EU sanctions against Russia face complexity and weak implementation

Uneven enforcement, trade diversion and complex financial structures hamper the implementation of economic sanctions imposed by the EU on Russia, Euronews has learned from several sources.

A package of measures, the twelfth in 21 months, was presented by the European Commission last week – but some MEPs say restrictions in key areas such as oil and diamonds are still not sufficient.

The economic sanctions aim to punish Vladimir Putin’s regime and weaken the Russian economy following the invasion of Ukraine. For Lithuanian MEP Andrius Kubilius (EPP), the results are mixed.

“Sanctions work and skeptics who say they should be abandoned are wrong“, he explains to Euronews. But he thinks they should be stronger.

If Moscow’s oil and gas revenues have halved from pre-war levels, Andrius Kubilius estimates that “Russia still receives too much” of Europe and that creative workarounds mitigate the effect of sanctions.

In a declaration adopted on November 9, MEPs called for a total ban on a range of energy products derived from Russia, while expressing concern about Moscow getting its hands on high-tech European products.

In the wake of the EU’s decision to restrict direct sales of anything that could be used by the Russian army, exports to neighboring countries increased, rather suspiciously, in the same proportions, specifies the Lithuanian MEP. It therefore suggests that supplies were moved without disappearing.

“We must try to convince these third countries not to participate in this exercise“, but also put pressure on EU companies with questionable business practices. “If your iPhone sales in Kyrgyzstan suddenly increase 10 or 100 times, you must wonder what’s behind it“.

Andrius Kubilius’ suspicions are supported by evidence from the Ukrainian battlefields. Russian weapons seized often contain Western components, Svitlana Taran, a researcher at the European Policy Center think tank, explains to Euronews.

This suggests that the goods also arrive via countries like Kazakhstan, Georgia or Armenia. However, Russia still pays the price through longer and riskier supply chains, she adds.

Since economic sanctions are at the heart of the EU’s response to the Kremlin’s war, European officials are keen to defend their record.

In a message published in August, EU foreign policy chief Josep Borrell said the Russian economy was being pushed “towards isolation and decline“, with the fall of the ruble, industrial production and GDP.

EU sanctions have grounded the oligarchs’ planes, grounded 200 billion euros of Russian central bank assets and forced the military to resort to lower-quality weapons dating back from the Soviet era, explains a Commission spokesperson to Euronews.

The body also appointed a new sanctions envoy, veteran diplomat David O’Sullivan, in March to persuade countries like Kazakhstan to stop participating in circumventing EU sanctions.

But Andrius Kubilius wants the EU to go further. He proposes seizing some 300 billion euros in assets from the Russian central bank, which he says would help finance much of Ukraine’s post-war reconstruction.

Christine Lagarde has warned that such a measure could damage the reputation of the euro, but the MEP believes she has found a solution to circumvent international legal obstacles and hopes to be able to persuade other elected officials to join her call.

When one state harms another, it is possible to “implement countermeasures to seize state property“, assures Andrius Kubilius. “In this case, there is no legal immunity.“

The secret

Measures against those close to Vladimir Putin have also proven delicate, notes Roland Papp of Transparency International, because they are hampered by financial secrecy.

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“Mr Putin’s yacht is not marked PUTIN’S YACHT“, explains Roland Papp, responsible for illicit financial flows policy within the NGO. He believes that the EU’s delays made life easier for the oligarchs.

The Belgian Prime Minister, Alexander De Croo, assured that too hasty sanctions on diamonds would only displace Antwerp’s trade without harming Russia, but the long time needed to finalize trade blockages allows additional loopholes to be created, Roland Papp warns.

“Russian entities and individuals expect to be sanctioned – they will have already taken steps to conceal their assets“, he explains. “It is unreasonable to imagine that they sat for a year and a half without doing anything“.

Compared to OFAC, the financial supervisory body of the United States, European authorities have been timid, according to Roland Papp, and the fines imposed on large financial institutions represent little more than a “rounding error“.

Sanctions for sanctions

According to a document published in 2021 by Eurojust, the European judicial cooperation agency, the maximum fines for violating sanctions – set and applied at national level – are only 1,200 euros in Estonia, while in Spain it is only 1,200 euros. It’s not even a crime.

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This needs to change, believes MEP Sophie in ‘t Veld (Renew Europe), who is campaigning for tougher sanctions in the event of an infraction.

“It’s debatable whether the maximum prison sentence should be three years or five years, but it’s not that important“, explains the Dutch elected official to Euronews. “What is important is that the punishment is the same in all member states – otherwise, if you are a Russian oligarch, you will go to the country where the regime is nicest“.

“Not a day goes by without the media reporting that sanctions were dodged in this country, that they were not enforced in another country, or that people found back doors“, adds Sophie in ‘t Veld.

A new round of negotiations aimed at finalizing the new laws is planned for the end of the month, and she says “safe“to be able to find an agreement with the national representatives who meet within the Council of the European Union.

But she is also frustrated by the gap between EU politicians’ anti-Russian rhetoric and what they actually bring to the negotiating table.

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“The Council really wants to announce and boast of having adopted yet another set of sanctions… it is still very satisfied with itself“, she judges. “Looking at the actual application, there’s not much to be proud of.”.