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EU Sanctions - Action Against Busting States

Author: Zulfi Meerza  16 May 2023
2 min read

Countries that help Russians obtain banned goods could have sanctions imposed on them due to a key measure in the European Union’s 11th sanctions package.

European officials drew up plans to hit states with economic penalties if they either do not comply with Western sanctions or cannot provide a valid explanation for their sudden increased trading in banned goods. The measures are aimed at so-called “third countries’’ - countries that are not members of the European Union (EU) or whose citizens do not enjoy the European Union’s right to free movement.

The plans were made as part of the latest sanctions package against Russia, which is in response to the Russian invasion of Ukraine last year. They are an indicator of the EU’s awareness that some states and businesses are helping Russia circumvent Western sanctions imposed on it.

The measures represent a notable change, as they are the EU’s first use of what are known as secondary or extraterritorial sanctions. These are sanctions introduced to prevent third parties from trading with countries subject to sanctions issued by another country - even if the third parties are not citizens of the issuing country or based in the issuing country. Such sanctions are already used by the US. 

Pressure

The European Commission hopes the new measures can be used to pressure particular countries to comply with Western sanctions on Russia. Central Asian countries such as Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan, as well as China, Turkey and the United Arab Emirates, are viewed as those where there is a need to address the issue of sanctions circumvention. One example that illustrates the EU’s concern is that EU exports of vehicles to Russia fell by 78% in 2022, whereas such exports from the EU to Kazakhstan rose by 268% - leading to suspicions that some of those Kazakhstan-bound vehicles may eventually end up in Russia.

The measures, therefore, can be viewed as a necessary step. While the previous 10 sanctions packages focused on emptying Putin’s war chest, the aim of the 11th package is to crackdown on the circumvention of sanctions. The new measures will also ensure broad alignment with other G7 countries.

The devil will be in the detail but, in principle, this could prove to be very effective, as the aim is to both close loopholes and boost enforcement. The reason it is only being brought in now is primarily due to political tensions over a list compiled by Kyiv of private companies that it calls “war sponsors”, which includes a number of European companies. But there also has to be an awareness that naming and shaming countries could potentially hurt political relations and, some may argue, drive countries suspected of facilitating the circumvention of sanctions towards countries not aligned with the West.

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Zulfi Meerza

Senior Associate Solicitor

zulfi.meerza@rahmanravelli.co.uk
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Zulfi’s in-depth expertise in business crime investigations and serious regulatory matters makes him a logical choice to advise and represent corporates, board members, senior business figures and high net worth individuals throughout the life of a case.

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