Sanctions Against Russia

Home , God Nisanov, Igor Shuvalov, International sanctions, Iskander Makhmudov, Sergei Roldugin, Sergey Shoygu

SANCTIONS AGAINST RUSSIA

CURRENT STATUS, PROSPECTS, SUCCESSES AND GAPS IN THE MULTILATERAL INTERNATIONAL SANCTIONS REGIME AGAINST THE RUSSIAN FEDERATION

KYIV‑2019 2 tional sanctionsregime againstthe RussianFederation Current status,prospects, successesandgapsinthe multilateral interna- Sanctions againstRussia Kyiv 2019 other thinktanks. Sanctions 2020Initiative;experts from theWorld Policy Institute andanumberof Viktor AndrusivoftheUkrainian Institute oftheFuture; AnnaTalimonchuk from the Anastacia Galoushka,Yegor Kiyan,MaximStepanenko; IliaKusa, IgorTyshkevich, cluding experts oftheInternational Center forPolicy Studies Mykola Kapitonenko, The studywasdevelopedthanksto several non-governmentalinstitutions,in - Sanctions againstRussia Current status, prospects, successes and gaps in the multilateral international sanctions regime against the Russian Federation CONTENTS

EXECUTIVE SUMMARY...... 4 INTRODUCTION...... 7 INTERNATIONAL SANCTIONS: BETWEEN WAR AND WORDS...... 9 RUSSIA’S REACTION...... 29 FLAWS IN THE CURRENT SANCTIONS REGIME...... 33 BENCHMARKING...... 42 RECOMMENDATIONS...... 45

3 4 EXECUTIVE SUMMARY EXECUTIVE SUMMARY reason mostly on the list of targeted individuals and the surprising names which chapterThe fourth discussestheflawsincurrent sanctions regime, focussing policy intheState orcreating Department anewpostwithsimilarauthority. aspects intheprocess, suchasrestoring thepositionofacoordinator ofsanctions adapt itssanctioningregime accordingly andchangetheprocedural andorganisation anisms aren’t it’s having any effect at all. Nevertheless, for the important West to nism againstRussia,as itshouldbeanintegral ofthegeneral part regime. the conditionswhichwould allowforanyalterations inthecurrent sanctionsmecha- to establishasystematic benchmarkingmechanism.The fifthchapter elaborates on has becomeatopic ofdiscussioninthe international diplomatic arena, it’s necessary Now thatthequestionofrelaxing orevencompletely liftingsanctionsagainstRussia example ofalegalentitywhichhasalsomanagedto escapetheWest’s sanctions. region. TheInternational Investment Bank,alsoincorporated asan inthislist,serves tegrity andsovereignty andthedestabilisation of international securityintheEurope directly orindirectly, contributed to actionsaimedatviolatingUkraine’s territorial in- Chayka, Yuriy Chayka,Yuriy Trutnyev andSergey Sobyanin.Allthosepeoplehave, Iliyev, Valeriy Gerasimov, Sergey Shoygu, Igor Shuvalov, Sergey Ivanov junior, Igor included: Sergey Roldugin,RuslanRostovtsev, IvanSavvidi, GodNisanov, Zarakh lin’s aggressive foreign policyshouldn’tbeunderestimated. Thefollowingpeopleare ICPS, compiledalistofindividualswhoseinvolvementinandinfluenceontheKrem- norms, it would be incorrect to assume that the Putin’s unaltered foreign reluctance policyandfurther to comply withinternational Chapter three discussestheeffectthesesanctionshaveonRussia.Despite further European, Americanandothersanctions,withinconsistency inindividualtargeting. in aconsistent andsystematic mannerwiththeirallies.Thisleadsto apatchworkof ation liesinthefactthat,neitherEU, northeUSAiscoordinating theirdecisions response to Russia’s aggression inUkraine. Theobviousproblem of thecurrent situ- the Russian Federation, with a specific focus on the sanctions that were introduced in up by an in-depth assessment of the status quo sanctions regime of the West against ofsanctions,aswelltheirpossible differing sorts repercussions. Thisisfollowed The firstchapter offersatheoretical analysisofthesanctionssystem and explainsthe and howtheirapplicationcanbeimproved inorder to optimize theresults. effect is.Thegeneral goalofthispaperis to establishwhere sanctionsare lacking sanctions are, whytheyare useful,howtheyare currently beingusedandwhattheir EU andtheUSAagainstRussianFederation. Itoffersageneral ofwhat overview This paperconstitutes andin-depthstudyofthecurrent sanctionsmechanismofthe

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are yetto beincluded.TheSanctions2020initiative,together withthe

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albeit flawed Sanctions againstRussia

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sanctions mech-

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for some EXECUTIVE SUMMARY 5 by control and de facto of de jure only full restoration It’s clear that any loosening of sanctions should be directly linked to specific steps specific steps to linked directly clear that any loosening of sanctions should be It’s - interna to compensation of the damage it caused undertaken by Russia towards quo»-demand pro or lifting the sanctions without a «quid Weakening tional security. weakening In the situation where perpetrators. future signal to would send the wrong altering to start with diplomatic sanctions before best of sanctions is justified, it’s discourse with Rus- for future tools further pressuring ensure the economic ones, to of sanctions that do not concern Any alteration destabilization limited. sia and keep of the Minsk the framework made in the progress to linked Crimea should be directly negotiating positions in Ukraine’s improve a way to As these sanctions are Protocol. until Moscow remain unaltered the asymmetrical conflict with Russia, they should concessions. makes Most importantly, though, Kyiv over the territory of the ORDLO can be a prerequisite for the beginning of gradual for the beginning of gradual can be a prerequisite of the ORDLO over the territory Kyiv - restora and only complete of sanctions against the Russian Federation, weakening can Ukraine over Crimea and compensation for the damage done to tion of control anti-Russian sanctions the multilateral permanently terminate be a condition to regime. part, sanctions can and should be strengthened. on Russia’s In absence of progress sanctions; amplify the signals existing the already systematise It’ll be important to account their in- into take with allies so to ways of interacting sent by them; improve Current status, prospects, successes and gaps in the multilateral international international the multilateral and gaps in successes prospects, status, Current Federation the Russian against regime sanctions 6 EXECUTIVE SUMMARY tions from Russia.Thisshouldbecomplemented restric withtheimpositionofsecondary - also beusedindiplomaticspheres, whenjustifiedbyasurge inaggressive behaviour terests andmaintaintheunity. Well-founded threats to imposenewsanctionsshould following recommendations inthesixthandfinalchapter: regimes’ applicationininternational practice years,weofferthe forthepastthirty sia bymore countries,aswellallthetheoretical thanforty nuancesofsanctions Taking into accountoverfiveyearsof experience inapplyingsanctionsagainstRus- sion-making powersinMoscow. and scope.Itscriticalweakness,however, isthelittleinfluenceitexerts onthedeci- international security. Thestrength ofthesanctionsmechanismliesinitsflexibility sure ontheexternal policyofRussiawhilerestricting itsdestructivepotential for Sanctions, asatool «betweenwarsandworlds»,remain auniquewayto exert pres- areas whichhavealready beencovered byexisting sanctions. 9. 8. 4. 1. 7. 6. 5. 3. 2. Using threats andsanctionsinamore activeandwide-spread manner.

