Experts’ guidance on how to make sanctions on Russia effective and force it to stop the war

Although the current Western sanctions against Russia over its war aggression in Ukraine are unprecedented, they are not perfect and have not yet fulfilled their main objective of forcing Moscow to stop the invasion of a sovereign neighbor country.

In addition, the Russian military-industrial complex has found cunning ways to circumvent some of the sanctions and obtain parts for weapon production, although it has faced serious problems due to the restrictions imposed.

How to close loopholes that Russia uses to evade sanctions?

Experts have identified several issues with the EU and US sanctions against Russia and loopholes that help Russia circumvent the restrictions. The list includes:

  • continued Western companies’ activities in Russia through their local subsidiaries;
  • loopholes for circumventing sanctions caused by a non-alignment between different sanctions regimes (the EU, the US, Japan, the UK, and Canada);
  • gaps in export controls of dual-use goods (with a potential military use);
  • lack of sanctions against many Russian entities collaborating with military enterprises;
  • weak restrictions against countries that help Russia evade sanctions despite much evidence in journalistic investigations.

Experts also propose stepping up actions against key sectors of the Russian economy that help the Putin regime finance the war. In particular, they are talking about strengthening the oil embargo—lowering the ceiling on Russian crude oil—and stricter supervision and punishment of violators of the price cap, including companies and countries that cooperate with Russia’s “shadow fleet”.

Experts also call for increased liability for sanctions evasion, including circumventing secondary sanctions. Strict restrictions against the states through which Russians systematically circumvent sanctions could help overcome sanctions schemes.

First of all, we are talking about the former Soviet republics in Central Asia that have friendly historic ties with the Kremlin: Kazakhstan, Uzbekistan, and Kyrgyzstan.

Yale experts proposed three ways to increase sanctions impact on Russian economy

In March, Yale professor Jeffrey Sonnenfeld, who was key in leading the campaign to penalize Russia for its war, and co-author Steven Tian, the director of research at the Chief Executive Leadership Institute, wrote an article criticizing an insufficient enforcement of Western sanctions against Russia and their omission of significant commodity exports. They recommend three strategies for Western decision-makers to follow to make a stronger impact on the Russian economy.

As the Russian invasion of Ukraine continues for the third year, the experts are concerned that some of the well-crafted economic restrictions on Russia are not sufficient due to the lack of enforcement. Some critics have mistakenly claimed that all sanctions are ineffective and pointless, citing the Kremlin’s inventive ways of getting around Western restrictions and the slight growth in the Russian economy.

However, some sanctions are already seriously hurting Russian production, prompting Putin to feed his war machine by cannibalizing the Russian economy. The experts explained why these actions won’t have a negative economic impact on the West and offered three essential steps that Western governments should take to strengthen sanctions against Russia.

Call for sanctions on Russian exports of metals

They proposed applying additional penalties to Russian exports of commodities and metals, as well as capitalizing on the current low prices and large supply of substitutes. Even though raw commodity exports account for around 80% of Russia’s federal budget, several Western governments have been hesitant to impose harsher restrictions on Russian commodity exports, in particular for fear of escalating inflationary pressures or triggering supply issues.

Sanctions have not affected Russian metal exports. Metals are Russia’s second-largest export, behind energy, at more than $60 billion a year. The evidence refutes the widespread belief that sanctions on Russian metals will cause the world economy to become unstable, the experts say. Europe’s ability to diversify its energy sources and cease importing Russian gas and oil without negatively impacting its economy served as proof of this.

Since Russia’s supply of metals is relatively small for global markets (making up no more than 6% of the world’s supply), the Kremlin needs to export its metals much more desperately than the world needs to buy them. Global prices for key Russian metal export categories, such as aluminum, nickel, copper, zinc, and cobalt, are now substantially lower than pre-war levels.

Crack down on sanctions evasion and tighten sanctions enforcement

The second recommendation is to crack down on evasion and tighten the enforcement of existing sanctions against Russia. The implementation of sanctions has been slow and sometimes insufficient, with Putin’s regime dodging past under-resourced and bureaucratic implementation and enforcement of restrictions.

The G7 coalition’s price cap on Russian oil, which operated effectively for its first year of existence, reduced Putin’s oil income by hundreds of millions, while global oil prices fell by thirty percent. According to research by leading economists at the Kyiv School of Economics, Russia built up a shadow fleet of ships to circumvent the price cap, and as enforcement deteriorated, even G7 shippers and insurers became more and more complicit.

As a result, at least half of all Russian oil shipments avoided the price cap. Even Treasury Secretary Janet Yellen has acknowledged that there has been a “reduction in the efficacy” of the price ceiling and that stronger enforcement is necessary.

Stopping Russia from obtaining Western-made dual-use technologies

The experts also urge stopping Russia from obtaining Western-made dual-use technologies for the manufacture of weapons. The Kremlin is circumventing Western sanctions meant to restrict Russia’s access to cutting-edge technology through widespread smuggling and “parallel import” operations.

