State Sponsor of Terrorism Designations

Session 23 of the Congressional Study Group

Image released by the Russia Ministry of Defense on Wednesday May 4, 2022 shows Russian soldiers conduct self-propelled artillery installations Malka in counter-battery combat against Ukraine. May 4 marks the 70th day of Russia invasion of Ukraine. The total amount of direct infrastructure damage has reached $92bn since the invasion in February at a cost of $4.5bn (£3.6bn) a week as bombs tear through thousands of buildings and public utilities, and miles of road, according to the Kyiv School of Economics (KSE). More than 33,000 sq metres of residential buildings have been hit by missiles, bombs and suffered other damage during the war, worth almost $30bn in total. More than 23,000km of road have been ripped up or pockmarked by shelling, and almost 90,000 cars, worth billions of dollars combined, have been damaged.
Editor's note:

The following is a summary of the 23rd session of the Congressional Study Group on Foreign Relations and National Security, a program for congressional staff focused on critically engaging the legal and policy factors that define the role that Congress plays in various aspects of U.S. foreign relations and national security policy.

On August 19, 2022, the Congressional Study Group on Foreign Relations and National Security convened over Zoom to discuss the debate over designating Russia as a state sponsor of terrorism (SST). While there have been increasing calls for designating Russia, doing so brings a number of risks with it, some of which could prove more harmful than helpful for Ukraine.

The study group was joined by two outside experts for the session: Brian O’Toole, a leading sanctions expert who is currently a non-resident senior fellow at the Atlantic Council and previously held positions at the Treasury Department and Central Intelligence Agency; and Ingrid Wuerth, a leading international law scholar and professor at Vanderbilt Law School.

Prior to the discussion, the study group circulated the following background readings:

The presenters began by describing the role that SST designations play in the menu of sanctions tools available to the U.S. government. The Department of State holds responsibility for the primary action of designating an SST, while enforcement and implementation of the designation is the responsibility of the Department of the Treasury.

The presenters focused on two consequences that they predicted would flow from designating Russia as an SST: first, a chilling effect on financial institutions that could avoid transactions with Russia that may be technically permitted, but institutions deem too risky to participate in; and second, pursuit of claims against Russia by U.S. citizens who could collect on judgments from Russian assets frozen by the United States, which would reduce the funds available for rebuilding Ukraine and compensating Ukrainian victims of Russian acts or as leverage to modify Russian behavior.

The presenters explained that predicting follow-on effects of SST designation is difficult because firms, particularly the financial institutions that serve as gatekeepers to economic activity, may calculate that risks of conducting otherwise permissible business with companies and individuals in SSTs pose too much risk, thereby extending the SST designation’s effect beyond its precise legal boundaries. This chilling effect could lead to outcomes that are undesirable to policymakers: for example, a designation could cause firms involved in Russian exports of grain to step back from these transactions due to the reputational risk of doing business with an SST-designated country (or some other risk concern), which in turn could lead to elevated food prices in countries that rely on those exports.

The designation of Russia as an SST could also create opportunities for U.S. claimants to seek to enforce judgments against currently frozen Russian state assets. This could in turn hinder efforts to use those assets to rebuild Ukraine, compensate Ukrainian victims of Russia’s actions, or induce Russia to change its behavior (or some combination of those three activities). While the Foreign Sovereign Immunities Act generally immunizes sovereign governments from suits in the United States, SST designation is an exception to that immunity and thereby opens a gate to suits based on conduct that was the basis for or occurred after the designation. Only U.S. citizens, U.S. service members, and U.S. government employees are eligible to be plaintiffs in these circumstances.

Therefore, the presenters noted, the basis for SST designation would create categories of eligible and excluded plaintiffs: current legislation cites as a basis for designation the Second Chechen War, Russian support of separatists in the Donbas region of Ukraine, Russian material support to Syria, private military networks of mercenaries, and allegations that Russia provides sanctuary to a U.S.-designated terrorist group. The panelists suggested that such expansive bases for designation could create pools of U.S. plaintiffs who could enforce judgments against Russia and erode the pool of assets frozen by the United States, thereby preventing the use of those assets to compel changed Russian behavior, as payment to Ukrainian claimants who are not qualified to sue in U.S. courts, or other use of those funds to rebuild Ukraine.

Following the outside experts’ initial remarks, the session went into open discussion. Topics discussed included: how SST designation interacts with other terrorism-related designation regimes; what makes SST designation in the United States different from similar regimes in other countries; and how Congress could create alternatives to SST designation.

Visit the Congressional Study Group on Foreign Relations and National Security landing page to access notes and information on other sessions.