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‘Black Friday’ in US-Russia relations could unleash ‘cyber-skirmishes’ and more

Diplomatic relations between the U.S. and Russia have hit a new low and tensions could lead to cyber-war, additional U.S. sanctions and more, risk consultancy Eurasia Group warned on Sunday.

October 7 would be remembered as "Black Friday in US-Russia relations," Eurasia Group analysts Cliff Kupchan, Jonathan Lieber and Mujtaba Rahman and Paul Triolo said in a note.

The comments come after the U.S. on Friday accused the Russian government of directing hacks into U.S. political organizations in a bid to "interfere" with the electoral process.

"The most impactful development was the U.S. in effect stating that President Putin ordered the (Democratic National Committee) DNC hack with the intent of sowing chaos in the U.S. election. Though the circumstantial case against the Kremlin was strong, this step raises the issue's profile to an entirely new level," the analysts said.

The accusations came shortly after State Secretary John Kerry called for Russia to be investigated for war crimes in Syria, where it is supporting the Syrian regime's bombing campaign in parts of the capital Aleppo.

In response, Russia Foreign Minister Sergei Lavrov was cited by Reuters on Sunday as saying that he had detected increasing U.S. hostility towards Moscow. In an interview with Russian state TV, reported by the news agency, Lavrov complained about what he said was a series of aggressive U.S. steps that threatened Russia's national security. He also blamed the Obama administration for what he described as a sharp deterioration in U.S.-Russia ties.

The Eurasia Group analysts said that the escalation of tensions on Friday could mark a new low ebb in US-Russia relations and lead to "intense" political pressure for the U.S. to act.

"Friday's series of escalatory actions bring US-Russian relations to their lowest level since Moscow used force in Ukraine in 2014," they said. "Developments pose risk of a cyber-war, additional US sanctions, increasingly provocative military postures, and diplomatic expulsions."

From bad to worse

Russian President Vladimir Putin with President Barack Obama
Mikhail Klimentyev | Sputnik | Kremlin via Reuters
Russian President Vladimir Putin with President Barack Obama

Relations between Russia and the U.S. turned sour after Russia annexed Crimea from Ukraine in early 2014 and around the same time supported a pro-Russian uprising in the east of the former Soviet satellite state.

Since then, the U.S., European Union (EU) and a number of other Western countries have imposed tough economic sanctions on Russia in an effort to coerce it to comply with a ceasefire agreement with Ukraine.

Russia has also caused anger in the West by its overt military and diplomatic support for Syrian President Bashar al-Assad who is waging war on rebel groups wanting to remove him from power. In assisting Syria in bombing rebel–held areas of Aleppo, killing hundreds of civilians in recent weeks, Russia has also been accused of war crimes by the U.S.

With no love lost already between Russia and the U.S., the latest spat could prompt the U.S. to impose more punishments on Russia.

"Sanctions against people and firms involved in cyber or Syria (Aleppo) are likely," Eurasia Group noted. In addition, the analysts believed that expulsions of Russian diplomats "were also likely" as well as possible retaliatory cyber warfare - although they said that an attack would be limited in scope.

"Possible but less likely is a relatively minor cyber-attack against a Russian individual or firm, one that may never become public. Impact here would be high, but the risk of an escalating cyber war will probably lead the Obama team to step back from even a limited attack on Russian Internet or critical infrastructure," they said.

Another reason why the outgoing Obama administration could be cautious in its approach to Russia is due to the impending presidential election in early November. Eurasia Group forecast that Hillary Clinton would assume office and take up the baton of punishing Russia.

"Deep mistrust of Putin will now be structural and unanimous among U.S. policy makers. The Obama Administration burnt the bridge behind it by publically fingering the Kremlin for hacking. And with the hawkish Mrs. Clinton on the verge of assuming office, bad will get worse," they said.

The impact for markets of "Russian Black Friday" would be three-fold, the analysts warned.

"First, the EU will delay movement toward sanctions relief. Second, there is an improbable but real chance of new sector sanctions or a modest and dangerous cyber-skirmish. Finally, tense bilateral military postures in many regions will unnerve some market players," they said.

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