Russia is not only trying to circumvent European and American sanctions in the oil, gas and banking sectors, but also manages to buy goods for the defense industry. Dozens of Western components have been found in new missiles currently used to attack Ukraine. Focus I learned what the Kremlin is trying to achieve, how it circumvented sanctions and how to avoid it.
“Different countries, different companies, without them, Russia cannot produce terrorist vehicles, especially missiles. A terrorist state, through a network of suppliers, manages to use the world’s technologies and circumvent international sanction regimes.” Volodymyr Zelenskyy recently drew attention to how Russia circumvented US and European sanctions after a private meeting.
Turkey, Kazakhstan, the United Arab Emirates, Georgia, Armenia – with the help of a number of companies that are not officially related to the defense industry in these countries, Russia continues to buy even electronic components for missiles.
The scale of sanctions: what losses and successes
Now about 11,000 different sanctions restrictions have been imposed on Russia – its individual citizens and businesses. This is more than Iran, a country considered a state that supports terrorism. Most of the sanctions against the Russian Federation were introduced by the European Union. And all for the sake of a common goal: to force Russia to stop the war with the help of sanctions.
And as experts say, it has an effect. And not only because there is a large exit of foreign companies from the Russian market. According to the World Bank estimates, the level of the Russian economy will decrease from 3.4-5.5% in 2022 to 2.3-4.5% in 2023. Economists say that eventually the impact of the sanctions will lead to a significant drop in GDP compared to the default in 1998.
“The sanctions are already paying off. Revenues to the state budget in the energy sector have decreased by almost 50 percent compared to last year, due to the sanctions.” Focus And the planned deficit for 2023 was closed in three months, – Vladimir Omelchenko, director of energy programs of the Razumkov Center. So there could be a deficit three times larger than planned: 5-6%, not 2%. For Russia, this is unpleasant, but not fatal. International partners – on Rosatom and the financial sector – need to take a tougher position. It is important for Russian banks to prevent SWIFT and electronic payments, commercial operations other than humanitarian ones. But unfortunately, not everyone in the world is ready to lose their profits to force Russia to comply with international rules.”
Russia did not feel the first packages of sanctions because its economy had a certain margin of safety that was used to curb inflation and a drop in imports. He then began using schemes to circumvent the sanctions imposed on him, given the experience he had gained since 2014.
Oil and gas market: by sea to third countries
As is known, until recently, Russia was one of the world’s largest suppliers of oil and gas. In 2021, oil and gas accounted for 49% of the country’s total export revenues. And the Russians supplied half of it to the Europeans.
Significant international sanctions were imposed on Russia following the start of an extensive invasion. For example, in the sixth package of sanctions, the EU placed an embargo on Russian oil. True, with a few reservations and a gradual application procedure.
Mikhail Drapak, expert at the Prism Foreign Policy Council of Ukraine, recalls that the European Union has set the goal of completely freeing itself from dependence on Russian energy carriers by 2030. At the same time, many countries, especially Germany, accelerated this transition. “But in general the EU is in no hurry. For example, Hungary is allowed to buy from Russia, because there is no other way of delivery yet – the country has no port, it is difficult to bring it. Also, this is for Slovakia and the Czech Republic, which depend on Russian oil. this possibility has been retained,” he explains.
Experts point out that despite the losses, Russia’s income from the oil and gas industry is quite high. And all because Russia has found loopholes that it can exploit with impunity. For example, China illegally supplies oil at low prices to certain countries such as India, Tunisia, Morocco, Indonesia or Saudi Arabia. After that, oil does not go like Russian, its country of origin changes.
In this respect Focus says Vladimir Omelchenko. He points out that Saudi Arabia, which produces a lot of oil and oil products, buys Russian products. And all to sell it much more expensive on world markets.
“This type of oil is returned to various markets, including the European market, after processing,” says the expert. Existing plans, such as the transfer of oil from Russian tankers to tankers with other flags, in various ports near Greece, Bulgaria and Turkey, play a minor role.”
He also recalls that in the gas sector, no sanctions are imposed on Russia, but Russia imposes sanctions on itself, forcing all partner countries, Gazprom counterparties, to renegotiate contracts in rubles that violate their contractual obligations.
“Therefore, most EU countries abandoned the Russian pipeline gas. In addition, three gas pipelines were blown up – Nord Stream and Nord Stream 2. But at the same time, although Russia has reduced pipeline gas supplies to Europe, the supply of liquefied LNG is primarily Natural gas is on the rise, with the Russian gas company Novatek supplying gas to the European market and other countries in Japan, Korea, China and the Asia-Pacific region,” adds Vladimir Omelchenko.
Why is Rosatom still not sanctioned?
The main industries affected are metalworking, woodworking and engineering. But that’s not all that scary when compared to the fact that giant businesses like Norilsk Nickel and Rusal continue to sell their products worldwide. In addition, no sanctions were imposed on Rosatom, the state-owned atomic energy company that consolidated more than 300 businesses.
