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Polina Chupriyanova

Program Coordinator at the Russian International Affairs Council

The threat of applying secondary sanctions is often perceived as a key way to influence violators of foreign restrictions against Russia. This explains the great attention paid to this issue in research literature, the writings of experts and the media. Many sources focus on the risks of incurring administrative and criminal prosecution for evading sanctions legislation. The frequency of using both tools of pressure has increased significantly since February 2022 as a result of a significant expansion of financial sanctions and export controls against Russia. Unlike the United States, which has extensive experience in applying secondary sanctions, the EU’s experience in this area can be assessed as very limited.

As a result, one of the problems with the dynamic expansion and development of EU law enforcement practice in the field of ensuring compliance with anti-Russian restrictions is that the Union’s coercive measures no longer act as an alternative to secondary sanctions. On the contrary, administrative and criminal prosecution can be combined with the use of secondary restrictions, which creates additional risks for European businesses still working with Russian partners. The further strengthening of EU enforcement efforts and their effectiveness will depend both on deeper coordination between EU bodies and relevant national agencies and on an increase in the number of anti-Russian sanctions, primarily in the area of export and import controls.

The threat of applying secondary sanctions is often perceived as a key way to influence violators of foreign restrictions against Russia. This explains the great attention paid to this issue in research literature, the writings of experts and the media. Many sources focus on the risks of incurring administrative and criminal prosecution for evading sanctions legislation. The frequency of using both tools of pressure has increased significantly since February 2022 as a result of a significant expansion of financial sanctions and export controls against Russia. Unlike the United States, which has extensive experience in applying secondary sanctions, the EU’s experience in this area can be assessed as very limited. The focus on the law enforcement practice of EU countries against violators of the EU sanctions against Russia is updated taking into account a number of circumstances:

1. Since 2022, there has been a rapid increase in the dynamics of initiating administrative and criminal cases against the citizens and businesses of EU countries on the grounds that anti-Russian restrictions were violated.

The practice of applying coercive measures for non-compliance with the sanctions regime is not new. For example, in the United States, administrative liabilities for circumventing financial sanctions and export controls have been applied since the early 2000s. In 2017, the US Treasury imposed the first fine on an American oil company for working with a Russian enterprise belonging to a person on the SDN list. Around the same time, the first cases of initiating criminal investigations for more serious violations of export controls against Russia appeared. Since then, Washington has consistently increased the practice of administrative and criminal prosecution for circumventing the restrictions in force against Russia. The beginning of the military operation in Ukraine and the accompanying expansion of anti-Russian sanctions naturally contributed to the growth in the number of such cases. At the same time, the openness and publicity of the investigations provide an extensive empirical basis for analysing US law enforcement, tracking its dynamics and changes.

In the case of the EU, the law enforcement practice of member states began to develop noticeably only after February 2022. Before that time, open sources recorded only isolated investigations of violations of sanctions legislation. As the number of sanctions increased, mainly involving trade, the number of administrative and criminal investigations increased sharply and, according to some sources, it is estimated at more than 2 thousand cases. The geography of such investigations has also expanded significantly. Pinpoint criminal proceedings in Germany and the Netherlands until 2022 gave way to a broad practice of monitoring compliance with sanctions in almost all EU member states.

2. The lack of transparency in EU sanctions legislation creates additional risks for Russian and foreign entities when conducting business under the EU’s jurisdiction.

The presence of contradictory wording in EU sanctions legislation may contribute to inconsistent and, in some cases, incorrect interpretations of provisions by national authorities and relevant agencies, including in the context of ensuring control over compliance with the restrictions. In July last year, the attention of Russian experts was attracted to reports of the seizure of the personal vehicles of Russian citizens entering the territory of the European Union. The arrests were initiated amid expanding import controls against Russia and restrictions on the import to the EU of a wide range of goods, including cars, cameras, household appliances, chemical products, etc.

Citing the fact that the provision of the Council Regulation (Article 3i of Regulation 833/2014) did not include any exceptions for personal use, German customs authorities seized the car of a Russian citizen on the grounds that the person in question had violated EU sanctions legislation by importing goods prohibited for import (in this case, vehicles) into its territory. After a preliminary investigation by the local prosecutor’s office, the Russian citizen managed to get the car back. At the same time, already in September 2023, the European Commission confirmed the absence of any exceptions for products and transport for personal use, which allows for further seizures of the property of Russians upon entry into the territory of EU countries.

On the one hand, the aforementioned case does not mean that the property of Russian citizens will be freely seized in any EU country in the event of a minimal suspicion of violations. On the other hand, the very existence of non-transparent provisions in the EU legislation and their interpretation creates additional risks for working under an EU jurisdiction, even in those areas that are not formally subject to restrictions.

3. Recognising effective control over compliance with the restrictions regime against Russia as a priority for EU sanctions policy.