— the factors thatwillbeoftheutmostsignificanceinaddressing bothtasks. regional security, international regimes andthedegree ofinterdependence are the formatofrelations withRussia. Thebalanceofpower, theoverall context of a synergy of two strategies: settling the conflict in Eastern Ukraine and determining tool, takinginto ofUkrainian-Russian accountthe asymmetry relations the Russianpopulationitself. effective than they seem and that Russian counter-sanctions are damaging to Expanding thelistofpersonssubjected to personalsanctions. Keeping sanctionsdiverseandextending themperiodically. Maintaining ameaningfuldialoguebetweenalliedcountries,includingUkraine. geopolitical implications. Determining theoptimalcharacteristics ofthesanctionregime. goaloftoday’sprimary sanctionsregime againstRussia. The applicationofsanctions Setting the augmentation of the price for violating international norms as the Including sanctionsinlong-term planningandpayingmore attention to possible Conveying themessageto theRussianpopulationthatsanctionsare more

intimidate andwarnthird thatcontinueto parties cooperate withRussiain

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a complex, sometimes contradictory andcostly, Sanctions againstRussia

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should be should be INTRODUCTION 7 - Concerns regarding the future regime of anti-Russian sanctions have been triggered triggered been have sanctions anti-Russian of regime future the regarding Concerns with Russia to process of the bumpy negotiation renewal developments; by recent west- relations between some warming up of Ukraine, Eastern the conflict in resolve - Assem the Parliamentary to of the Russian delegation Russia, return ern leaders and membership in the Russia’s renew and even calls to of Europe, bly of the Council against the state of sanctions for softening conducive atmosphere Big Seven create separatists Crimea, supported annexed 2014, illegally its neighbour in which attacked than 13 deaths and millions of blame for more one to militants in Donbas and is the law and post- about destruction of international speak displaced persons, not even to instrument in pressur a key sanctions remain date, To security architecture. Cold War for respect rules and enforcing the international to adhere to state ing the aggressor answer: the questions we need to are Here independence and sovereignty. Ukraine’s countries, in as well as other the USA and the EU, of Ukraine, what is the strategy multilateral further against Russia? How long will the current maintaining sanctions condi- the their supportcontinue of countries coalition are for sanctions and what conditions the are What reinforcement? and mitigation modification, for their tions in context — another or one direction — in of sanctions for the review and indicators to other questions need clear answers in order These and of the Minsk Agreements? law. of international rules the to adherence restore to and region the peace in achieve policy foreign a standard have become sanctions other and diplomatic Economic, the geopolitical de- or redirect change to a tool Sender countries use them as tool. government. In 2014, such sanctions were country’s cision-making of the receiving Union, Canada, of America, the European States imposed on Russia by the United Crimea actions in Russia’s to countries, as a reaction a variety of other and Australia and most the largest assume that Russia is, so far, safe to It’s and East-Ukraine. Despite sanctions. such intense to subjected ever have been country to integrated that EU have stated level, the USA and the its significant position on an international Minsk Agreements unless Russia complies with the these sanctions won’t be lifted returns the an- as well as and enables peaceful settlement of the conflict in Donbas, Ukraine. Crimean peninsula to nexed on the Russian economy, A lot can be said about the effect that these sanctions have to establish the effectiveness of said sanctions on an eco- difficult much more yet it’s a means inherently, are, sanctions — as key is efficiency Yet level. political and nomic imposed why these sanctions were achieve an end. When looking at the reason to that the — it can be stated Ukraine towards aggression in the first place — Russia’s this does Yet policy. foreign robust in Russia’s changes instil to did little sanctions useless? has been completely Russia towards mean that the sanction system they but behaviour, Russia’s affect not might sanctions these as necessarily, Not economy since 2014, have an effect nevertheless. The negative impact on Russia’s Current status, prospects, successes and gaps in the multilateral international international the multilateral and gaps in successes prospects, status, Current Federation the Russian against regime sanctions INTRODUCTION 8 INTRODUCTION Initiative; experts from theWorld Policy Institute andanumberofotherthink tanks. siv oftheUkrainian Institute oftheFuture; Anna Talimonchuk from theSanctions2020 Galoushka, Yegor Kiyan,MaximStepanenko; IliaKusa, IgorTyshkevich, Viktor Andru- experts of theInternational Center forPolicy Studies Mykola Kapitonenko, Anastacia The studywasdevelopedthanksto several non-governmentalinstitutions,including standards. relax sanctionsagainstRussiainresponse to compliancewithinternational lawsand sanctions. Thedocumentoffersclearguidancewhenitispossibleandnecessary to and methodsofimproving theeffectivenessofindividual,diplomaticandeconomic on Russia.Particular attention ispaidto thegapsincurrent sanctioningsystem tool anddraw thegeneral linesofthestatusquoonEUandUSAimposedsanctions will therefore offeratheoretical background to theinternational politicalsanctioning In thispaper, theauthorsattempt to answertheseandotherquestions.Thispaper them? Andunderwhichconditionswillthishappen? But what’s next: tightening sanctions, maintaining the status quo, or gradually easing as personanongrata declarations) andinsufficienttargeting oftheRussianeconomy. proach to Russiafrom theWest, overestimation ofsheersymbolicalsanctions(such yet becauseofnumerous reasons, suchas:aninconsistent andschizophrenic ap- could argue thatthesanctionsagainstRussiasimplyhaven’treached itsfullpotential is obviouslyinsufficient toinstigate achangeinRussia’s policy towards Ukraine. One for example, issomethingthathasbeennoted