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CCSDD | Enforcing EU Sanctions Against Russia: What Are the Options for Improvement?
Enforcing EU Sanctions Against Russia: What Are the Options for Improvement?

Viktoriia Lapa and Marco Sibona

Enforcing EU Sanctions Against Russia: What Are the Options for Improvement?
Viktoriia Lapa and Marco Sibona
July 4, 2024

According to the EU finance forecast of spring 2024 released by the European Commission on May 15th 2024 the Russian economy started 2024 'on a strong footing'. Even though Russian GDP growth is expected to slow the forecast still predicts 2.9% growth in 2024 and 1.7% in 2025. As a matter of fact the European Union still struggles to weaken the Russian war effort through its sanctions. Indeed on April 25 Ukrainian President Zelenskiy following his meeting with British Finance Minister Jeremy Hunt posted on his X account that "It is important to extend restrictive measures against Russia and make the circumvention of sanctions impossible." This message by the Ukrainian President is in line with what the Executive Vice President of the European Commission Valdis Dombrovskis declared on April 9th saying that the EU was working on a 14th sanctions package including several measures with a strong anti-circumvention focus. Given the fact that EU exports to Turkey the United Arab Emirates (UAE) Kazakhstan and other "Kremlin-friendly" countries surged by €2.979 billion or 81.55% in the October 2022 – September 2023 period compared to the previous year the focus on the circumvention of sanctions and their effectiveness as such is heightened.

The question is thus: what kind of measures should the Union adopt to increase the effectiveness of its sanctions and prevent their circumvention? Professor Bryan Early identifies three main mechanisms to do so: improve domestic compliance; improve foreign compliance; and mitigate external sanctions busting.

Improving domestic compliance should be the first priority for the Union and luckily some steps have been taken in this direction with the recent adoption by the European Parliament of a Directive aiming to harmonize penalties between member states for violations of EU sanctions. But while this is a good step forward it is not enough. Implementation and enforcement of the measures are still too diverse among member states with approximately 160 competent authorities being in charge of it.

Following the call by Enrico Letta for a stronger and reformed Single Market actions in this field should also be directed towards centralization and harmonization of measures and practices. Having 27 different sanctions implementation systems gives rise to loopholes and "forum shopping" activities by malign actors who can carry out their circumvention activities in the member state that is most convenient for them. This difference also creates an unfair level playing field among EU businesses giving greater possibilities to businesses based in some member states to seek that risk premium. Guaranteeing uniform enforcement of EU sanctions is not only a matter of responsibility towards common security or support for Ukraine but it is also a matter of fair competition in business.

The second mechanism is to improve foreign compliance which can be achieved either via diplomatic efforts such as building sanctions coalitions or via coercive ones such as extraterritorial sanctions provisions. The first possibility is what is currently in place between the EU the US the UK Canada Japan and to some extent South Korea. Clearly the bigger the coalition the better as several studies have confirmed that multilateral coordination is the best available tool to maximize sanctions effects. The second one is a controversial practice to some extent as many states consider it to be against international law as it implies an application of foreign laws on domestic jurisdictions. Nevertheless the United States have been applying extraterritorial sanctions (also called secondary sanctions) for decades causing significant diplomatic and political tensions with the EU.

Finally in order to mitigate external sanctions busting the EU has adopted anti-circumvention measures. In simple terms circumvention means avoiding existing export or import prohibitions or making any effort towards this direction thus rendering the restrictive measures de facto ineffective. Starting with the eighth sanctions package adopted in October 2022 the EU introduced a new listing criterion that would allow for the asset freeze of third parties involved in sanctions circumvention or in 'frustrating' their meaning. Another relevant anti-circumvention measure was the introduction of the 'anti-circumvention tool' with the eleventh sanctions package adopted in June 2023. This tool is fundamentally a legalized 'naming & shaming' mechanism whereby the Union lists under Annex IV of the relevant regulation third-country companies revealed to help Russia circumvent European sanctions. Note that this does not mean supplying Russia with goods produced in said third country whose supply is prohibited in Europe but supplying Russia with goods produced and sold in the EU whose supply is prohibited. Firms registered in China, Belarus, Turkey, Kazakhstan, Kyrgyzstan, Armenia, Uzbekistan, India, Serbia, Sri Lanka, and Thailandhave currently been listed using this tool.

It is important to note that the prohibitions do not apply to third-country persons under anti-circumvention mechanisms but only to EU persons who are prohibited from supplying said companies with the goods listed in the relevant sanctions regulation.

Unfortunately the way anti-circumvention norms have been designed gives them an inherently limited scope (they only apply within the EU jurisdiction) and thus limited effects. This limitation stems from the EU's commitment to respecting international law and its historical opposition to the secondary sanctions as applied by the United States. However it is also likely that if the EU were to adopt secondary sanctions similar to those applied by the US they would lack real deterring power (due to the higher relevance of the US dollar) making them not the best tool to increase EU sanctions' effectiveness.

In a moment where support for Ukraine by Western countries—including the US—is to say the least weakened and delayed it is crucial to reflect upon all the sanctions measures we have adopted so far to understand their weak points and what we should do to maximize their effectiveness. As Europeans we should be particularly aware that supporting Ukraine should be our first objective for collective security and that Ukrainian defeat would be extremely negative for the rest of the continent. The enforcement of sanctions is one of the tools to put pressure on Russia and weaken its war machine. Complying with sanctions is a matter of common responsibility of good citizenship if you wish. Not doing so as a European is essentially putting profit interests ahead of the common security of your fellow citizens.


Viktoriia Lapa, Lecturer, Bocconi University, Affiliated Research Fellow, CCSDD
Marco Sibona, Analyst, BCW Brussels.


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