Relations between the US and Russia are widely expected to continue their downward trajectory when President Biden enters office on 20th January. Biden arrives in office in very different circumstances from previous incumbents. In most recent cases, US presidents have started their terms by seeking better relations with Russia. This time, however, there are no illusions about the state of the US-Russia relationship and its current direction. With levels of trust between the two nations at such a low ebb, and goodwill lacking, there are likely to be few areas of potential cooperation.

US-Russia relations have been on something of a dual track during the Trump presidency, with Trump having expressed warm sentiments toward Putin but the US government as a whole increasingly seeing Russia as an adversary. Under President Biden, we can expect to see the president and the government apparatus acting more in concert, with a more pro-active policy to offset what the US establishment sees as Russian malign influence.

For its part, the Kremlin still holds animosity toward the US Democratic party after relations between Russia and the US took a downward turn under Barack Obama´s presidency. Relations had been deteriorating since the mid-2000s, with George W. Bush´s presidency seeing multiple disagreements over issues including the 2008 war between Russia and Georgia, the invasion of Iraq and US support for civil society and NGOs in Russia. Toward the end of Obama´s presidency, relations went further downhill, with revelations of Russian hacking of the Democratic National Committee (DNC) and leaking of Clinton campaign emails.

Trump´s positive stance towards Russia did nothing tangible to improve the wider relationship. The US government more broadly became more negative towards the Putin administration and imposed further sanctions on Moscow.

The context for US-Russia relations going into the Biden presidency is therefore that, beyond rhetoric in the media, the communication channels between Washington DC and Moscow have become narrower and more dysfunctional than at any time since the end of the Cold War.

Biden´s Approach to Russia

There are several reasons to expect the bilateral relationship to worsen further under a Biden presidency.

Many of the officials who will obtain senior positions at the National Security Council, the State and Defense departments, will be former members of the Obama administration, meaning the US establishment´s worldview under Biden will be broadly similar to that of the Obama years. However, the increasingly bad feeling that has developed between the sides since Obama left power will mean there is greater suspicion of motives on the part of both the US and Russia, resulting in fewer areas for potential cooperation.

The key areas of disagreement between the countries remain unresolved. Russia´s interventions in Ukraine continue, with no progress in sight in either the Crimea or Donbas issues. Meanwhile Washington says Russia continues to engage in malign influence operations, including cyberattacks.

One major difference from the Trump presidency will be a change in rhetoric. Biden has historically been hawkish on Russia in his public statements, saying he will take a tougher stance against Putin, and has called Moscow the biggest current threat to the security of the US. The new president will also be more active in backing US government agencies in countering Russian influence, both in the US and globally.

The recent poisoning of Russian opposition activist Alexey Navalny will further complicate any possibility of rapprochement between the US and Russia under Biden, and UK-based open-source intelligence firm Bellingcat´s investigation implicating Russia´s FSB security service may lead to further sanctions.

Closer Engagement with Allies

Biden´s administration will represent a return to ´normal´ US politics where the US engages more closely with both allied states and international bodies such as NATO and the United Nations. Where Trump largely withdrew from engagement with allies, focusing instead on domestic issues, Biden can be expected to work more intensively with former Soviet countries that are moving away from the Russian orbit such as Ukraine, Georgia and the Baltic States. Biden´s support for states in Russia´s ´near abroad´ may inflame tensions further, however.

Biden’s administration can be expected to instigate a more coordinated Russia policy. While foreign policy under Trump suffered from a lack of coordination between the White House and government agencies, US actions abroad under Biden will be guided by a greater degree of strategic planning.

Biden´s administration will have closer ties to Europe and may even seek improved relations with China. The latter development, in particular, would put greater pressure on Russia, which has forged closer links Beijing in recent years as both countries´ relations with the US have deteriorated.