world-wide.Yet thedamageitcauses Sanctions againstRussia INTERNATIONAL SANCTIONS: BETWEEN WAR AND WORDS 9 international legal responsibility. Consequently, sanctions are, by definition, a Consequently, sanctions are, legal responsibility. international Economic sanctions — partial restriction or complete termination of trade of trade termination or complete Economic sanctions — partial restriction with the country. relations offending the of territory the on military of force use the — Military sanctions country (military intervention). - or the termi of diplomatic presence Diplomatic sanctions — the reduction nation of diplomatic relations. The broad interpretation of the term «sanctions» primarily includes economic sanc- of the term interpretation The broad of pun- mechanism tions. The use of economic sanctions, as the most widespread The modern world is built on a system of international law that aims to regulate the regulate law that aims to of international is built on a system The modern world - de can use to legal instruments that countries through between states relationship the replace to in order was introduced This system national interests. fend their own national promote to war — as using military of kings» — force «argument traditional the leading powers of risky and costly, even for be quite itself to has proven interests the world. to establish need to the devastating effects on humanity led War’s The Second World of international system the the embodiment of became game», which «rules of the the of vio- the use preventing relations, for interstate regulations create Its task is to law. achieve political ends. lence as a means to it must be accompanied by law, of international the effective functioning guarantee To «pacta sunt servanda», im- to subjected countries are Formally, tools. enforcement they treaties of the international the provisions to plying that they voluntarily comply instances of violations us with numerous provides practice However, a party to. are that can develop a set of remedies the need to which have led to law of international provide pun- legal field or the international back into the offender coerce be used to ishment for the violation. The Oxford also called «countermeasures». is sanctions, The most common remedy trade, contacts, etc. with restricting order Dictionary defines sanctions as «an official - comply with interna to do something, for example, it to force a particular country to as sanctions international defines Encyclopedia Diplomatic Ukrainian The law.» tional an terminate law to of international applied by subjects measures coercive legitimate obligations in the rights and fulfill the offender’s violated restore offense, international of area to influence a sanctioned entity. levers that uses different tool coercive types of sanctions: law usually distinguishes three International Current status, prospects, successes and gaps in the multilateral international international the multilateral and gaps in successes prospects, status, Current Federation the Russian against regime sanctions INTERNATIONAL SANCTIONS: SANCTIONS: INTERNATIONAL WORDS AND WAR BETWEEN 10 INTERNATIONAL SANCTIONS: BETWEEN WAR AND WORDS The reasons, scope,duration depending on theirpur andforms ofsanctionsvary which are beingimposedbyinternational organizations, suchastheUnited Nations. However, it’s commonpractice forstates to adhere onlyto thosesanctionsregimes Sanctions can be applied by both states (individually) and international organizations. for amore comprehensive policytowards theaggressor country. tions isdifficult tocompare witheconomicones,butthecombinationoftwogives nation ofdiplomaticrelations betweencountries.Theeffectiveness of politicalsanc- national treaties, exclusion from international organizations orevencomplete termi- These mayincludediplomaticrestrictions, termination orsuspensionofjointinter The applicationofeconomicrestrictions isoften accompaniedbypoliticalsanctions. madebyRussia efforts to bringabout their removal. that testifies to the effectiveness ofthe regime against theRussian Federation is the suffer more from themthantheRussian Federation itself.But thesimpleargument also widespread amongRussiansthatcountriesapplysanctionsagainstthem on itare evenbeneficial to itthrough substitution»policy. itsso-called«import Itis lar, to Russiaistrying convincetheworldthatsanctionshavebeenimposed tiveness of economic sanctions, which often- happens in the political field. Inparticu der economicsanctions.Thissituationallowsusto manipulate thetopic oftheeffec- number offactors un- thatcanhavebothpositiveandnegativeeffectsforacountry effectiveness. Thecomplexity oftransnational economicprocesses creates alarge The problem ofapplyingeconomicsanctionsisthecomplexity ofmeasuringtheir spite oppositionfrom fervent theUnited States. upon anotherparty. Inaddition,third parties end upsufferingsevere economiclossesbecauseofthesanctionstheyimposed those againstwhomtheyhavebeeninvoked. Even thatappliesthemmay thecountry ishment forviolationsofinternational law, posesathreat to more countriesthanonly of thiswouldthe«Nord Stream global economicprojects withoutproper accessto themarkets. Apoignantexample is therestriction ofaccessto financial resources. It’s almostimpossible to implement therefore aneffectivebutlong-term methodofinfluence.Anothercommon of extracting and processing these raw materials. Artificial technological backlog is es, buttheyoften lacktheadvancedtechnologies thatwouldimprove theefficiency and extraction ofminerals isessentialforcountrieswithsignificantnatural resourc- cation of economic sanctions. Access to advancedtechnological tools for production Restrictions ontechnological cooperation betweenstates are often usedintheappli- effect ontheaggressor state thanonthird countries. sanctions, it’s allaboutfindingtheoptimalvariantthatwouldhaveagreater negative it’s impossibleto completely safeguard third intheapplicationofeconomic parties andminimizeloss fortheoffendingcountry external collateral damage. Even though all possible risks. It must be kept in mind that the main goal is to cause tangible far-reaching impact, the application of economic sanctions must be weighed against up sufferingthenegativeeffectsofeconomicsanctionspolicies.Becausetheir of international law but have close economic ties to the aggressor

