EU states want to do more to combat sanctions circumvention

Russian refinery

The fight against circumventing the sanctions should now be made a priority.

(Photo: imago images/ITAR-TASS)

Brussels The EU has decided on nine sanctions packages against Russia, the tenth is to be announced on the anniversary of the Ukraine war on Friday. At the same time, there is growing displeasure in the European capitals that the sanctions have so far not had the desired effect: According to trade data, Western goods are still finding their way to Russia, and the Kremlin seems to be keeping its wartime economy running with alternative supply chains.

The fight against circumventing the sanctions should therefore now be made a priority. “2023 must be the year in which we successfully take action against the circumvention of sanctions,” says a paper from the Dutch government that is available to the Handelsblatt. The initiative is supported by 13 other EU countries, including Germany, France, Italy and Poland.

The problem: The sanctions are decided at EU level, but then implemented at national level. This happens very differently in the 27 Member States.

Especially in smaller countries, there is often a lack of infrastructure and personnel to effectively control exports or to take action against sanctioned persons. That is why the punitive measures are only on paper in many places.

The EU heads of government therefore decided at their special summit on February 9 to better coordinate sanctions control. In the paper, the Netherlands are now making the first concrete proposals:

  • There should be more exchange between the national and the EU level to identify and close loopholes. Law enforcement agencies, secret services, customs and EU agencies would have to work closely together.
  • A one-stop shop in the EU is proposed to collect and analyze information on suspicious trade flows. The responsible finance department in the EU Commission has been increased in terms of staff, but it is busy with the creation and administration of the sanctions lists. In the future, the planned European money laundering authority AMLA could play a role, but it will not start work for a few years at the earliest, so far there is no location for the authority.
  • The third countries through whose territory trade in sanctioned goods takes place should be addressed directly. At the turn of the year, the EU appointed ex-ambassador David O’Sullivan as sanctions officer for this task. If the diplomatic pressure is not enough and a third country refuses to cooperate, the EU should also consider trade penalties.
  • The industries that can produce or distribute sanctioned goods are to be checked more intensively. For example, a “watch list” of certain sectors and companies could be created. The proof threshold for violations of sanctions could be lowered, and there could be a warning if there was a suspicion.
  • So far, only companies and people who directly support the war or who can be proven to have a connection to sanctions violations can be put on the EU sanctions list. The Dutch are now calling for the criteria to be expanded. For example, all companies whose goods are “directly or indirectly” linked to war production could end up on the list.

Pressure on Turkey, Kazakhstan, China

According to the paper, a “strong signal” must be sent to people and organizations in third countries. “Material support of Russia’s military industrial base will have severe consequences for their access to the EU internal market.”

container port

The industries that can produce or distribute sanctioned goods are to be checked more intensively.

(Photo: imago/Winfried Rothermel)

No names are mentioned in the paper. But the countries that import western goods to sell to Russia are well known: they are neighbors like Turkey, Armenia and Kazakhstan. But the economic powerhouses China and India have also multiplied their trade with Russia in the past year.

“Russian evasion tactics are becoming more numerous and creative,” the paper said. “Alternative supply chains are being created by front companies and middlemen in countries around Russia.” Disrupting these supply chains could have a major impact and hamper Russia’s arms production.

>>Read here: China and Turkey cut ties with Russian banks

The push by the Netherlands in the EU Council is apparently not yet able to win a majority. The signatories not only lack long-term critics such as Hungary, but also, for example, the large shipping countries Greece, Cyprus and Malta. These had pushed through a number of exceptions to the sanctions packages.

To better monitor the sanctions, the Europeans are dependent on the United States. Over the past few decades, Washington has built up a powerful sanctions bureaucracy that can rely on the findings of the secret services. Therefore, the Dutch propose to coordinate closely with the partners.

More: How Russia Diverts Its Trade Flows and Outsmarts the West

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