The West has imposed economic sanctions against Russia for years; since the beginning of the special operation in Ukraine, they have become noticeably tougher, and cannot be called anything other than unprecedented. In early autumn, the eighth package of anti-Russian sanctions was introduced. Will there be a ninth, or has the West exhausted its sanctions capabilities?
Russia has been the target of Western sanctions for several years. The main stages of the escalation were related to the events of 2014 and the adoption of the Countering America’s Adversaries Through Sanctions Act of 2017, the most ambitious sanctions law. It provided for restrictive measures about Ukrainian issues, cybersecurity, human rights, corruption and Russia’s policy in the Middle East. In addition, the law made it possible to impose sectoral sanctions against companies in the mining, metalworking and railway industries.
The period from 2019 to 2020 is associated with a qualitative expansion of European Union sanctions against Russia. At this time, the EU created new legal mechanisms for the introduction of restrictive measures and applied them against Russian individuals and organizations. This foreshadowed a change in the EU’s approach to sanctions policy in favor of closer consolidation and coordination of sanctions pressure between Washington and Brussels. However, Western countries at that time refrained from imposing large-scale or draconian sanctions. At the end of 2020, Russia was only the least of the three “leaders” in the number of sanctions events initiated against it, surpassed by Iran and China.
However, in 2022, restrictive measures of an unprecedented nature were introduced against Russia, primarily by a coalition of Western states: the United States, the European Union, Great Britain, Switzerland, Canada, Japan and Australia. They coordinate sanctions policy, introducing similar, but not always identical, measures. Some of the countries are ahead of their partners in specific restrictions—in particular, a ban on the import of Russian gas. The EU, Switzerland, and Japan have so far refrained from introducing this measure, while the United States has completely banned the import of all energy resources from Russia.
In general, all the initiators of restrictive measures against Moscow have significantly tightened their sanctions regimes over the past year. Western sanctions are directed against the financial sector, the transport sector, the energy sector, extractive industries, and the military-industrial complex. Among other restrictions, the U.S. Treasury Department has adopted directives that ban certain transactions with the Central Bank of Russia, the National Welfare Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation—including the transfer of assets and operations with foreign currency, as well as participation in the secondary market of ruble and non-ruble bonds issued by them. Similar measures were introduced by the EU. Many large Russian banks have come under blocking sanctions. Blocking indicates a ban against persons in the jurisdiction of the initiating country carrying out financial transactions with them. By the decision of the European Union, some Russian banks (Sberbank, Moscow Credit Bank, etc.) were disconnected from SWIFT.
At the G7 level, a decision was come to introducing maximum prices for Russian oil and oil products, limiting the provision of services for their sea transportation in the event of purchase at a higher price. Russian aircraft have been restricted from access to the airspace of a number of countries, and sea craft—from ports and locks. The bans also affected road freight. The Russian government has adopted symmetrical measures on companies from countries that have applied transport restrictions against Russia, prohibiting them from carrying out road cargo transportation on the territory of the Russian Federation.
It is important to note that Western countries have also increased pressure against Russia through export-import restrictions. Import restrictions are actively applied to a number of goods from Russia, including oil, coal, and ferrous metals. There are strict export controls on dual-use items and technologies, and a wide range of industrial goods—including industrial equipment, refrigeration equipment, motors and engines of certain types, etc. Export restrictions on the Russian energy sector have also been tightened.
Moreover, Washington uses against Moscow the FDP rule, which regulates the export and re-export to Russia of goods produced in third countries using American technologies, software and components. Notably, in addition to against Russia, the United States is applying the FDP rule against China, in order to contain its technological and military capabilities—by restricting access to American technology, as well as other goods, components, and software produced on its basis.
Thus, the initiators of sanctions have used almost all existing types of restrictions: blocking, sectoral measures, export controls, import bans, visa and transport restrictions. However, the possibilities of tightening sanctions have not been finally exhausted. In particular, a number of countries have not yet joined the full embargo on Russian energy. Nevertheless, for the most part, the possibilities for expanding sanctions are limited by the set of measures already in place—if we are talking about qualitative characteristics.
However, the initiating countries retain the potential for quantitative expansion of sanctions—by including additional individuals and legal entities in the sanctions lists, and adding new items to the lists of goods prohibited from export or import. In other words, there may be an expansion of the restrictions already in place. It is telling that in the July amendments to its sanctions regulations, the UK clarified the concept of the “closest relatives” of persons associated with the Russian government who may fall under restrictive measures.
Another direction may involve the use of secondary sanctions and coercive measures. The United States has a well-developed mechanism for applying coercive measures, and actively uses the instrument of fines. Investigations of agencies into the facts of violations can last several years. In April of this year, a fine was imposed by the US Treasury against American company S&P Global, Inc. for violations in 2016 of the sectoral sanctions against Russia. Currently, several criminal cases are pending in the United States for violations of the sanctions regime against Russia, in particular for the supply of dual-use technologies to Russia and for trying to export a grinding machine to Russia. For the use of American aircraft without a license, the US Department of Commerce has imposed Temporary Denial Orders (TDO) on a number of airlines. A TDO prohibits any export or re-export (through third countries) from the United States for the benefit of the companies it covers.
The EU and the UK are also perfecting their own institutions and practices. In this regard, it is important to highlight the fact that in October of this year, the European Union changed its criteria for imposing restrictions, creating a mechanism for secondary sanctions. A precedent in their application were the blocking sanctions imposed against the Iranian drone manufacturer Shahed Aviation Industries and certain Iranian individuals, in connection with their alleged supply of unmanned aerial vehicles (UAVs) to Russia. It is noteworthy that previously the European Union had criticized the United States for applying secondary sanctions and coercive measures. Brussels even made attempts to counter them, including the use of the so-called “Blocking Statute,” which can essentially be described as unsuccessful.
Thus, Western countries are likely to continue sanctions pressure on Russia. U.S. sanctions are definitive in comparison with the regimes of other initiators. The development of mechanisms for the use of secondary and coercive measures by the EU is unlikely to have a significant impact under the conditions when foreign business is already prone to excessive compliance with sanctions. In fact, Russia’s experience shows that despite the damage to the economy and some imbalances, it is possible to adapt to large-scale sanctions.