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2» project, to whichRussiaistrying implementde-

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countries thataren’t actinginviolation Sanctions againstRussia

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may also end - - INTERNATIONAL SANCTIONS: BETWEEN WAR AND WORDS 11 more more

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against Southern Rhodesia and of freedom and democracy. The democracy. and of freedom

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forms of pressure. Still, the excessive use of sanctions in recent years is an use of sanctions in recent the excessive Still, forms of pressure.

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«Comprehensive» sanctions: a set of restrictions which are imposed on the which are a set of restrictions sanctions: «Comprehensive» country; entire imposed on certain government individuals, restrictions sanctions: «Targeted» etc. of the economy, sectors officials, specific Practice shows that, even though comprehensive sanctions work on a large scale large sanctions work on a comprehensive shows that, even though Practice relevance and effective- their population, the entire affect manage to and generally safeguard very those in power usually manage to little. This is because ness remains avoiding the sanctions’ negative effects, and therefore themselves and their assets, - Comprehen regime. dominant the of behavior the correct to unmotivated remaining consequences on a humanitarian level, while have grave sive sanctions can therefore making process. decision the country’s in altering obtaining little results the on impact negative «smart»or reduce hand, other the on sanctions, Targeted the innocent people and deci- a clear line between population and draw general scope, their and extend can both narrow sanctions targeted Moreover, sion makers. the most efficient be targeted, that have to of individuals depending on the groups sec- key against sanctions Sectoral etc. affected, be they can which through sectors they sanctions because effects as comprehensive similar of the economy create tors in one way or another. society affect the entire «between war and as a set of measures their reputation Sanctions have cemented popular than it has worth more noticing that the use of sanctions is now It’s words». United active in the currently Of the 26 sanction programs ever been in the past century. the the end of the Cold War, in the last 10 years. Before 12 have been initiated States, Nations had imposed sanctions only twice United violent pose, the disparity between forces, and the specific characteristics of the sanctioned of the sanctioned characteristics and the specific forces, disparity between pose, the and scope of degree the to according two groups, into divided are Sanctions state. their application: South Africa, whereas it’s imposed more than 20 different sanction regimes since 1991. sanction than 20 different imposed more it’s South Africa, whereas legal of international a weakening in the quantity of sanctions indicates An increase than not used as often more since sanctions are regimes, norms and international Sanctions serve«rules of the game». as a form of the international a subsidiary to - agree international violating of the price increase to also meant are but punishment, than alternative ments. The imposition of sanctions entails a much lower risk EU defines the following key objectives in its sanctioning regime: ensuring the val- key objectives in its sanctioning EU defines the following indication of the unreliability of global governance institutions and international norms of global governance institutions and international indication of the unreliability of sanctions is a sign of a crisis in increase the severe In other words: of regulation. security. the field of international an end, not an independ- a means to that sanctions are in mind keep important to It’s that allow measures and restrictive meant as precautionary ent goal in itself. They’re events and challenges political to adequately respond to community international the and values goals the international to contrary are that Current status, prospects, successes and gaps in the multilateral international international the multilateral and gaps in successes prospects, status, Current Federation the Russian against regime sanctions 12 INTERNATIONAL SANCTIONS: BETWEEN WAR AND WORDS logic choice initsfavourlesslikely, yet assumption thatsanctionsincrease thecostofundesirable behaviourandmake the targeted country’s decision-makingprocess andproceeds accordingly. However, the olent disputes. Thesanctionmechanismtakes into accountitsowninfluenceonthe be used as a weapon or an instrument of persuasion in a trade war or other non-vi- forcethe useofmilitary againstneighborsorthethreat ofgenocide.Theycanalso Sanctions canbeaimedatpushingagainstthedevelopmentofanuclearprogram, role intheirscopeandnature. by increasing the cost of undesirable alternatives, nuances can still play an important priorityofsanctionsistothe overwhelming influencethedecision-makingprocess sanctions are appliedinthepursuitofawidearray ofinterests andgoals.Although tional law;conflictprevention andstrengthening international security. It’s clearthat democracy,supporting theruleoflaw, humanrightsandtheprinciplesofinterna- ues, fundamentalinterests andsecurityoftheEU;peacekeeping; strengthening and Sanctions are the chapters below. Donbas region. Sometimesthegoalofsanctions is to discourage othercountries ties, to enforce thereturn ofCrimeaor to thepresence curtail ofRussian troops inthe courage the internal collapse ofRussia’s rulingforces, to capabili - curbtheirmilitary the matter. Sanctions have been introduced in order to weaken the Kremlin, to en- dependingfromThe purposesvary, eachcountry’s personalstake andinterests in of sanctionsand,secondly,theinternal divergence inpurposesofthesesanctions. goal-oriented thevantagepoint:firstly,simultaneousapplication ofawidevariety Two tendencies whenlooking atanti-Russiansanctionsfrom can beobserved a ment strategy, aswellinthegeneral relations towards Russia. tools ofinternational lawandbeincorporated inabroader Donbasconflictmanage- arsenal shouldtake into accountnumerous nuances,becomplemented withother these objectivesthrough sanctionsalone, which iswhysanctions from theUkrainian aggressionity ofsufferingfurther from Russia.It’s practically impossible to achieve whereas Ukraine’s main goal is to reclaim lost territories and minimize the possibil- getically usesanctionsto weaken theKremlin’s potential destabilization, forfurther nificant riskifonewouldbeenticed to turn to violentforce. Western nationsunapolo- since theconsiderable inpowerbetweenthetwo states asymmetry indicates asig- Sanctions against Russia, for Ukraine, constitute a solution «between war and words», attempting to changeitsinternal regime. After all,sanctionsare aimedatdestabilizing the aggressor possiblyeven country, prevent deterioration further ofthesituationanddiscourage harmfulactions. further enticed to changeitsbehaviour, anotherdesirable outcomeofsanctionswouldbeto violations ofinternational law. Whenitseemsunlikely thatthetargeted state willbe asawarningforothersandexemplifiescases, sanctionsserve theprice to bepaidfor ly, meaningnoamountofsanctionswillachievetherectification ofawrong. Insuch times sanctionsare appliedinresponse to decisionsthatcan’tbeundoneretroactive-

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this rarely worksinpractice. Thereason whyisdiscussedmore vigorously in

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de facto

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used aspunishmentforactionsalready taken, yetsome-

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for allitssimplicityandseeminglypersuasive Sanctions againstRussia INTERNATIONAL SANCTIONS: BETWEEN WAR AND WORDS 13 conviction

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naive

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- use of sanctions or lack of appro Excessive pay. always a price to there’s

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Sanctions against Russian oligarchs and companies make them more dependent them more and companies make Sanctions against Russian oligarchs In continuation of the previous risk, it’s necessary to point out that sanctions sanctions that out point necessary to it’s risk, previous the of continuation In CAATSA, the USA transferred substantial power to lift and impose sanctions from lift and impose sanctions from substantial power to the USA transferred CAATSA, an even the sanction system making a swift end to the Congress, to the president outcome. unlikely more seem to become an inherent part of the USA’s and EU’s routine foreign policy. policy. foreign routine and EU’s part of the USA’s become an inherent seem to as the idea of their continuous inevitability actually discourages This is dangerous, which caused the imposition confrontation for a way out of the search Russia to theWith leverage. its lose will West the case, this In place. first the in sanctions of effectiveness, as Russia and its partners actively search for alternative options and for alternative effectiveness, as Russia and its partners actively search shift already paradigm a There’s imposed obstacles. bypass the mechanism to to their exposure minimize working to Russia and China are taking place, where and dependency on the American financial market. on the Kremlin. This, in turn, will fortify their support for Putin, as their survival will This, in turn, will fortify their support for Putin, on the Kremlin. depend on him. Since European companies are more exposed to Russia than American companies, to exposed more companies are Since European causegive turn, can in This, penalties. U.S. to especially vulnerable this made them of of a joint front undermines the maintenance and actively diplomatic tensions to against the Russian Federation. the West increase tensions between the USA and the EU. The CAATSA, for example, was was for example, The CAATSA, USA and the EU. between the tensions increase by the USA and enabled the imposition of secondary sanctions. imposed unilaterally Another risk is the fact that overusing sanctions eventually wears down their overusing sanctions eventually wears down their Another risk is the fact that The discrepancy between sanctions and the collateral damage they cause may may damage they cause collateral sanctions and the between discrepancy The

