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As part of the latest sanctions launched to mark the one-year anniversary of Russia’s invasion of Ukraine, US officials said they would target companies and individuals who helped Russia find back doors to secure restricted funding and technology.
With several rounds of sanctions have been implemented, the former deputy minister of energy for the Russian government said there should be an increase in compliance monitoring if NATO countries are seriously squeezing Russia’s ability to finance and fight wars.
“The toughest sanctions have generally been adopted. The priority should be enforcement… which is sometimes weak,” said Vladimir Milov, who has been living in exile in Vilnius, Lithuania, since leaving Russia in 2021.
“Putin effectively circumvents sanctions.”
New sanctions and export controls
On Friday, the US Treasury Department announced the launch of new sanctions against several people accused of helping Russia evade previous ones.
In addition to targeting Russia and Russian companies, sanctions were imposed on Swiss and German citizens.
The U.S. Commerce Department also announced a ban on exports of U.S. technology and goods to several companies located outside of Russia, including five Chinese and two Canadian companies.
CBC News in Ukraine: This week, join The National hosted by CBC’s chief correspondent, Adrienne Arsenault, in Kyiv. Watch at 9 pm ET on CBC News Network, 10 pm on CBC TV, and streaming on CBC Gem (http://gem.cbc.ca) and CBC News Explore (https://www.cbc.ca/news/cbc-news-explore-1.6512577).
The restrictions were put in place due to fears that products could be diverted to Russia, where they could be used by the military.
CBC News spoke to two experts on Russia’s sanctions regime who say third-party countries are helping Russia — and they point to Turkey and the United Arab Emirates as among the culprits.
Earlier this monthUS Treasury officials visited both countries to warn that they could lose access to G7 markets if they help Russia’s defense sector evade sanctions.
Turkey’s foreign minister said earlier this week that it does not sell products to Russia that could be used for war.
The Russian economy is developing resilience
Milov, who has consulted Western politicians on how to tighten sanctions against Russia, served as the country’s deputy energy minister in 2002. But since leaving the government, he has been a vocal critic of the Russian government and President Vladimir Putin.
The sanctions won’t have the immediate impact some might imagine, he said, and patience is key.
The Russian economy has developed a certain resilience by moving to Asian markets and develop your own alternative to the international payment system SWIFT, which many Russian banks has been banned from accessing since the early days of the war.
A surge in energy prices last year helped ease the sanctions, and Milov said Russia had been able to export some of the banned resources, including coal – which is subject to import ban by the European Union Last August – by mixing the product with coal from Kazakhstan and exporting it from there as Kazakhstan coal.
“The scheme is not easy to trace,” he said in an interview this week, before the new sanctions were announced.
“There are many [EU] the officials involved actually plan the sanctions and get the sanctions adopted. But I just don’t see someone … in Brussels tracking all these transactions and saying, ‘No, this supply chain has to stop.'”
As a former bureaucrat, Milov said, he understood the complications of hiring hundreds of additional staff dedicated to lifting sanctions, but it was necessary to implement the measures already in place.
“I think right now, we’re looking to close the existing sanctions loopholes,” said Maria Shagina, a senior fellow in Berlin with the London-based International Institute for Strategic Studies who has studied the effectiveness of sanctions against Russia. since 2014, at that time annexed Crimea.
Overall, the sanctions are starting to take effect, he said, but he believes the Russian oil industry should have been targeted earlier and could still be hit harder.
Russian President Vladimir Putin has boasted that Western sanctions have failed to slow the economy, but experts say the impact is starting to show and the strain will become more apparent as the year goes on.
An EU embargo on seaborne crude oil shipments was launched in December, along with a $60-a-barrel price cap, which Shagina says is costing the Kremlin 160 million euros a day. He said the cap could be lowered, even to $30 a barrel.
While the oil and gas industry is the “cash cow” of the Russian budget, Shagina said other sectors have not yet been targeted by Western sanctions, such as Russia’s diamond industry and the nuclear sector.
Consumers vs. the military
Shagina said there is an appetite by Western officials to make sanctions more effective – and one of the trickiest areas to navigate is the blurred space around civilian goods that can be repurposed.
“How many civilian microchips … can be reused for military use?” he said in an interview.
As civilian drones are diverted from Chinese companies to Russian companies, he said, consumer products could end up on the Ukrainian battlefield.
German news magazine Der Spiegel reported this week that Russia is talking to a Chinese manufacturer about buying 100 drones.
China’s Foreign Ministry said it was unaware of the talks.
Shagina said the sanctions regime was developed under a “smart sanctions” approach, meaning that anything that is only used against civilians should not be collateral damage. But many Western brands have voluntarily withdrawn or limited their business in Russia over the past year.
Companies leave, but some brands remain
according to Yale University, more than 1,000 Western companies voluntarily cut back operations in Russia since last February – but this does not mean that products have disappeared from Russian shelves.
Some Western brands have sold or transferred their assets to other companies, which continue to import and sell their products in Russia.
Manufacturer of sneakers and sports Reebok made a deal with a Turkish entity to buy more than 100 retail stores in Russia. The outlet has now been renamed Sneakerbox and sells Reebok products.
About a month after Russia’s invasion of Ukraine, Muscovite Konstantin Rozhkov launched a YouTube channel, where he explores the impact of Western sanctions and corporate withdrawals.
“It’s not as bad as we thought at first,” Rozhkov said in an interview with CBC News.
“It’s hard for me to find a single brand that I can’t buy in Russia now. Even Apple – like, I can easily buy Apple.”
The right to sell the product has been transferred to a new brand, or entered Russia through the country parallel import schemewhich was launched in March 2022, to protect consumers from the closure of Western shops.
The scheme allows Russian companies to import selected foreign products originally intended for countries near Russia and resell them without the permission of the trademark owner. This applies to a number of products in many sectors, including cars, electronics and clothing.
In August, Russia’s trade and industry minister estimated that products brought into the country through parallel imports would reach US$16 billion by the end of the year.
Military exports
While Western goods available on Russian shelves may appear to undermine the company’s withdrawal, Western pressure remains focused on stunting Russia’s war machine, and Milov says it is working.
Putin “can only increase Russia’s military budget by something like 30 to 40 percent a year,” he said. “But what we need is to increase it by two or three to actually have enough funds to finance this massive war.”
Milov said Russia has no money due to oil and gas sanctions.
Earlier this month, the Russian Ministry of Finance announced that revenue from the energy sector fell by 46 percent annually.
In order to further squeeze the Kremlin, Milov said Western politicians should also increase pressure on countries that buy weapons and weapons systems from Russia.
He said Russia earns between $10 billion and $15 billion a year in arms sales to countries, including India, Vietnam and Egypt.
“We need more long-term contracts for the procurement of Russian weapons to be terminated,” said Milov.
“Listen, people, you’re either giving Putin top dollar or you’re helping him carry out this aggression… You have to stop.”
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