Since February 2022, the supranational bodies of the European Union have actively participated in developing a specialised legal framework and facilitating the investigation of violations in EU countries. Among other things, there is the role of the EU Parliament and Council in eliminating imbalances in the activity of national bodies in the field of law enforcement. Earlier studies have shown that such imbalances contributed to the fact that transactions and operations prohibited by law are successfully controlled in some member states, but continue to be carried out unhindered in others. This required the harmonisation of national legislation of EU states in the field of implementation of coercive measures. In April 2024, a draft Directive was approved, defining uniform parameters for establishing administrative and criminal liability, penalties for violations, including fines and prison terms, and mitigating or aggravating circumstances. The provisions of the Directive should be incorporated into the legislation of EU countries within a year and, as a result, contribute to uniform and effective control over compliance with the sanctions regime.

Another step in this direction was the active participation of supranational EU bodies in conducting investigations at the national level. Thus, in October this year, the European Anti-Fraud Office (OLAF), together with Spanish law enforcement authorities, arrested four suspects for evading sanctions (three of whom are Russian citizens) for allegedly supplying chemicals to Russia. Among other things, OLAF’s role is to monitor suspicious trade flows, identify potential attempts to circumvent EU sanctions, and prevent illegal transactions.

Given the specifics of EU law enforcement, its analysis is complicated for a number of reasons. The key one is the lack of a single institution monitoring compliance with the EU sanctions regime, or at least several such institutions. By comparison, the US policy on sanctions enforcement is coordinated by OFAC when it comes to initiating administrative investigations and by the US Department of Justice when it comes to criminal liability for violations. The role of other agencies involved in the investigation can be described as auxiliary.

In the European Union, the individual member states are responsible for ensuring compliance with the law. Each of them has an extensive system of courts that have the right to decide on liability for circumventing sanctions. The specialised agencies, including customs authorities, agencies of various profiles, etc., also have broad powers in the field of law enforcement. The decision to disclose the violations under investigation or to keep them confidential also lies within the authority of each of these agencies. In other words, it seems difficult to assess the full picture in this area. At the same time, the available empirical data allow us to talk about a number of features of the current EU system for monitoring compliance with the sanctions regime against Russia.

The first feature is the persistent imbalances in the activity of national bodies in the field of law enforcement. On the one hand, there are jurisdictions characterised by the fastest pace of development of coercive measures and a consistent increase in the number of investigations. The leaders among them are Germany, the Netherlands, Finland and Latvia. Open sources allow us to say that together, they conduct more than half of all investigations into violations of the EU sanctions regime. This pattern can be explained by the broader approach of these states to the implementation of sanctions policy against Moscow: starting in 2022, they not only implemented measures adopted at the EU level, but also consistently tightened anti-Russian restrictive measures in accordance with national sanctions legislation. On the other hand, a number of states, including Hungary, Slovakia, Slovenia and Malta show no activity in the field of law enforcement.

The second feature is the clear identification of priority areas in the field of law enforcement. Since 2022, the majority of administrative and criminal cases have been initiated on the grounds of exporting dual-use and military goods and technologies, as well as microelectronics to Russia (almost 40%). In early 2023, these product categories were included in the “high priority” items list, developed jointly by the US, EU and UK. About 20% of investigations are related to transactions and the provision of services to persons on the list of blocking sanctions. About 15% of all cases are cases initiated on the grounds of supplies of industrial and construction products to the Russian Federation, as well as various types of raw materials. Deliveries of “luxury goods” from EU countries to Russia became the reason for initiating investigations in more than 10% of cases. Finally, about 15% of investigations by EU authorities are related to the export of conditionally “other” goods to Russia (these included extremely small deliveries of goods for civilian transport, chemical products, and items whose purpose was not determined).

The third feature is the ongoing cooperation with relevant US authorities in the area of ensuring compliance with sanctions. As the data show, the overwhelming majority of investigations in EU countries are initiated on the grounds of circumventing the export controls and financial sanctions of the European Union. At the same time, in a number of cases, suspects are detained in connection with the violation of US sanctions legislation for subsequent extradition at the request of the US. Thus, in August last year, the authorities of Cyprus, at the request of the US, detained Arthur Petrov, a citizen of Russia and Germany, for the alleged supply of US-made military goods and technology to the Russian Federation. In the summer of 2024, Petrov was extradited to the United States to determine the measure of responsibility and execute the sentence. Another area of coordination between the US and EU is US blocking sanctions, which have prompted investigative actions against European citizens and companies. In September 2023, the US Treasury included two Finnish logistics companies (Luminor and Siberica) in the blocking sanctions list for the alleged supply of dual-use electronics to Russia. Following this, the Finnish authorities launched their own investigation. As a result, the head of two companies was arrested and brought to trial. Finally, cooperation between the US and the EU is developing at the level of adopting joint documents on key policy areas in the field of monitoring compliance with sanctions, as was the case with the list of “high-priority items”.

As a result, one of the problems with the dynamic expansion and development of EU law enforcement practice in the field of ensuring compliance with anti-Russian restrictions is that the European Union’s coercive measures no longer act as an alternative to secondary sanctions. On the contrary, administrative and criminal prosecution can be combined with the use of secondary restrictions, which creates additional risks for European businesses still working with Russian partners. The further strengthening of EU enforcement efforts and their effectiveness will depend both on deeper coordination between EU bodies and relevant national agencies and on an increase in the number of anti-Russian sanctions, primarily in the area of export and import controls.

First published in the Valdai Discussion Club.

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  1. In your opinion, what are the US long-term goals for Russia?
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