Answering the question why the Russian company Rosatom and its subsidiaries were not sanctioned, Omelchenko said, “This is because commercial and commercial interests play a large role. Security interests outweigh. Today they control about 40% of the enriched uranium.” This means that today it is nearly impossible to replace enriched uranium services. This will take five years or more. If sanctions are imposed, then many countries, especially the United States, will have reactors and it will be impossible to enrich it. Without the enrichment procedure, it would be impossible to obtain the fuel itself for the reactors.”
Russia is also building and designing many reactors around the world. It is strongly integrated into the nuclear industry, it is difficult to immediately separate it and refuse its services. And it is Russia that controls important uranium deposits not only in its own country, but also in Kazakhstan.
“This is why we see that our international partners, Western countries, today cannot give up on the commercial interests from Rosatom. Unfortunately, although it is clear that after the seizure and removal of ZNPP this company turned into a terrorist company. Unfortunately, human values and security do not always win, but more with finance and trade. acquires relevant values, ”adds the expert, director of energy programs of the Razumkov Center.
And such enterprises manage to purchase dual-use goods used by some enterprises in the defense industry, thanks to which enterprises managed to evade sanctions for having the status of “civilian”. In addition, there is evidence that Rosatom was directly involved in the supply of goods to the Russian military-industrial complex.
How did Tajikistan, Uzbekistan and Kyrgyzstan become Russian donors of modern technologies?
In March 2023, Bloomberg reported that Russia circumvented sanctions to acquire modern technology for warfare. The diplomat, who did not name the publication, said that according to the analysis of trade data, modern chips and microcircuits produced in the EU and other countries are also delivered to Russia through third countries such as Turkey, United Arab Emirates and Kazakhstan. Journalists pointed out that after the Russian invasion of Ukraine, chip imports from Turkey and the UAE increased sharply. And the case of Kazakhstan in general is unique: in 2022, this country exported modern semiconductors worth $ 3.7 million to Russia, but a year before that – only $ 12,000.
As for the EU, the USA, Japan and the UK, by 2022 Russia bought modern chips and microcircuits from them for an average of 163 million dollars. Now almost three times less. But other countries are helping to close the gap, including Serbia, Turkey and the United Arab Emirates, as well as some countries in Eastern Europe and Central Asia. Deliveries of components and dual-use products have increased significantly. The Russians use commercial electronics in the defense industry.
The fact that major companies are subject to sanctions but not their subsidiaries also helps Russia survive and operate through them.
“For example, not only military, but also sanctioned civilian equipment is supplied to Tajikistan, Uzbekistan or Kyrgyzstan, and from there to Russia,” adds Vladimir Omelchenko, “EU countries and the United States agree on this. , the chip industry in Tajikistan Even though they understand that there are no factories that can use chips, but they still give permissions and licenses for the material. This means that commercial interests have a serious weight in this. I think serious action needs to be taken, put Russia on the FATF blacklist and this organization leave it out, close all accounts, this would be a treat worthy of a terrorist country.”
What is the way out – tougher sanctions and responsibility for their non-compliance
“Sanctions are troubling for Russia, but not deadly,” says Mikhail Gonchar, head of the Strategy XXI Center for Global Studies, international energy relations and security expert. certain losses, but at an acceptable price for democracy. And this in principle pleases Moscow and leaves room for Moscow to blackmail the West.”
Experts point out that when it comes to sanctions, it is important not only to monitor the implementation process, but also to monitor the restrictions. And if the United States has a fairly effective device for ensuring the enforcement of sanctions – there is a special monitoring body that collects information, there are means to comply with the relevant legislation and decision, then in the EU everything is complicated. Europe places the responsibility of monitoring on each state and there is no enforcement mechanism. Nothing works but shame. You may remember the story of the supply of Siemens turbines to the occupied Crimea – when a German company fulfilled an order, realizing that even before a full-scale invasion, they were selling goods that were sanctioned by Russia.
Now, experts also point out that it is important to impose sanctions on other sectors and individual businesses. Especially the oil, gas and oil refining industries. Ban EU companies from doing business with Russian oil companies.
Mikhail Gonchar states that it is important to put pressure on countries through secondary sanctions on countries that consciously or unconsciously help Russia circumvent sanctions regimes. But Ukraine’s partner countries are not united on this issue because if such an imposition happens, the business will suffer. That’s why Italy, France and Germany have warned that they cannot agree on such sanctions regimes against China, despite the US’s insistence on this.”
In addition, it is important to expand the list of dual-use goods and strengthen control by imposing sanctions on military or military-civilian enterprises that are part of Rostec, Roskosmos, Rosatom, Almaz Antey.
Source: Focus
Bridger is a political journalist at 24 News Breaker, covering the Politics section with over 5 years of experience. Known for their detail-oriented reporting, Bridger delivers insightful and engaging analysis on political issues.