What would recognizing Russia as a state sponsor of terrorism actually entail?

Ukraine’s political leaders intensified their appeals to the U.S. government to designate Russia as a state sponsor of terrorism after Russian soldiers executed Ukraine’s prisoners of war on July 29.

The Ukrainian government has been calling on the United States to label Russia a state sponsor of terrorism since the early spring of 2022 when the first large-scale attacks occurred. Members of Congress have backed the move, which would place Russia alongside Cuba, North Korea, Iran and Syria as terror supporters. 

American law affirms that the Secretary of State bestows the designation of a state sponsor of terror by providing evidence that the state in question has repeatedly supported acts of international terrorism. Such a designation is not just a political act but a precondition for imposing further substantial sanctions.

The State Department bans the reexporting of U.S.-origin dual-use items, including items that can be used for military purposes, to countries so designated. In addition, it bans the export of software and technologies, as well as certain financial transactions. By designating the Russian Federation as a state sponsor of terror, the United States would send a powerful message to those counties that have not imposed sanctions on Moscow and further state that Washington is firmly determined to help Ukraine win the war.

The move could also signal to those nations that have taken a pro-Russian line that it is in their interest to adopt the American-led sanctions regime rather than face the substantial stigma of continuing to do business with a terror-listed pariah state.

Three Examples

Sudan

In 2020, in its report on terrorism, the State Department mentioned that the Trump administration’s decision to remove Sudan from the list allowed Khartoum to obtain some loans. It also allowed Sudan to be rehabilitated in the international arena after twenty-seven years of isolation after the Sudanese government openly sheltered Osama bin Laden after he ordered terrorist attacks on the American embassies in Kenya and Tanzania in the 1990s. Before it regained access to international lending, the country was burdened with an inflation rate of more than 150 percent.

Removal from the U.S. list was prompted by a change in Sudan’s ruling party that made it possible for the country to attract investments from the International Monetary Fund. At that time, Treasury Secretary Steven Mnuchin stressed that the United States was prepared to help the Sudanese government renegotiate its $60 billion in foreign debt.  A more important provision was that Sudan agreed to pay $335 million to victims of the attacks on the American embassies. That precedent suggests Russia may be compelled to pay Ukraine for war damages if it is put on the U.S. list and wishes to be delisted.

Cuba

The Obama administration removed the Communist-led island from the list in 2015; the Trump administration, in a move described as “blatantly political”, returned it to the list in January 2021, with the imposition of additional sanctions. Those sanctions were mostly related to travel bans and money transfers, which particularly hit vulnerable Cubans who had been receiving remittances and other aid from Cuban-American relatives and American tourists. Cuba’s precedent illustrates that the U.S. government should not fear whether in thirty to fifty years it might have to deal with Russia, for example, conduct talks on bilateral treaties, including nuclear nonproliferation. If Moscow does not commit any further terrorist acts, Washington may consider removing Russia from the list.

North Korea

The logic and timeline of U.S. sanctions against Pyongyang and the designation of North Korea as a state sponsor of terrorism correspond to the current U.S. sanctions imposed on Moscow. First, severe sanctions were introduced, and then the country was put on the terror list. Before North Korea was listed in November 2017, dozens of restrictions were imposed by the United States and its partners. In the summer of 2017, Congress approved the Countering America’s Adversaries Through Sanctions Act, which required the U.S. President to impose sanctions on Russia, North Korea and Iran under three separate titles of the act. In that regard, Western sanctions and the designation as a sponsor of terror can be arranged in parallel, and the status of a state that sponsors terrorism will be subjected to more substantial sanctions.

Effects of Designating Russia a State Sponsor of Terrorism

Russia has never before been designated a state sponsor of terrorism by the United States, though some European governments are now moving to apply this label to Moscow. Doing so, in the context of the Russia-Ukraine War, would allow the United States to increase sanctions and encourage other countries not to finance Russia’s participation in the war. There is broad, almost unanimous, support in the U.S. Congress to proceed with listing the Russian Federation.

The effects of such a listing are onerous. In addition to having no chance of obtaining U.S. foreign aid or of buying U.S.-origin items that have dual commercial and military use, Moscow would find it nearly impossible to approach the world’s leading financial institutions, such as the World Bank, for loans.

A long-duration war would also be expected to lead to Russia’s default on its foreign debts, which would make it impossible for Moscow to obtain money from the international financial institutions and would likely terminate Russian troop activity and that of mercenaries financed by Moscow, such as the Wagner Group, in Ukraine.

The designation of state sponsor of terrorism essentially involves two areas of law – sanctions and sovereign immunity – from lawsuits. The U.S. Senate’s nonbinding resolution approved on July 27 leans towards the latter. It calls for waiving Russia’s sovereign immunity, which would put teeth into lawsuits brought against Russia in American courts. Here the Foreign Sovereign Immunities Act comes into play: though the act generally provides protection for foreign states that are sued in U.S. courts, it does allow Americans – but not Ukrainians, in this case – to sue designated countries for certain heinous acts and, if they prevail, to be awarded compensation from the state’s frozen assets. At present, there is $38 billion in Russian assets currently being held in American banks.

A Russian response to being designated a state sponsor of terrorism would likely include stepped-up efforts to intervene in the United States’ midterm elections in November and to carry out cyberattacks on American infrastructure. Russian state propaganda might even resort to inventing reports of false flag attacks on Russian state-controlled TV. Moscow has already accused the United States of sponsoring a phantom “war of aggression” by Ukraine, and even of supporting “Nazis” in Kyiv. This means that any attempt by the Russian Federation’s tightly controlled media to forge a new narrative that justifies their actions will most likely fall on deaf ears. 

The Kremlin could also jeopardize talks on the new agreement needed to replace the New START Treaty, a nuclear arms reduction treaty, whose extension expires in 2026. Moscow has already halted U.S. inspections of its nuclear arsenal as required under the treaty, and further noncompliance may be expected, particularly if it can be turned to propagandistic purposes.

One forceful line of propaganda emanating from the Kremlin is to paint the United States as a global superpower in decline. The public announcement of Russia’s suspension of inspections in early August, during an UN-sponsored treaty on nuclear nonproliferation, caught observers on the back foot, though most of the discussions on major issues are handled privately. However, an open announcement of this sort, according to Foreign Policy, seems intended to stoke tensions with Washington.