European Union Increases Sanctions on Russia; Evasion of Sanctions Becomes More Difficult

On Monday, the European Union approved its fourteenth round of sanctions against Russia in response to the ongoing Russian attacks on Ukraine. This package includes increased sanctions against Russian liquefied natural gas exports. The sanctions target 116 individuals and entities and introduce new measures to ensure that companies do not evade existing sanctions. Ukrainian Foreign Minister Dmytro Kuleba emphasized the importance of the new sanctions 'to further choke Putin's war economy' in his speech on Monday at the EU Foreign Relations Council meeting. He separately stressed the need to expedite military aid to Ukraine, particularly air defense systems. Before the council meeting on Monday, EU foreign policy chief Josep Borrell told reporters in Luxembourg that Ukraine currently needs more assistance. Borrell stated that Putin is 'clearly' preparing for a 'long war.' The new EU sanctions, aimed at reducing Russia's liquefied natural gas revenues, for the first time strike at Russian gas exports. The sanctions encompass maritime trade and Moscow's SPFS financial network, which is equivalent to the global SWIFT payment system. On Monday, EU foreign ministers stated that the Union's fourteenth sanctions package against Russia was approved 'to close some loopholes and hit Russian gas exports for the first time.' This package also prohibits EU banks outside of Russia from utilizing the ban. Since the beginning of Russia's invasion of Ukraine in March 2022, the West has imposed extensive sanctions on Moscow, which have gradually increased. Reuters reported that the aim of the new gas restrictions is to reduce Russia's revenues from liquefied natural gas exports through a ban on transportation in EU ports, along with a clause allowing Sweden and Finland to cancel certain liquefied natural gas contracts with Russia. These measures align with the EU's ban on importing liquefied natural gas from Russia, which had increased since the onset of the Ukraine war. The sanctions will be implemented after a nine-month transitional period. This package also prohibits new investments and services to complete unfinished Russian liquefied natural gas projects. Gas market experts say that the action is likely to have little impact since Europe continues to purchase the gas it needs from Russia, and the transfer of gas through EU ports to Asia constitutes only about 10% of Russia's total liquefied natural gas exports. Some Central European countries still receive Russian pipeline gas through Ukraine. The EU banned Russian oil imports in 2022, with limited exemptions. The goal of the new package is to limit the evasion of sanctions by creating greater accountability and penalties at the member state level for individuals and countries that violate the rules. The EU has also announced that it will impose new sanctions on six individuals involved in 'cyber destructive activities' by Russia against EU countries and Ukraine. The EU stated that four of them are directly linked to Russian intelligence and security services. The European Commission, the EU's executive arm, had also proposed extending the so-called 'No to Russia clause' that was approved in the previous package. This measure obliges EU company subsidiaries in third countries to prohibit the re-export of certain goods to Russia, including items with dual-use for military purposes, as well as ammunition and firearms. In an effort to further harm Moscow's ability to engage in global trade, this package prohibits EU banks outside of Russia from using Moscow's SPFS system, which is equivalent to the global SWIFT payment system. Western powers excluded Moscow from the SWIFT system in 2022. According to the European Commission's statement, 'The Union also allows the Council to compile a list of non-Russian third-country banks connected to such a system. These banks will be banned from trading with EU operators.' These measures are designed to target valuable sectors of the Russian economy, such as energy, finance, and trade, making it more difficult to evade EU sanctions. Additionally, based on measures published on Monday in the official journal of the EU Council, the Union has also sanctioned the Russian state shipping giant 'Sovcomflot' and its CEO Igor Vasilyevich Tonkovidov. This section of the sanctions targets the so-called shadow fleet that aids Russia's military efforts. This action will be implemented by creating a framework to add oil tankers that circumvent the price cap on Russian oil set by the G7 countries, and ships that transport North Korean munitions to Russia to the sanctions list. EU diplomats have stated that initially, 27 vessels—mostly oil tankers—will be included in the list, with more to be added later.