Ukraine

During the Obama presidency, Biden was the White House´s point man on Ukraine. Biden developed a strong relationship with then Ukrainian President Petro Poroshenko and oversaw the US policy on Ukraine, travelling a number of times to Kiev in the post-Yanukovych era.

Biden has been a vocal supporter of Ukraine´s pro-western orientation since 2014 and has taken a close interest in bringing the country into the European-transatlantic fold. His administration is therefore likely to provide more support for Ukraine than Trump did, and the incoming president´s previous cooperation with the Ukrainian government suggests he will provide both rhetorical and practical support for the Kiev government. As vice president, Biden was particularly active in monitoring progress in Ukrainian efforts in the anti-corruption sphere, and he can be expected to boost US support in this area. While Trump sought to smear Biden over his son´s work for a controversial Ukrainian gas company, there was no evidence of wrongdoing on Biden´s part.

Meanwhile Biden´s support for Ukraine in its territorial disputes with Russia is likely to prove a particular sticking point in his relations with Russia, given the ongoing tensions between Moscow and Kiev.

Nord Stream 2

Another issue for the Biden administration will be whether to seek to stop Nord Stream 2 from being completed. The USD 10 billion gas pipeline from Russia to northern Germany was 90 percent complete when construction was halted by US sanctions on companies involved in the building work. Chancellor Angela Merkel strongly favours going ahead with the project, but the US wants it stopped, as it would increase Russia’s influence on Europe’s energy supply and reduce the US share of the European gas market.

Biden´s commitment to obstructing the completion of Nord Stream 2 is unclear, but his approach may not differ dramatically from that of Trump. The outgoing president was against the pipeline primarily because he foresaw it reducing the scope for US liquefied natural gas exports to Europe.

The US Senate in early January approved further sanctions on Nord Stream 2, imposing measures that may end construction of the pipeline. Existing measures targeted companies providing pipelaying vessels for the project. But the new sanctions, which could be passed into law within weeks, would extend penalties to entities providing technical certification and insurance for the work. Meanwhile the German government remains in favour of completing the pipeline, potentially paving the way for a stand-off with the Biden administration.

Cyberattacks

The claim that in December 2020 Russian hackers had carried out a major cyberattack on US government online infrastructure will ramp up the antagonism between Washington DC and Moscow. The development will also likely increase the pressure on Biden to take further punitive action against the Kremlin early in his presidential term in response to malign activity. The intrusion had given the hackers months of access to internal email accounts in at least a dozen US agencies, including the Treasury, Homeland Security and Commerce departments, according to reports. US officials said the breach may have been the largest in five years.

Potential Areas for Cooperation

Despite the tensions in the US-Russia relationship, there will still be areas for potential cooperation.

One of these is arms control, and the major issue between the countries in this sphere is the possible extension of the New START treaty. The treaty, which was signed in 2010 but expires in February 2021, is the last remaining nuclear nonproliferation agreement between the US and Russia. The two sides held talks in 2020 but the negotiations ended in stalemate. An agreement appeared close in October 2020 when the US said it had reached an agreement in principle, but Russia rejected the deal.

Iran is another area where the US and Russia may find they can work together under President Biden. Biden may take a more flexible approach to Tehran than Trump did, potentially opening the door to limited cooperation with Moscow.

Considerations for Investors

Ongoing tensions between Russia and the West mean heightened risks in the commercial sphere. Entities doing business with Russia should keep abreast of changes in the sanctions regime and conduct ongoing monitoring of counterparties.

Any expansion of measures may be marginal for the Russian economy as, despite Trump´s ostensible friendliness toward Moscow, the US government nevertheless continued to impose heavy sanctions against Russia during his time in office.

However, there is an increasing risk of sanctions being expanded from state officials and companies to oligarchs with interests in state-affiliated or other major companies, and businesspeople with looser government connections.

The likelihood of further sanctions being imposed will increase with Biden in the White House, and investors will need to follow developments closely to ensure compliance with any new measures.

Patrick Gill, Associate Berlin Risk Advisory