In 2023, Western sanctions programs have increased by 42%. Russia is the undisputed world leader in such programs, with more than 11,000 sanctions imposed on it. However, bodies monitoring the implementation of sanctions around the world must remain vigilant.
Sanctions are a complex mechanism
Daniel Tannebaum, Senior Fellow at the GeoEconomics Center of the Atlantic Council, directs Oliver Wyman’s International Financial Crime program (Daniel Tannebaum, GeoEconomics Center, Atlantic Council).
He is among those who work with companies that have left or are leaving the Russian market.
Tannebaum believes that Russia “has made it extremely difficult for Western companies to exit by preventing the sale of their assets and, in some cases, even nationalizing their assets. Many companies tried to protect their staff in Russia by evacuating their employees, many of whom were citizens of the Russian Federation.
Daniel Tannebaum
According to Tannebaum, “some companies suffered losses of almost $10 billion as a result of their activities leaving Russia.” However, today it is important to take a closer look at “the activities of those who said they were leaving the Russian market, but still have not,” Tannebaum believes.
The big picture of how sanctions work against Russia, published on the Atlantic Council website and the chronicle of US sanctions against the Russian Federation is constantly updated in a special section of the Russian media service.
The United States is significantly ahead of other Western jurisdictions in terms of the number of Russian legal entities and individuals that have come under sanctions.
Peter Piatetsky, CEO of Castellum.AI, explained it not only by the great “experience of the American administrative apparatus and its close relations with the intelligence services and the financial authorities”, but also by the fact that “all the Decisions are made exclusively within the United States, as opposed to European Union countries.
Petr Piatetsky
“In some European countries, we often hear that the EU, following the imposition of sanctions against Russia, can expect difficult times. And they make very different decisions, because it is not easy to make such serious decisions in one capital. Therefore, the EU will always act a little more slowly. But, overall, it is by far the most coordinated global sanctions program in history,” Piatetsky explained.
“I think the focus should be on increasing publicity and condemnation of companies whose actions are contrary to the goals of Western coalition countries, in terms of responding to Russia’s actions in Ukraine,” said Daniel Tannebaum.
The main ways in which Russia circumvents sanctions
Piatetsky noted that more needs to be said about the means used by Russia to evade sanctions. Escape “number one” Peter called resale.
He cited as an example the latest published data, according to which, for example, last year Kazakhstan “increased sales of chips and cards for mobile phones to Russia by about 18 times”. Piatetsky explains this by the fact that supplies that used to go to Russia are now going to Kazakhstan – to be resold in Russia.
“So we are seeing exactly the same pattern as Iran and the UAE, where many Iranian businesses and Iranian citizens live in the UAE. They have been doing good business for decades, basically buying things that cannot be bought in Iran but can be bought in the UAE to resell,” Pyatetsky explained.
“The question is, what will be the position of the US and the EU in the field of law enforcement, and will they also have the political will? After all, the United States and the EU have not completely stopped their trade relations with the Russian Federation. However, there is outrage at what is happening, for example, in Turkey and India compared to Russia,” Piatetsky said.
Daniel Tannebaum believes that the results of the sanctions are far from ideal. He added that “some European countries still do not have the legal right to apply sanctions and therefore cannot apply them”.
Sanctions in the oil sector: success or failure?
So far, according to most experts, the agreement on the introduction of a cap on the price of Russian oil was considered the most successful in the field of global sanctions.
Ellen Wald, senior fellow at the Global Energy Center and president of Transversal Consulting, is among those who are still skeptical about the effectiveness of this measure, because she does not see mechanisms for its strict and universal application.
Ellen Wald
Ellen said Russian-traded oil blends had already fallen to $60 because they were cheaper than Brent and WTI.
The overall customer base of “black gold” consumers in Russia before the imposition of sanctions and the “ceiling price” was very diverse. Today, the Russian Federation “has fewer customers, but the export of Russian oil has not been interrupted”, underlined Ellen Wald.
“Russia, for example, has opened up a new market for itself in India, because it’s India that can’t afford to buy hundreds of dollars a barrel of crude oil,” Wald explained.
“The only good thing is that it leaves Russia largely at the mercy of its main consumers – China and India, who won’t want to pay too much,” she admitted.
Regarding the last of the measures introduced – the ban on the purchase of Russian petroleum products, as well as crude oil by sea, Ellen noted that, unfortunately, among the “losers” could be Europe and the States States, which already have some problems with obtaining petroleum products. The winners in this case will certainly be the Asian refiners as they buy a lot of Russian crude oil at a discount and now have the potential to refine it into petroleum products and resell it to Europe and the United States.
Moreover, according to Wald, “Russia adopted much of what Iran did while under sanctions. Iran has increased its tanker fleet. Russia is doing the same.”
With all this “pessimism”, Wald is ready to discuss with Daniel Tannebaum, who underlined that “it is already significant that now many companies providing financial services, including insurance, have simply decided not to participate in the financing any longer. Russian oil”. , which is a serious obstacle to its transport and marketing.
How to improve the effectiveness of sanctions?
Daniel Tannebaum sees enough room for improvement in Western sanctions policy: “Secondary sanctions have not yet been used. They are often threatened, but rarely used. Although, let me remind you, they have proven to be fantastically effective, forcing many people on the planet to choose between trading with Iran and dealing with Western countries.
Ellen Wald believes that it is urgent to move to more drastic measures in the trade of oil and petroleum products, perhaps, on the contrary, abandoning the “price cap”, seeking a global drop in oil prices.
Atlantic Council discusses improving sanctions enforcement against Russia
Piotr Piatetsky believes that “the West will not change the will of the Russian leadership only with sanctions, because Russia is a dictatorship run by criminals, and they do not care about their people and the value of human life”.
However, he is convinced that the most effective method of influence is the fine. “The U.S. government, with all its resources, is aware of all entities and individuals, particularly in the Middle East and Asia, who are violating the sanctions imposed on Russia. We must ‘hit’ them with fines,” he concluded.
