The main task of the next wave of EU sanctions is to prevent Russia from circumventing sanctions, in particular by imposing restrictions on the countries that facilitate this.

Ukraine’s negotiations with the EU are ongoing, but sometimes one hears the question of why sanctions are needed if they are not stopping the war right now. But this is a myth created by Russia itself to ease the sanctions pressure on it.

Already, the Russian budget deficit is 17 percent higher than planned for 2023. During the first year of the full-scale war, Russia spent five trillion rubles – ten times more than the annual budget of all Russian subsidised regions, including Chechnya, Buryatia, and Dagestan.

Active hostilities cost the terrorist country ten trillion rubles a year – and even now, it cannot afford to spend so much because capital is flowing out of Russia, and the remaining foreign companies are leaving as well.

Sanctions, therefore, are an effective tool that has a cumulative systemic effect.

And now our goal is to strengthen the sanctions mechanism so as to prevent Russia from creating a ‘grey’ economy in some areas.

For instance, the EU set the price cap for the export of Russian crude oil supplied by sea at USD 60 per barrel last year. Unfortunately, we see that Russia is trying to find ways to circumvent these sanctions by using ship-to-ship overloads, spoofing, or by mixing oil to obscure its origin.

As a result, Russian oil enters the market under a different flag and at a different price. And ‘petrodollars’ are a critical source of revenue for the Russian budget.

This loophole can be closed by tightening control over ship traffic, banning ships found to be detoured from entering European ports, restricting insurance services, and applying restrictions on the flags under which those ships fly.

The same applies to the sale of dual-use goods by Russia through shell companies and companies with an opaque ownership structure, the use of ‘parallel import’ schemes, or through re-export schemes through third countries.

Russia is also trying to increase the supply of sanctioned goods through the free and special trade economic zones of Iran and India, which operate within the international North-South transport corridor. Free economic zones facilitate import and export operations of prohibited and controlled goods, customs duty evasion in case of illegal importation, money laundering, etc.

To date, 74 free economic zones that Russia’s interested in have been identified.

There are also remedies for this loophole, such as tighter export and import controls, verification of the origin of goods, and other trade restrictions, including higher import duties and additional licensing.

Among other things, the Russian government is currently experiencing major problems with foreign exchange earnings, which is putting pressure on the financial system.

Russia continues its efforts to preserve export revenues from energy sales to Europe, and is trying to persuade its partners to pay for exports and imports in national currencies.

It’s also trying to use services like Moneyport to make international payments in foreign jurisdictions, as well as unblock assets abroad to gain access to foreign currency – so far in vain.

To ensure the effectiveness of sanctions, Ukraine uses various international cooperation platforms. And in the future, it should create new ones.

By reducing the cost of their goods, the Russians have made many countries dependent on them, and this dependence is now painful to overcome. However, limiting trade with Russia, which is toxic in every sense, will mean building a new, more stable economic regime for the world.

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sanctions against Russia