Back to business as usual with Russia?

In recent weeks various contacts stateside have asked me to comment on the state of the business environment in Russia, with the angle I think being the presumption that the Trump administration wants to open up to business with Russia, so U.S. government and business needs to be ready. This certainly comes across in messaging from Trump officials, Trump himself, but Witkoff, et al, that this US administration wants to get back to business as usual with Russia and I think for a variety of reasons:

First, that the business block in the Trump administration just want to make quick and big bucks and they can leverage the opening up of business with Russia, to cut favourable deals with a desperate Putin administration. I think we saw some of that in the way the Ukraine minerals deal panned out, or at least it did initially.

Second, I think for the ideological MAGA security types like Bannon, Tucker Carlson, Colby Eldridge, et al, it is all about a reverse

Nixonian, and they view offering business deals to Putin, et al, as a means to pull Russia out of the China orbit, and into a Judaea-Christian alliance against China. For these types the biggest threat to US security is China, not Russia, so they have no qualms about getting back to business with Russia, indeed, there is advantage f this means accessing Russia’s vast minerals wealth, cheaply.

The above I think suggests uncomfortable dilemmas for Europe, and Ukraine, but also for international investors.

For Europe, I think we can see clear blue water, an Atlantic Ocean in fact, opening up between European and US security interests. US interests seem clear now, as above - China, not Russia is the existential threat to US global hegemony. But Europe’s interests I think diverge 180 degrees, almost from those of the US. Indeed, Europe had I think a “eureka” moment at the Munich Security Conference in February with the visits of Trump minions, Hegseth, Vance et al, that while faced with an existential threat from Russia, they are now kind of on their own with the US AWOL, and re prioritising away from Europe to Asia and China. Europe can no longer rely on the US defence and security backstop, they have to develop their own autonomous defence capability. Unfortunately, given the neglect of the past, that could take a decade or more to put in place. In the interim, and until they develop that autonomous defence capability, they have an interest in keeping Russia weak, and that means doing all in their power to keep sanctions on Russia in place for as long as possible.

The above suggests that perhaps a difficult decision/clash is looming for Europe, with the US. I imagine, irrespective of the course of Ukraine peace talks, that the Trump administration will tire of the war in Ukraine, and with its own China threat interests coming to the fore that it will opt to lift sanctions on Russia, unilaterally, but perhaps also as a wider effort to get the collective West to lift sanctions. As noted above, Europe will have zero interest in following the US line. They will try and stall the US decision, and push back on US pressure for a generalised lifting of Western sanctions on Russia.

But can Europe resist US pressure?

Imagine a scenario where the Trump administration tries to force Europe’s hand - could it threaten to pull out of NATO, or cut arms supplies to Europe, unless Europe follows the U.S. in lifting sanctions on Russia?

Facing such threats could/would Europe resist?

More optimistically the Trump administration might see advantage in a differentiated Western sanctions piste around Russia, where with European sanctions on Russia remaining in place, US companies could take advantage of an uneven playing field, cleaning up on deals with Russia, at Europe’s expense. In the latter scenario though we might well see European companies complaining of being left disadvantaged, and lobbying then for the lifting also of European sanctions. They would no doubt question the effectiveness of European sanctions where the US is allowed to trade with Russia.

International business might be expected to quickly go back to business as usual with Russia if the U.S. moves to ease sanctions. Or perhaps not.

Certainly some business might see advantage of making a quick buck and have fewer cares about ESG or reputational issues.

But I think many businesses will be worried about the sustainability of any reapproachment with Russia. They would be worried about opening up exposure to Russia too quickly only to be reversed with the risk of having assets stranded again.

There is the issue of the potential that Europe fails to follow the US lead, and this leaves a legal minefield for international business to navigate. Imagine therein a U.S. bank, but with operations in Europe., would it risk following US advice to do business with Russia, only to get caught in the European regulators sanctions trap? Would a European regulator dare to go after a U.S. company though for breaking European only sanctions on Russia?

And how sure can we be that the back to business with Russia policy itself will be sustainable?

What if the is a change of presidency in the US, or the Democrats prosper in mid term elections? Will internatinal business then be caught up by a quick reimposition of sanctions and left then with assets stranded in Russia, as occurred for many in the days after Russia’s full scale invasion of Ukraine.

With doubts over the consistency of Western policy, international business will surely ask whether they expect a change of modus operandi by Russia - will Russia pull back its imperialist ambitions shown in the invasion of Ukraine, and prior that invasions of Georgia and Moldova, sufffice that it’s ok to go back into business in Russia?

Are we sure also that concessions by Trump, lifting sanctions on Russia, but also in accepting, de jure, Russia’s territorial gains in Ukraine, will not see further Russian aggression against ts neighbours?

History suggests that weakness in the face of aggressors - feeding the beast - just emboldens those aggressors. International business should then expect more, not less, aggression from Russia. More breaking of international law, crossing borders and generally malign actions against its foes in Europe and elsewhere. Against such action could even a Trump presidency turn the other cheek and ignore such action, or would there then be pressure for the reimposition of sanctions? I think not.

A conclusion from the above is some investors, perhaps portfolio investors, with liquid, easily tradable assets, not physically located in Russia, might be more amenable to trading with Russia. But perhaps foreign direct investors with exposure thru physical assets in Russia will be more cautious to move.