What do the US Midterms Mean for Sanctions?

While we do not have complete results from Tuesday’s midterm election and the balance of both houses is still to be officially decided, what is certain is that the outcome from the election sets the ground for a much more complicated picture for US sanctions over the next two years. 

Biden still retains the power of veto,  but when it comes to sanctions, the dynamics of needing to use that power, if ever, will go through a byzantine process. We will have plenty of “smoke” from active members of Congress, particularly in the House, ready to push aggressive stances on foreign policy issues, or hold Biden administration priorities hostage for election posturing rather than foreign policy aims.  The difficulty for Nordic companies will be determining what is fire from all the smoke.

What will the future of Russia and China sanctions look like?

The two main issues that we will see plenty of boisterous rhetoric and efforts to force the Biden administration to realign are Russia/Ukraine and China.  

The House Republican budget boasts of many foreign policy efforts that will be more aggressive than where the Biden administration has gone thus far, and will certainly be calling for more sanctions on Russia in the face of continued aggression in Ukraine. Targeting additional industries, a broader cutoff from SWIFT to include the Central Bank of Russia, imposing “secondary sanctions,” and labeling Russia as a State Sponsor of Terrorism will all be efforts that are likely to be pushed in the near future.  How much traction these efforts gain will depend on the election outcome for each chamber, but will certainly depend on the course of events on the ground in Ukraine and the rapidly changing overall economic and political climate.

On China, we are likely to see continued calls for further restrictions on China’s access to industry leading technologies and efforts to compel international cooperation on the same front.  As newly empowered politicians promote “decoupling” the West from China, we are likely to see calls to add more companies to the Chinese Military-Industrial Complex list and to further restrict goods and services for companies on the list. We are also likely to see calls to force international alignment and to expand restrictions on exports to and imports from China for which the recent US Commerce’s BIS rule on advanced computing and semiconductors and the Uyghur Forced Labor Prevention Act (UFLPA) serves as a guide map. All of which complicate the market potential and supply chain reliability of China for Nordic companies. 

These next two years will see lots of charged rhetoric on sanctions and export controls, the likely result of which will be hearings and legislative proposals that have real and potentially dire impacts for Nordic companies.  Many of these efforts will be nothing more than smoke but some will certainly contain real fire. 

Fortunately, we are uniquely experienced in understanding the nuances of Washington and its impact on sanctions implementation, enforcement and international policy for which we currently advise clients in the Nordics and Asia. So certainly contact us so we can help your company understand the changing landscape and its impact now and in the future for your company.