4) 2) 3) 1) that sanctions are imposed and maintained solely for the sake of Ukraine’s support of Ukraine’s the sake and maintained solely for imposed are that sanctions a way to Sanctions are strategy. basis for a joint long-term be a good to is unlikely remain important to it’s and of the participating states further interests the national may differ sig- they Moreover, of these interests. scope and nature informed on the for un- to punish Russia on the country:nificantly, depending desire some countries victim fall not to it, so as weaken to desire others whereas order, world the dermining of abuse sanctions as a tool to dangerous it’s However, revisionism. the Kremlin’s to pressure to follow into Russia’s footsteps by showing the high cost of being ostracized. Each of being ostracized. the high cost by showing footsteps Russia’s follow into to and sanctions, rhetoric, application of a differing through goals is achieved of these sanctions at all. through be achieved goals cannot Some of these their scope. dialogue with its partners in constant and find remain to Ukraine for paramount It’s The sanctions. of the application in are their interests out what In order to be able to talk about an effective sanction regime, it will be necessary talk about an effective sanction be able to to In order policy towards the status quo and the lacunae in the current not only evaluate to from gestures — actually voice which specific — small and large Russia, but also to of in intensity at least, decrease or, the possible abolition lead to would the Kremlin sanctions. priate strategy entails certain risks, such as: strategy priate Current status, prospects, successes and gaps in the multilateral international international the multilateral and gaps in successes prospects, status, Current Federation the Russian against regime sanctions Sanctions against Russia

THE CURRENT INTERNATIONAL MULTILATERAL SANCTION REGIME AGAINST THE RUSSIAN FEDERATION

The sanctioning regime against Russia is currently in its fifth year. It was introduced as the international community’s response to Russia’s violation of the territorial integrity of Ukraine, as well as the infringement of human rights in the annexed Crimea and in the Donetsk and Luhansk regions. The following sanctioning instruments have been used by the EU and the US:

diplomatic measures (exclusion of Russia from the G8, depriving the Rus- sian delegation of their voting rights in the PACE, suspension of EU-Russia summits, suspension of practical NATO-Russia cooperation, etc.); THE CURRENT INTERNATIONAL MULTILATERAL MULTILATERAL THE CURRENT INTERNATIONAL individual sanctions (asset freezes and travel restrictions for individuals and entities included in the sanction list);

restriction of economic relations with Crimea and Sevastopol (prohibition of SANCTION REGIME AGAINST THE RUSSIAN FEDERATION REGIME AGAINST SANCTION investment and transfer of technologies to separate entities);

restriction of economic cooperation with Russia (specifically: restrictions on operation of certain critical infrastructure sectors, in particular when implementing large infrastructure-based energy projects, or limiting the operation of large entities in these sectors).

The sanctions were imposed in stages, ranging from visa sanctions and asset freezes for a specific list of individuals to sectoral economic sanctions. Sanctions were usually tightened after every significant breach of international law by Russia or after further escalation of the conflict. After introducing the first stage of sanctions in March 2014 (visa restrictions and asset freezes), following the violation of Ukraine’s territorial integrity, the subsequent tightening of sanctions by the EU and US only followed at the end of July 2014 (in response to Russia shooting down the Malaysian passenger plane MH17) by imposing sectoral economic sanctions and restrictions on trade in military and dual-use items. The sanctions imposed restrictions to access the capital markets for Russian banks and companies, as well as prohibited investments in Russian energy projects and thwarted exportation of high-tech equipment to Russia. Later, the EU and the US only strengthened, refined and expanded the list of companies subjected to sanctions. By late 2014 and 2015, sanctions were imposed on

14 Current status, prospects, successes and gaps in the multilateral international sanctions regime against the Russian Federation

several entities in the Russian energy sector, such as «Rosneft», «Transneft», «Gaz- SANCTION REGIME AGAINST THE RUSSIAN FEDERATION THE CURRENT INTERNATIONAL MULTILATERAL prom Neft», «Gazprom», «Lukoil» and «Surgutnaftogaz». In 2016, the United States expanded sanctions by adding Kerch Bridge-based construction companies and Gazprom subsidiaries to the sanctions list. In 2017 (due to Russia’s interference in US elections), US President Donald Trump signed a law that provided additional sanctions against Russia (as well as Iran and the Democratic People’s Republic of Korea). The idea was to introduce penalties, for both American and European companies, which cooperate with Russia’s Gazprom in the construction of the Nord Stream‑2 gas pipeline. Later that same year, both the EU and the US extended sanctions against companies and individuals involved in the illegal importation of gas turbines from the German company Siemens to Russia’s annexed Crimea. Throughout 2018 and 2019, the sanctions regime did not intensify. The EU and the US have only clarified the list of targeted individuals and extended the previously imposed sanctions. Notably, another escalation of the situation by Russian force — the seizure of Ukrainian warships in the Kerch Strait in November 2018 — didn’t lead to the expected response of strengthening the sanctions regime. The EU and US’ joint response was only to further specify which targeted individuals were subjected to visa restrictions and asset freezes. Table 1. Timeline of US and EU sanctions against Russia 1

Date Country Type of sanctions Description

March 3, 2014 The United States suspended trade and investment talks USA Economic, financial with Russia, as well as military cooperation.

March 17, 2014 The EU imposed visa restrictions and asset freezes on 21 EU Personal Russian and Ukrainian/Crimean officials.

The United States imposed visa restrictions and asset March 17, 2014 freezes on 11 Russian officials, including Federal Council USA Personal Speaker Valentina Matvienko, Deputy Prime Minister Dmi- try Rogozin and president’s assistant Vladislav Surkov. March 20, 2014 EU Diplomatic EU-Russia summit canceled. Moscow banned nine U.S. officials from entering Russia March 20, 2014 in response to American sanctions on itself and Crimea, RF Personal including former House Speaker John Boehner, Senate Majority Leader Harry Reid, and Senator John McCain.

March 20, 2014 The US Treasury imposed sanctions against sixteen Rus- USA Corporate, personal sian officials and the Bank of Russia

Twelve individuals added to the EU sanctions list: the speaker of the Federation Council, Valentina Matviyenko; presidential adviser Sergei Glazyev; Deputy Prime Minis- ter Dmitry Rogozin; State Duma speaker Sergei Narysh- kin; the head of the Rossia Segodnya news agency Dmitry Kiselyov, Deputy-Commander of the Black Sea Fleet, Rear March 21, 2014 EU Personal Admiral Aleksandr Nosatov; Deputy-Commander of the Black Sea Fleet, Rear Admiral Valery Kulikov; presidential aide Vladislav Surkov; Crimea Electoral Commission Chair Mikhail Malyshev; Sevastopol Electoral Commission Chair Valery Medvedev; the commander of Russian forces in Crimea, Lieutenant General Igor Turchenyuk; and State Duma deputy Yelena Mizulina.

1 https://www.rferl.org/a/russia-sanctions-timeline/29477179.html

15 Sanctions against Russia

Date Country Type of sanctions Description

March 25, 2014 The EU embassies in Russia ordered not to issue visas to EU Diplomatic residents of Crimea.