Quoting their sources, the Yale experts stated that some firms in Central Asian countries are smuggling cutting-edge semiconductors into Russia with little opposition from their governments. Closing these loopholes is essential to make sanctions on Russia fully work.

The EU is thinking of measures to prevent China from aiding Russia – O’Sullivan

According to EU Sanctions Envoy David O’Sullivan, the European Union and its allies are thinking of taking additional measures in response to China’s export of goods that might benefit Russia’s military. This could involve taking action against China.

As the Western nations have been looking to crack down on Moscow’s evasion of sanctions imposed over its war in Ukraine, last week EU Sanctions Envoy David O’Sullivan said he discussed with US counterparts how to address China’s role of production hubs in Southeast Asia as sources of cutting-edge products, as reported by Reuters.

In an attempt to prevent Russia from obtaining the funds and cutting-edge technology it needs to produce weapons for the war, which has claimed tens of thousands of lives, the US, the EU, and their allies have imposed a number of sanctions on Moscow. 

Western allies to continue penalizing firms in third states for helping Russia evade sanctions

Western allies have made an effort to block ways that Moscow uses to circumvent sanctions. According to O’Sullivan, those measures have resulted in a slowdown or even a halt to the flow of dual-use components through nations like the United Arab Emirates, Turkey, and Serbia.

“Because of that success, we see what I call a kind of eastward drift. We see an increasing focus on Hong Kong, China, as the source of these products. We also see Western production hubs in Southeast Asia as a source of supply,” O’Sullivan said.

According to EU envoy, the EU has and will continue to apply penalties to certain firms in China and Hong Kong that it believes are a part of networks that purchase European goods for export to Russia.

Washington and the EU are also considering other options for dealing with the new phase, such as contacting China directly, the EU envoy said. China has declared that it is firmly against EU restrictions imposed on Chinese companies linked to Russia’s war efforts.

O’Sullivan also expressed concern about the “shadow fleet” of aging tankers that Western sanctions and a price cap force certain participants in the Russian oil market to rely on. He said that the EU and its partners are trying to shut off the supply of old tankers.

Every Russian missile attack on Ukraine shows the insufficient efficacy of the sanctions – Zelenskyy

Every Russian missile attack on Ukraine uses foreign-made parts supplied through sanctions evasion schemes, underscoring the need for stricter sanctions and accountability measures against those who aid Russian aggression. According to UNN, Volodymyr Zelenskyy, the president of Ukraine, stated last week that every terrorist incident by Russia demonstrates the insufficient efficacy of the sanctions imposed by the international community on Putin’s regime.

“Companies outside of Russia produce parts for every Russian missile that these non-humans use to attack our nation.” There are at least 53 types of such components in the design of the X-101 missile. The Kinzhal missile has at least 49 types of components that Russia does not produce. A significant portion of them are manufactured by companies in the free world and imported to Russia through various gray schemes. It is crucial to block such schemes and all those who support them,” Volodymyr Zelenskyy said.

Along with military and diplomatic measures, economic pressure is a crucial instrument in the struggle to stop Putin’s invasion of Ukraine, but it cannot stop Putin on its own. Russia and its allies are already investing vastly disproportionate amounts of financial resources in the ongoing war.

Despite the fact that the combined GDP of the allied nations is 25 times larger than Russia’s, the US and the EU, respectively, are allocating 0.3% and 0.4% of their national budgets to military and humanitarian assistance for Ukraine. Meanwhile, Russia is using 10% of its GDP, or 40% of its budget, to attack and bombard Ukraine.

How to keep EU-made dual-use technology out of Russia’s hands

Adding corporate responsibility to European technology manufacturers could help prevent their goods from reaching the Russian regime and being used in their military production to fuel their war against Ukraine.

Companies that produce items that can be used for military purpose have to adhere to high corporate responsibility. Especially if it has already been revealed that their technology and parts have already been purchased by sham firms supplying Putin’s belligerent regime, which is waging an aggressive war in Ukraine, killing thousands of innocent civilians.

The EU’s recently enacted legislation regarding the duty of vigilance may be helpful in this regard.

Read more: Russian war: the duty of vigilance of European companies regarding sanctions

European governments have a duty to prevent the supply of their countries’ products to criminal regimes. The likelihood of evading sanctions decreased with the implementation of the most recent sanctions packages in December 2023 and February 2024. However, it’s still insufficient.

Companies that provide Russians with goods that could be used for military purposes ought to be held accountable. Sanctions should be more strictly enforced, and modern technology and machinery sales should be subject to inspection.

After all, only strict implementation of the sanctions and the dismantling of Moscow’s attempts to get around them can ensure that the Russian economy is under enough pressure to force it to end its war against Ukraine and stop producing weapons.

The absence of sanctions enforcement will significantly reduce the effectiveness of military assistance to Ukraine. Furthermore, continuing Russia’s weapons production will push the conflict closer to EU borders and incite further action from the Kremlin, perhaps against NATO and European nations.

Russian missiles built with the aid of European technologies have the ability to target cities within the European Union if Russia launches a war against European nations, amid reports that the Kremlin has been planning for it.

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