In a resolute response to Russia’s unwarranted military aggression against Ukraine, the European Union (EU) has unveiled a comprehensive sanctions package, collaborating closely with its G7 partners to impose strict measures aimed at weakening Russia’s economic and military capabilities. The multifaceted sanctions target key individuals, companies, and sectors, reflecting the EU’s commitment to holding Russia accountable for its actions.
Diamonds, LNG, and More: Unpacking the Sanctions
One notable facet of the sanctions package is the ban on the export of Russian diamonds to Europe, part of an internationally coordinated G7 diamond ban. The move seeks to cut off a crucial revenue stream estimated at €4 billion annually for Russia. All G7 members are set to implement a direct ban on diamonds exported from Russia by January 1, 2024.
The sanctions also extend to the energy sector, with a controversial decision to ban liquified petroleum gas (LPG) imports worth over €1 billion annually. However, existing contracts will remain valid for a maximum period of 12 months. The EU has taken a firm stance on the import of liquid natural gas (LNG) from Russia, imposing additional export restrictions on dual-use and advanced technological goods, amounting to €2.3 billion per year.
Stricter Asset Tracing and Measures Against Circumvention
The sanctions package includes measures to tighten the monitoring and implementation of the oil price cap, encompassing transport costs in the total price. Stricter asset tracing obligations and measures against third-country companies attempting to circumvent sanctions are also integral components. Operators within the EU are now obliged to contractually prohibit the re-export of sensitive goods to Russia, particularly in aviation, jet fuel, firearms, and items on the Common High Priority list.
Furthermore, a new measure requires the notification of certain fund transfers out of the EU from entities with more than 40% ownership by Russians or entities in Russia. Over 140 individuals and entities have been added to the sanctions list, subject to asset freezes, spanning military and defense actors, private military companies, and those involved in the recent disputed elections in occupied Ukrainian territories.
Belgium’s Role in LNG Trade Raises Questions
Belgium plays a pivotal role in the international trade of Russian LNG, with gas operator Fluxys providing storage and transshipment facilities to Yamal LNG in the port of Zeebrugge. Despite calls for a ban on LNG imports, Hungary’s opposition has prevented a unanimous EU decision. This raises questions about the effectiveness of anti-circumvention measures, with Belgium citing a contract dating back to 2015 as a barrier to halting LNG imports.
Ukraine’s Unique Approach: “International Sponsors of War” List
Meanwhile, Ukraine has taken matters into its own hands, implementing an extra-sanction instrument by publicly naming and shaming companies and individuals still conducting business with Russia. The “International Sponsors of War” list includes entities from various countries, with China topping the list, followed by the United States and EU countries. The hope is that the reputational impact will compel listed entities to cease business with Russia and condemn its aggression.
Challenges and Adaptations: Is the EU Keeping Pace?
With 12 sanctions packages launched and reinforced gradually, Russia has had time to adapt its economy to the sanctions and find ways to circumvent them. The EU acknowledges that growing trade figures indicate Russia’s active attempts to bypass the sanctions, emphasizing the need to redouble efforts in tackling circumvention. The European Commission monitors sanctions enforcement but relies on member states to implement them, revealing potential weaknesses in the system.
The Commission recognizes that unscrupulous individuals are attempting to circumvent sanctions, prompting continued diplomatic outreach by EU Sanctions Envoy David O’Sullivan to key third countries. While there have been reported successes in preventing circumvention, the EU remains vigilant, drawing up a list of economically critical sanctioned goods requiring heightened scrutiny.
EU’s Firm Stand in the Face of Aggression
As tensions escalate on the global stage, the EU’s sanctions package underscores its commitment to responding resolutely to Russia’s aggressive actions. The measures, though comprehensive, face challenges in enforcement and circumvention. The evolving situation demands continued cooperation among EU member states and their international partners to ensure the sanctions effectively curtail Russia’s military and technological capabilities, while also imposing significant economic costs on the Kremlin.
