Trading with Russia: The Magnitsky Act (UPDATE)
In case you missed it, late last month, Russia officially became a member of the World Trade Organization (WTO). The Heritage Foundation’s Ariel Cohen and Bryan Riley explain the importance of this little noticed event:
Russia’s accession to the World Trade Organization (WTO) will put U.S. companies at a disadvantage with their global competitors unless Congress first exempts Russia from the application of the Jackson–Vanik Amendment, a tool from the 1970s designed to promote human rights that no longer advances that goal. Russia admittedly suffers from weak rule of law and pervasive corruption, but Congress should pass new human rights legislation rather than try to uphold Jackson–Vanik beyond its utility. Then, Congress should grant Russia permanent normal trade relations status, which will promote transparency, property rights, and the rule of law in addition to the expected economic benefits for U.S. companies.
The legislative vehicle for replacing Jackson-Vanik is the Magnitsky Act, which Heritage says “would accommodate Russian membership in the WTO while signaling long-term American commitment to the rule of law and human rights in Russia and other countries.”
Will Congress act? Today, House Speaker John Boehner (R-OH) placed the ball in President Obama’s court:
We’ve got a pretty busy week next week. If the president really thinks this is an important issue that we ought to deal with, then maybe he ought to be out there making the case for it. I haven’t seen that as yet.
The administration has remained oddly silent on the issue, and with just a few legislative days scheduled before the election, next week may be their only chance to push the legislation, and thus trade normalization with Russia.
UPDATE: Lanhee Chen, policy director for the Romney campaign, said in a statement that “Gov. Romney believes that permanent normal trade relations (PNTR) should only be granted to Russia on the condition that the Magnitsky human rights bill be passed.”
Also, Heritage’s Cohen has a good overview of Sergei Magnitsky, for whom the pending legislation is named after:
Sergei Magnitsky was a 37-year-old attorney who uncovered a giant corruption scheme that involved embezzlements of $230 million from the Russian Treasury by law enforcement and tax officials. After making accusations, he was arrested on fabricated tax evasion and tax fraud charges.
Magnitsky died in isolation at a Russian prison where he was denied medical care and beaten mercilessly by guards; an investigation by the Russian Presidential Council on Human Rights has confirmed as much. This has not resulted in the punishment of those involved. Those that were in power remain in power, and some have even been decorated or promoted. Earlier this month, Russian state prosecutors dropped charges against the chief doctor at the prison where Magnitsky died after the statute of limitations expired. The physician had been accused of negligence resulting in Magnitsky’s death. Other officials implicated in the affair have been promoted instead of being punished.
Another case the legislation could be applied to is that of Mikhail Khodorkovsky. Khodorkovsky, chairman and CEO of the Yukos oil company, was once Russia’s wealthiest man. In 2003, he was arrested on charges of tax fraud, and in 2005 he was sentenced to nine years in prison. At a second show trial in December 2010, he was sentenced to 14 years in prison. In 2006, Yukos was auctioned off at a rock-bottom price to Rosneft, Russia’s state-run oil company. Yukos shareholders, including many American small investors and mutual funds, were effectively expropriated by the Russian government without compensation.
In reality, Khodorkovsky ran afoul of the Putin administration due to his calls to curb corruption and because some of Putin’s associates coveted parts of Yukos. The show trial was used to intimidate and control other oligarchs that might have disobeyed the Kremlin. Amnesty International recognized Khodorkovsky as a political prisoner. Russia remains the only G-8 country with political prisoners.