March 27, 2014 The US banned licenses for exporting defense goods and USA Economic services to Russia.

The Russian Federation banned most US and EU offi- March 28, 2014 cials from entering in response to visa restrictions and the RF Personal freezing of Russian officials’ assets. It didn’t disclose the names of sanctioned individuals or their total number.

March 28, 2014 The bilateral US-Russian presidential commission was USA Diplomatic suspended.

The US Treasury added seven Crimean officials and the April 11, 2014 USA Corporate, personal Crimean oil company Chornomornaftogaz to the sanctions list.

The EU imposed sanctions against 15 people, including April 28, 2014 EU Personal Chief of the General Staff of the Armed Forces of Russia Valeriy Gerasimov. The US imposed sanctions against 7 people and 17 com- Corporate, economic, panies affiliated with President Vladimir Putin. It also re- April 28, 2014 USA personal stricted Russia’s import of U.S. goods deemed to contrib- ute to its military capabilities. Thirteen individuals, as well as two Crimean energy com-

THE CURRENT INTERNATIONAL MULTILATERAL MULTILATERAL THE CURRENT INTERNATIONAL panies that were expropriated by the de facto authorities May 12, 2014 on the peninsula, Chernomorneftegaz and Feodosia, were EU Corporate, personal added to the EU sanctions list. This brings the total number of Russian and Ukrainian citizens targeted with EU asset freezes and visa bans to 61. The US Treasury imposed sanctions against seven sep-

SANCTION REGIME AGAINST THE RUSSIAN FEDERATION REGIME AGAINST SANCTION June 20, 2014 USA Personal aratists, including a notorious military commander Igor Strelkov.

July 12, 2014 EU Personal The EU imposed sanctions against 11 more individuals.

The US Treasury imposed sanctions against two major Corporate, economic, banks (Gazprombank and VEB) and energy companies July 16, 2014 USA (Novatek and Rosneft), eight arms companies includ- personal ing the Kalashnikov concern, and several officials and separatists.

July 18, 2014 The European Investment Bank suspended funding for EU Financial projects in Russia.

The EU added 15 individuals and 18 entities to sanctions list, bringing the total to 87 individuals and 20 organiza- July 26, 2014 EU Corporate, personal tions. Individuals added in this round included Chechen leader Ramzan Kadyrov and the director of Russia’s FSB security service, Aleksandr Bortnikov. The US imposed sanctions against sectors of Russian July 29, 2014 economy, including defense, energy and finance. These USA Corporate, financial include VTB, the Bank of Moscow and the Russian Agri- cultural Bank. The EU restricted access to capital markets for Russian July 29, 2014 state-owned banks, imposed an embargo on trade in EU Corporate, financial arms, and restricted exports of dual-use goods and sensitive technologies, especially in the oil sector. Eight individuals and three entities added to the EU sanc- Corporate, financial, eco- tions list, including the Russian National Commercial July 29, 2014 EU Bank, defense manufacturer Almaz-Antey, and Dobrolet, nomic, personal a subsidiary of Aeroflot. A partial ban is also imposed on investment in Crimea. The EU added Arkady Rotenberg, Yury Kovalchuk, and July 31, 2014 Nikolai Shamalov, three Putin “cronies,” as well as Putin’s EU Corporate, financial first deputy chief of staff, Aleksei Gromov, and Bank Ros- sia to the sanctions blacklist.

16 Current status, prospects, successes and gaps in the multilateral international sanctions regime against the Russian Federation

Date Country Type of sanctions Description SANCTION REGIME AGAINST THE RUSSIAN FEDERATION THE CURRENT INTERNATIONAL MULTILATERAL

August 6, 2014 The United States restricted the export of various oil and USA Economic gas technologies to Russia.

Russia banned the import of most foodstuffs from the August 6, 2014 RF Economic United States, the EU, and other countries that imposed sanctions on it. Financing of Rosneft, Transneft, and Gazpromneft banned. Corporate, financial, eco- Loans to five Russian state banks restricted. Financing of September 12, 2014 EU Uralvagonzavod, Oboronprom, and United AIrcraft Corpo- nomic, personal ration (defense manufacturers) banned. Nine Russian defense concerns and 24 individuals added to sanctions list. The US Treasury banned American companies from supplying goods and technologies to Gazprom, Lukoil, Transneft, Gazprom Neft, Surgutneftegaz, Novatek, and September 12, 2014 Rosneft. Assets of five Russian defense companies fro- USA Corporate, economic zen, including Almaz-Antey. Capital market restrictions imposed on six Russian banks: Sberbank, Bank of Mos- cow, Gazprombank, Russian Agricultural Bank, VTB, and Vneshekonombank.

December 19, 2014 Export of goods and services to Crimea banned; imports EU Financial from Crimea banned.

Export of goods and services to Crimea banned, imports December 20, 2014 USA Financial from Crimea banned.

Nineteen individuals and nine entities added to the EU February 16, 2015 sanctions list, including the Sparta, Somali, Zarya, Oplot, EU Corporate, financial Kalmius, and Smert’ separatist battalions, as well as Rus- sian singer and lawmaker Iosif Kobzon.

March 4, 2015 All US sanctions against Russia in 2014 had been extend- USA Continuation ed for one more year.

Corporate, financial, The United States imposed sanctions against 14 individ- March 11, 2015 USA uals, the Russian National Commercial Bank and the Eur- personal asian Youth Union.

March 14, 2015 The EU sanctions against 151 individuals and 37 entities EU Continuation extended until September 15, 2015.

June 22, 2015 The EU economic sanctions against Russia extended to EU Continuation January 31, 2016.

Law allowing punishments for foreign banks doing busi- June 24, 2015 USA Economic ness with sanctioned Russian individuals and entities came into force.

June 24, 2015 Russia extended food import ban until August 6, 2016 in RF Continuation response to the EU extension.

July 30, 2015 USA Corporate, personal The US Treasury sanctioned 11 individuals and 15 entities.

August 7, 2015 The US imposed sanctions against the Yuzhno-Kirinskoye USA Economic oil field.

The EU visa bans and asset freezes against 149 individ- September 14, 2015 EU Continuation uals and 37 entities had been extended until March 15, 2016.

December 21, 2015 The EU economic sanctions against Russia had been ex- EU Continuation tended until July 31, 2016

17 Sanctions against Russia

Date Country Type of sanctions Description

December 22, 2015 The US Treasury added 34 individuals and legal entities to USA Corporate, personal the sanctions list.

March 2, 2016 The US extended economic sanctions against Russia for USA Continuation one year.

March 10, 2016 The EU sanctions against 146 individuals and 37 entities EU Continuation extended until September 15, 2016.

