a working system to pin- Magnitsky Act or similar legislation point and punish gross violators would not only empower the U.S. of human rights, while allowing government to take action against What the U.S. firms to compete equally for such individuals, but also send a clear United States Should Do business in Russia and elsewhere. message that the United States will The U.S. can improve trade rela- Extending PNTR to Russia would support the rule of law and freedom tions with Russia while still promot- also promote transparency, prop- in other countries. By placing human ing human rights and the rule of erty rights, and the rule of law. rights front and center and then law in Russia and in other countries. addressing the PNTR issue before Specifically, the U.S. should: ■■ Target blatant and system- Russia joins the WTO, Congress and atic abusers of human rights President Obama can both protect ■■ Adopt new measures to pro- who spend their time or keep U.S. interests in the global market- tect human rights in Russia their financial resources in the place and maintain America’s stat- and elsewhere. Targeted leg- West. The U.S. should coordi- ure as a nation that believes in and islation like the Senate version nate its efforts with its allies in actively defends human rights. of the proposed Magnitsky Act Europe and around the world who —Ariel Cohen, PhD, is Senior would more effectively encourage are promoting similar pieces of Research Fellow in Russian and Russia, and other countries which legislation. International coopera- Eurasian Studies and International systematically abuse human tion can go a long way in deterring Energy Policy in the Douglas and

27. Daniella Markheim and Ariel Cohen, “Permanent Normal Trade Relations for Russia Would Benefit the U.S. and Russia,” Heritage FoundationWebMemo No. 1286, December 14, 2006, http://www.heritage.org/research/reports/2006/12/permanent-normal-trade-relations-for-russia-would-benefit-the-us-and- russia, and Ariel Cohen and Richard Ericson, “Russia’s Economic Crisis and U.S.–Russia Relations: Troubled Times Ahead,” Heritage Foundation Backgrounder No. 2333, November 2, 2009, http://www.heritage.org/research/reports/2009/11/russias-economic-crisis-and-us-russia-relations-troubled-times-ahead. 28. Anders Åslund and Gary Clyde Hufbauer, “The United States Should Establish Permanent Normal Trade Relations with Russia,” Peterson Institute for International Economics Policy Brief No. PB11–20, November 2011, p. 2, http://www.iie.com/publications/pb/pb11-20.pdf (accessed April 20, 2012). 29. Cohen and Szaszdi, “Russia’s Drive for Global Economic Power.”

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Sarah Allison Center for Foreign Policy Studies, a division of the Kathryn and Shelby Cullom Davis Institute for International Studies, at The Heritage Foundation. Bryan Riley is Jay Van Andel Senior Analyst in Trade Policy in the Center for International Trade and Economics at The Heritage Foundation. Anton Altman, an intern in the Davis Center, contributed valuable research in the production of this paper.