Tom Keatinge is the founding director of the Center for Financial Crime and Security Studies at the Royal United Services Institute.
As the focus on sanctions against Russia remains resolute in the European Union — and among partners like the United Kingdom and the United States — two challenges will continue to confront the bloc this year, both related to implementation.
First, in order to ensure that the Kremlin’s ability to fund its war in Ukraine is ever more restricted, individual member countries will need to prioritize implementing the wide range of sanctions consistently and effectively; while the EU and its allies will also need to be more successful in encouraging third countries, such as Turkey and the United Arab Emirates, to implement restrictions against Russia — a mission that’s so far failing and undermining allied efforts.
With nine sanctions packages under its belt, the European Commission has already provided a vast number of targets for the EU’s private sector to restrict.
But while some in the private sector, such as banks and high-tech exporters, are familiar with sanctions and trade controls, and have the necessary staff and experience, others — for example luxury goods manufacturers or small- and medium-sized industries — have no such proficiency and are struggling, if they are even aware of the restrictions that apply to them.
Individual member countries are similarly struggling too. As one experienced sanctions expert told me, “There have been plenty of previous EU sanctions regimes, but this is the first time we have actually had to pay attention to implementation.” And as a result, laws have had to be updated, responsibility among government agencies more clearly apportioned, and enforcement mechanisms and penalties sharpened.
Now, as the first anniversary of Russia’s full-scale illegal invasion approaches, both the Commission and member countries need to diligently review and audit the extent to which sanctions packages to-date are actually being implemented, and where challenges are identified, make sure to log and urgently address them.
However, to deliver the impact required to restrict the financing and resourcing of the Kremlin’s war machine, much more still needs to be done. And to this end, the European Sanctions and Illicit Finance Monitoring and Analysis Network is already identifying fundamental issues that need to be addressed.
From the Commission enabling the creation of information-sharing networks and harmonizing implementation between member countries — by urgently enforcing the Sanctions Implementation Exchange Repository, for example — to member countries themselves driving awareness and sanctions compliance among individual companies, even in the furthest reaches of the EU, this year must see a relentless focus on implementation. We need to move beyond the broader picture and dive into the details, ensuring every loophole and vulnerability is dealt with.
This circle of effectiveness mustn’t merely be widened within the EU, however. Third countries, beyond the coalition of allies that currently supports sanctions against Russia, must also be encouraged and cajoled into recognizing the importance of constraining the Kremlin’s war machine. This could be achieved by limiting the funds they pay for Russian energy — implementing the oil price cap, at the very least — blocking access of Russian banks to their financial systems, or ensuring that their trading and logistics industries don’t facilitate the circumvention of trade restrictions.
Therefore, to broaden the community of nations actively opposed to the Kremlin’s illegal war, the EU needs to press forward with a three-pronged strategy of soft, medium and hard power.
For example, in many parts of the world — notably Africa — Russia’s diplomatic campaign has successfully turned countries that typically rely on the West for aid and other development support against allied sanctions. Thus, as a soft approach, the EU should first intensify diplomatic dialogue and engagement with third countries to understand why they aren’t supporting Ukraine, after which the bloc should seek various means to reverse this position.
Utilizing the “medium” approach, the EU should support civil society and investigative organizations that publicize how activities enabled by these countries continue fueling the war in Ukraine. The countries must be presented with incontrovertible evidence of both the atrocities being waged by Russia, as well as their own connections with, or facilitation of, this illegal war.
However, if they still fail to support restrictions on Russia, the EU must then turn to the “hard” approach, developing mechanisms that place consequences on the sovereign decisions that countries like the UAE and Turkey continue to make.
Of course, the EU resists secondary sanctions and has measures in place to support the resilience of its economic and financial system. But the bloc is nonetheless entitled to react to these sovereign decisions with certain measures of its own — and member countries have informed me they are comfortable in doing so.
For example, the EU already has country lists that require financial institutions to take enhanced measures against jurisdictions presenting heightened tax evasion or money laundering risks — a similar list reflecting the facilitation of sanctions evasion could easily be produced, placing economic restrictions on countries representing a high risk.
More productively, as with the oil price cap, incentives — such as preferred market access or engagement with other economic requests — could also be developed, bringing benefits to these countries for implementing further restrictions on the ability of the Russian economy, as well as businesses and individuals sanctioned under the EU’s restrictive measures, to raise and move funds.
Despite bluster from the Kremlin, data emerging from Russia is beginning to shed light on the negative impact sanctions are having on the country’s economy. The EU must now ensure this pressure continues via the increased effectiveness of member country implementation, as well as the expansion of the circle of countries supporting Ukraine’s sovereignty and right to peaceful existence.