June 17, 2016 The EU extended economic sanctions until January 31, EU Continuation 2017.

August 6, 2016 RF Continuation Russia extended food import ban to December 31, 2017.

September 1, 2016 The US designated 17 individuals and a number of entities USA Corporate, personal for sanctions, mostly local subsidiaries of Gazprom.

September 6, 2016 The US added 11 entities to its sanctions list. The list in- USA Corporate cluded 81 entities in total.

The EU imposed visa bans and asset freezes on 6 Duma THE CURRENT INTERNATIONAL MULTILATERAL MULTILATERAL THE CURRENT INTERNATIONAL November 9, 2016 EU Personal lawmakers from Crimea.

November 15, 2016 The US imposed sanctions against six Duma lawmakers USA Personal from Crimea. SANCTION REGIME AGAINST THE RUSSIAN FEDERATION REGIME AGAINST SANCTION December 19, 2016 EU Continuation The EU extended economic sanctions until July 31, 2017.

The US imposed visa bans and asset freezes on 7 individ- December 20, 2016 USA Corporate, personal uals and a number of companies involved in construction and logistics in Crimea.

December 23, 2016 USA Corporate The US sanctioned 23 Russian companies.

January 13, 2017 The US economic sanctions have been extended for one USA Continuation year.

March 15, 2017 The EU sanctions against 150 individuals and 37 entities EU Continuation extended for six months.

June 19, 2017 EU Continuation The EU sanctions on Crimea extended until June 23, 2018.

June 20, 2017 The US imposed sanctions against 38 individuals and en- USA Corporate, personal tities, including the military company PMC Wagner.

June 29, 2017 EU Continuation Economic sanctions extended to January 31, 2018.

July 5, 2017 RF Continuation Russia extended food import ban to end of 2018.

18 Current status, prospects, successes and gaps in the multilateral international sanctions regime against the Russian Federation

Date Country Type of sanctions Description SANCTION REGIME AGAINST THE RUSSIAN FEDERATION THE CURRENT INTERNATIONAL MULTILATERAL

The EU designated three Russian citizens and three com- August 4, 2017 EU Corporate, personal panies for sanctions in connection with the delivery of Sie- mens gas turbines to Crimea.

September 14, 2017 Sanctions against 149 individuals and 38 entities extend- EU Continuation ed to March 15, 2018.

November 21, 2017 The EU imposed sanctions against Dmitry Ovsyannikov, EU Personal the Russia-installed governor of Sevastopol.

December 22, 2017 The EU extended economic sanctions against Russia to EU Continuation July 31, 2018.

January 26, 2018 The US imposed sanctions against 21 individuals and nine USA Corporate, personal companies.

The US published the “Kremlin dossier,” a list of 210 people close to Vladimir Putin who might be designated for January 30, 2018 sanctions. The list included all members of the Russian USA government, members of the presidential administration, heads of state firms, former and current state-security officers and oligarchs.

March 2, 2018 USA Continuation The US economic sanctions extended for one year.

March 12, 2018 The EU sanctions against 150 individuals and 38 organi- EU Continuation zations extended to 15 September 2018.

The UK ordered 23 Russian diplomats, who Theresa May said were identified as “undeclared intelligence officers,” March 14, 2018 EU Diplomatic to leave the country after accusing Moscow of using a nerve agent in the attempted murder of former Russian spy Sergei Skripal on British soil.. The US made first use of CATSAA law to impose sanctions March 15, 2018 on 19 Russians, including 13 indicted in Robert Mueller’s USA Corporate, personal investigation into Moscow’s alleged meddling in the 2016 presidential election and Internet Research LLC.

March 17, 2018 RF Diplomatic Russia declared 23 British diplomats personae non-gratae.

More than 20 Western states ordered dozens of Russian March 26, 2018 USA Diplomatic diplomats expelled, including 60 from the United States, which also ordered Russia to close its consulate in Seattle.

March 29, 2018 RF Diplomatic Russia ordered 60 U.S. diplomats to leave the country.

March 30, 2018 RF Diplomatic Russia ordered diplomats from 16 EU countries out.

The US designated 38 Russian businessmen for visa bans April 6, 2018 USA Personal and asset freezes to punish Russian “malign activity” worldwide.

May 14, 2018 The EU imposed visa bans and asset freezes on 5 indi- EU Personal viduals linked to Russian presidential elections in Crimea.

June 18, 2018 EU Continuation The EU sanctions on Crimea extended to June 23, 2019.

19 Sanctions against Russia

Date Country Type of sanctions Description

July 5, 2018 RF Continuation Russia extended food import ban to end of 2019.

July 9, 2018 The EU economic sanctions on Russia extended to Jan- EU Continuation uary 31, 2019.

July 31, 2018 The EU added 6 companies involved in the construction EU Corporate of a bridge in the Kerch Strait to the sanction list.

The US imposed a ban on arms sales, arms-sales financing, U.S. government credit or other financial assistance, August 27, 2018 USA Financial exports of national-security-sensitive goods, and most foreign assistance to Russia under the terms of the Chem- ical and Biological Weapons Control and Elimination Act.

September 13, 2018 The EU individual and corporate sanctions extended until EU Continuation March 15, 2019.

November 9, 2018 The US added individuals and nine entities to the sanc- USA Personal tions list.

The EU imposed sanctions against 9 individuals respon- December 10, 2018 EU Personal sible for organizing "elections" in the so-called DPR/LPR.

The US sanctioned 15 GRU workers for their involvement THE CURRENT INTERNATIONAL MULTILATERAL MULTILATERAL THE CURRENT INTERNATIONAL December 19, 2018 USA Personal in a wide range of criminal activities, including attempts to interfere in the 2016 US election.

December 21, 2018 The EU extended economic sanctions against Russia until EU Continuation July 31, 2019.

SANCTION REGIME AGAINST THE RUSSIAN FEDERATION REGIME AGAINST SANCTION The EU foreign ministers sanctioned four Russians, five January 21, 2019 EU Personal, corporate Syrians and one Syrian company for using chemical weapons under a new sanctions regime.

Exemptions from the The US Treasury announced it was lifting sanctions against January 28, 2019 USA “Rusal”, “En+” and “Eurosibenergo” companies linked to sanction list Russian oligarch Oleg Deripaska.

March 4, 2019 USA Continuation The US extended sanctions against Russia for a year.

The EU extended sanctions against Viktor Yanukovych March 5, 2019 EU Personal, removal and 11 of his associates yet lifted the sanctions against Andrei Klyuyev.

March 15, 2019 The EU Council imposed individual sanctions against EU Personal eight Russian citizens due to the "Kerch aggression".

March 15, 2019 The EU Council extended individual sanctions against EU Continuation Russia for half a year.

