On May 5, the European Commission (EC) published its plan for the 11th sanction package against Russia, targeting third countries that they think are involved in Moscow’s sanction-evasion measures, Politico reported.
Brussels has slammed countries such as Turkey, Iran, China, and Kazakhstan for allegedly abetting Putin’s military efforts via equipment and funds, such as reselling Russian goods to Western markets and selling restricted European high-tech parts to Russia.
The EU regards third-country-enabled sanction evasions as a key factor undermining the successes of prior sanctions on Russia. Accordingly, thanks to these third countries, Moscow has been able to fund its military efforts for at least another year, based on the calculations of the recently leaked Pentagon documents.
“Those willing to make a profit, regardless of legal or moral circumstances, are ingenious in their tactics and methods,” the EU’s sanctions enforcer David O’Sullivan declared, elaborating that any idea to boost the implementation of EU sanctions “is certainly welcomed.”
Middlemen have been rushing to make profits by reselling unavailable goods to Russia because of Western sanctions. These new supply chains that are providing Russians with luxury goods, alcohol, and other Western products weaken the EU’s efforts to penalize Moscow and should be banned, Gabrielius Landsbergis, Lithuania’s foreign minister, told Politico.
“Circumvention of EU sanctions is not only a short-sighted decision — it undermines the basic principles of our union,” Landsbergis said, while alluding to data that depicted how countries in the Caucasus and Central Asia have been profiting from indirect trade with Russia.
“There are new trade flows through third countries where you can see exports to Russia have gone up, and also imports from the West have gone up,” said Janis Kluge, a senior associate at the German Institute for International and Security Affairs.
Most of these so-called parallel imports are consumer goods that producers do not wish to sell to Russia, but rather to countries with a close relationship with Russia, Kludge said. “It’s a multibillion-dollar business that has increased and is driving really strong expansions in exports from Russia’s neighbors.”
Temur Umarov, a fellow at the Carnegie think-tank’s Eurasia Center, opined that these sanctions are significantly enhancing countries around the former Soviet fringe.
“There have been several reports that Russian businessmen are reaching out to partners in Kazakhstan, Kyrgyzstan and even Uzbekistan — which is not a part of the Eurasian Economic Union — trying to ask them to order things from European countries and other parts of the world from where it’s not easy to import to Russia anymore,” he said.
Consequently, “the economic situation has become much more dynamic and energetic in Central Asia,” he added. “Many businesses and organizations are trying to use this momentum to fill the niche because they see demand for consumer products in Russia.”
Thus, the proposal offers two flexible annexes to list both countries and products under the proposed sanctions regime, establishing a legal basis to punish targeted companies and governments separately.
Although these envisioned sanctions would not be as harsh as American extraterritorial sanctions, this proposal within the framework of the 11th sanctions package has been regarded as an atypical move on Brussels’ end. To get EU member states to agree to the proposal, the latter would ensure that each state would retain its autonomy to separately sanction a third country.
Nonetheless, some observers posit that existing measures in the proposal may be inadequate for the package to go through interinstitutional discussions. For example, the proposal would only be effective if most member states are willing to enforce it, prompting analysts to doubt if discussions on the proposal could be finalized soon.
Various diplomats also articulated their worries that targeted countries on the envisioned sanctions list would retaliate. For instance, Turkey is a key NATO player that has been counted on to prolong the 2016 EU-Turkey migration deal after the Turkish elections on May 14 this year.
If the sanctions proposal passes through negotiations, a future EU “sanctions enforcement headquarters,” which was suggested back in February to coordinate the “use of the full strength of [the EU’s] collective economic strength and criminal justice system against those who assist in sanctions evasion,” could be set up.
The proposed new institution would then be a platform where EU members could gather resources to effectively counter comparable methods of sanctions evasion.
“We currently have too little capacity in the EU to analyse, coordinate, and promote new sanctions,” remarked Dutch Foreign Minister Wopke Hoekstra, justifying the need for the institution. “That is why I would like us to set up a sanctions headquarters in Brussels, aimed at circumvention.”
Hoekstra added that the envisioned institution would function like other existing watchdogs, keeping tabs on high-risk sectors and trade flows to identify sanctions circumvention.
Besides, under the proposal, companies operating in the EU would be “obliged to include end-use clauses in their contracts so that their products don’t end up in the Russian war machine,” Hoekstra stated.
“The EU must use the full strength of its collective economic strength and criminal justice systems against those who assist in sanction evasion,” Hoekstra said, “by naming, shaming, sanctioning, and prosecuting them.” The foreign minister pointed out that several EU member states such as France, Germany, Italy, and Spain have already expressed support for the proposal.
It remains to be seen if the proposed new entity would eventually outlaw the breach of EU sanctions within and by member states. While the EC submitted a draft proposal in May last year, many members remain reserved about reforming the EU’s criminal laws.
Beyond the EU, the new sanctions-enforcement body is poised to enjoy full authority to seize and freeze Russian assets and to directly refer cases it unearths to the EU’s general prosecutor.
In Hoekstra’s view, Europe would depend on sanctions even more in the future. “It is crystal clear that this will be a fundamental part of our future geopolitical toolbox, that we need more of this specific purpose, for this specific war,” he said.
