The EU’s Enforcement Problem: Navigating Secondary Sanctions Ahead of the 12th Sanctions Package
By Alexandra Kovalcikova
While some still have lingering concerns about the challenges posed by the European Union sanctions on Russia in June, the European Commission has recently introduced a fresh set of sanctions in response to Russia’s invasion of Ukraine. The twelfth package in twenty-one months is introducing new import bans on recently neglected fields, such as a ban on Russian diamonds and critical minerals. Furthermore, the sanctions package aims to address existing loopholes from previous measures, including the tightening of the oil price gap and dealing with issues such as sanctions circumvention. The sanctions against individual firms based in Central Asia point to the growing role the region around Russia is playing as an intermediary, working around Western sanctions. The EU’s ability to effectively combat sanction evasion in this region is still limited, and it will require collaboration and honesty about what can be achieved in cooperation with partners in the region.
The Role of Central Asia and the Southern Caucasus in Sanctions Circumvention
Following Russia’s full-scale invasion of Ukraine on 24 February 2022, the EU stunned observers by promptly implementing numerous retaliatory measures. Through the imposition of instruments such as import and export restrictions, individual restrictive measures and the oil price cap, these measures are intended to undermine the Russian war effort. The primary objectives pursued by the EU involve the denying of Russia’s access to sophisticated military equipment, the prevention of Moscow from acquiring the necessary financial resources to prolong the ongoing conflict, and the imposition of significant burdens on the Russian military and industrial complex in their efforts to maintain the war in Ukraine.
The efficacy of these measures has come under scrutiny, particularly with regard to sanctions evasion through transit countries in Central Asia and the Southern Caucasus. Since the initiation of economic sanctions by the EU in March 2022, exports of goods to Russia have plummeted by 50%. Yet, this decline has coincided with an increase in exports to neighboring countries such as Kazakhstan, Georgia and Armenia; raising suspicions of potential sanctions evasion through these transit nations. Exports to Kazakhstan and Kyrgyzstan have surged by 15% to 90% overall, including a notable 30% increase in exports of sanctioned dual-use goods critical for curtailing Russia’s war efforts. Despite Georgia’s explicit opposition to the war in Ukraine, its trade with Russia has increased by nearly 22% since the invasion.
While economic integration with Russia occasioned by membership of the Eurasian Economic Union may elucidate some of these countries’ sustained ties,, all countries in the region have resisted joining the EU sanctions regime so far, citing their economic interests and unwillingness to pick sides. This poses unique challenges for Brussels in formulating a strategy for future sanctions enforcement in the region.
The European Union’s Measures Up to Now
In response to allegations of sanctions evasion, the EU has implemented secondary sanctions against “persons and entities circumventing the Union’s restrictive measures by activities which have the aim or result of frustrating the prohibitions in those measures”, mirroring measures taken in the past by the US. Additionally, the appointment of sanctions envoy David O’Sullivan signifies an effort to engage with third countries on areas of concern. His role involves monitoring trade changes between the EU, countries of concern and Russia, all while maintaining an ongoing dialogue.
Crucial to this discussion is the recognition that the core issue revolves around sovereign decisions of these states and acknowledging that the EU lacks the ability to compel countries to adopt its sanctions policy. However, the EU can foster continuous dialogue with these nations, recognizing their shared interest in avoiding becoming hubs for sanctions evasion. Notably, all countries have taken steps to restrict the export of goods to Russia with military applications, although challenges persist as some companies continue to engage in trade that raises concerns in the West.
The Challenges of Secondary Sanctions
Loopholes and circumventions undermine the efficacy of sanctions; therefore, refining and enforcing them is crucial in terms of impact so as to increase their efficacy. However, certain considerations must be taken into account. Firstly, the EU cannot anticipate unwavering adherence to its approach to economic sanctions on Russia from countries in Central Asia and the Southern Caucasus, given their longstanding trade ties with Russia. Unlike the EU, these nations and the companies within them heavily rely on trade and investments from Russia. Furthermore, in the case of Kazakhstan, they are bound by the institutionalized common market of the Eurasian Economic Union. Another significant consideration is the extent of the state’s influence in compelling its companies to comply with sanctions. In an era where even European companies face accusations of ongoing trade with Russia, the EU must properly assess the influence that non-EU state authorities wield in restricting their national companies’ trade engagement.
Given these complexities, policymakers would be wise to maintain focus on curbing the reselling of dual-use goods and continue collaborating with partners from Astana to Yerevan, while actively listening to their concerns. Recognizing sanctions as a gradual impediment to Russia’s war effort, the EU relies heavily on continuing cooperation with regimes in the region to curb the overall trajectory of the war. While the EU should make it more challenging, time-consuming, and expensive for Moscow to circumvent sanctions, achieving a total limitation on circumvention in this region remains a distant aim.
Unwrapping the New Sanctions Package Before the End of This Year?
Turning a blind eye to circumvention significantly undermines the effectiveness of sanctions, eroding the EU’s credibility in this arena. However, Brussels must confront the reality of its limitations and set honest expectations regarding cooperation with actors in Central Asia and the Southern Caucasus when it comes to the new sanctions package. The considerable economic influence that Russia wields in this region necessitates a nuanced approach that balances assertiveness with consideration for the concerns of these partners.
An additional challenge lies in the uncertainty surrounding the timely approval of the sanctions package before the year’s end. Despite hopeful expectations, achieving this goal is in jeopardy due to the evolving political landscape within the EU. Slovakia has already voiced opposition, signaling potential hurdles to a unanimous agreement on another sanctions package. The recent electoral success of Geert Wilders, a Dutch eurosceptic politician, serves as a harbinger that the era of easily securing EU agreement on continuing sanctions to weaken Russia’s war economy may be gradually coming to an end. This shifting political dynamic underscores the need for the EU to navigate complex internal dynamics while maintaining a cohesive stance on its future sanctions strategy.
Alexandra Kovalcikova is a Master’s student at Sciences Po, specializing in International Security. With a keen interest in Central and Eastern Europe, she investigated these topics outside of academia in the German Bundestag and Federal Foreign Office.