The US Treasury imposed sanctions against six Russian March 15, 2019 USA Personal, corporate citizens and eight entities in response to Russia's ongoing aggression in Ukraine.

May 17, 2019 SOBR’s special unit “Terek” and five Russian citizens in- USA Personal cluded in the US sanctions list under the Magnitsky Law.

The US extended sanctions against several enterprises, May 22, 2019 including the Moscow Avangard plant, which produc- USA Corporate es missiles for the C-300 and C-400 anti-aircraft missile systems.

May 31, 2019 Russia expanded its sanctions list to include more EU rep- RF Personal resentatives and institutions.

20 Current status, prospects, successes and gaps in the multilateral international sanctions regime against the Russian Federation

Date Country Type of sanctions Description SANCTION REGIME AGAINST THE RUSSIAN FEDERATION THE CURRENT INTERNATIONAL MULTILATERAL

June 20, 2019 The EU Council extended "Crimean sanctions" for another EU Continuation year.

June 24, 2019 Russian President Vladimir Putin extended economic RF Continuation sanctions on EU products for another year.

Removal of diplomatic The Parliamentary Assembly of the Council of Europe June 24, 2019 EU adopted a resolution allowing Russia to return to PACE sanctions without fulfilling its international obligations.

June 27, 2019 The EU extended economic sanctions against Russia until EU Continuation January 31, 2020.

The second package of US sanctions against Russia over August 3, 2019 the poisoning of ex-spy Sergiy Skripal in Britain. Banning USA Financial US banks from participating in the primary sale of a sovereign debt in any other currency but rubles.

September 12, 2019 EU Continuation The EU extended sanctions until March 15, 2020

Of all types of sanctions, economic sanctions have proven to be the most effective so far. Their impact can be established by analyzing Russia’s economic development from 2014 onward. Thanks to the coordinated actions and concentrated efforts of the European Union and the United States of America, Russian currency suffered heavily, access to financial markets was restricted for Russian companies, and trade shocks were induced. The first round of sanctions included travel bans and freezing of US assets of the targeted individuals. Later on, bans on conducting business operations with Russian officials and companies were introduced. Subsequently, sanctions were able to affect entire sectors of in the Russian economy, including the banking (financial), oil and gas, defense and space industries. Indirectly, the sanctions also ended up targeting Russia’s national food sector. As time progressed, the list of individuals and legal entities subjected to sanctions in the EU and the US was expanded. As a result, 5 Rus- sian state-owned banks, 3 energy companies, 3 defense companies and subsidiaries acting on their behalf or under their direction were subjected to sanctions. A number of sanctions were also applied to the annexed Crimean Peninsula. This included the ban on tourism services, investments, technical assistance, construction and engineering services related to infrastructure, as well as restrictions on the import of goods originating in Crimea or Sevastopol (unless they have Ukrainian certificates), products, technology, telecommunications and energy industries. The economic sanctions Russia suffered can be divided into the following categories:

asset freezes of legal entities and individuals; limitation of access to financial resources; prohibition of activity of legal and natural persons in the territory of other countries; influence on sectors of the Russian economy and limiting their development opportunities; export-import restrictions.

21 Sanctions against Russia

The imposition of sanctions had a serious impact on the macroeconomic situation in Russia. Russia’s domestic and foreign debt growth, inability to access sources of external borrowing, and falling oil prices led to the collapse of the Russian ruble in 2014. The result was the rapid withdrawal of capital from Russia in 2014. Throughout 2014, a total of 151,5 billion USD was withdrawn — over 90 billion USD more than in 2013. In August 2014, the Russian government decided to respond to the situation by extending the moratorium on transferring pension savings to non-state funds until Janu- ary 1, 2016. This effectively destroyed the principle of the funded pension system and transformed Russia’s pension system into a financial pyramid. On April 27th 2015, at a meeting of the Legislative Council in St. Petersburg, President Vladimir Putin stated that the Russian economy had lost out on 160 billion USD because of sanctions. The incapability to borrow externally has also led to a rapid expansion of Russia’s domestic debt. By 2017 numbers, this debt increased by 18.8 % (up to 7 trillion 247.1 billion rubles). The result was a sharp acceleration of inflation, a depreciation of the ruble and an increase in mortgage rates. In February 2018, Russia liquidated the reserve fund because it had been exhausted to cover the state budget deficit in previous years. Its balances were combined with the

THE CURRENT INTERNATIONAL MULTILATERAL MULTILATERAL THE CURRENT INTERNATIONAL National Welfare Fund, which also declined by 14 % at the beginning of 2018, amount- ing to RUR3 752.94 billion (USD65.15 billion). A Bloomberg Economics study estimates the Russian economy’s losses throughout the duration of the sanctions (2014—2018) at 6 % in comparison to indicators of what SANCTION REGIME AGAINST THE RUSSIAN FEDERATION REGIME AGAINST SANCTION the economic growth could’ve been like without restrictive measures. Yet the findings also show that, although the sanctions did have an impact on Russia’s economy, they didn’t cause the shock that might have been expected. Russia’s macroeconomic situation had been exacerbated and was heading towards a general decline in the incomes of business entities and the living standards of ordinary Russian citizens, yet Russia’s behavior in the international arena didn’t change. Neither did it change Russia’s policy towards Ukraine, which means the continuation of enforcing peace on Russia’s terms, through the usage of hybrid instruments. It is difficult to evaluate the effectiveness of sanctions completely accurately, because they are rarely ever applied separately from other pressure mechanisms, such as threats, negotiations, appeals to courts, third party mediation, etc. It’s technical- ly impossible to separate the impact of sanctions from these additional factors. For example, the estimated impact of a set of factors on the Russian economy during 2014—2017 can be summed up by two indicators: a fall in nominal GNP by 25—35 % and a devaluation of the national currency — the ruble — of nearly 50 %. However, it must be kept in mind that sectoral sanctions were only one of the many factors which contributed to the overall recession in Russia’s economy and the drastic fall of energy prices. Then again, the dynamic of the ruble exchange rate is more closely correlated with changes in oil prices, meaning a possible more significant impact of the latter factor instead of the sanctions. The last round of US sanctions led to a rapid drop in the RTS index by 11 %, but almost half of this decline has already regained. Thus it remains quite difficult to correctly assess the impact of imposed sanctions.

22 Current status, prospects, successes and gaps in the multilateral international sanctions regime against the Russian Federation SANCTION REGIME AGAINST THE RUSSIAN FEDERATION THE CURRENT INTERNATIONAL MULTILATERAL WHAT AFFECTED THE RUSSIAN RUBLE MORE? OIL PRICES OR SANCTIONS?

Russian troops take over the Crimean Parliament

Shooting down the MH-17 “Malaysian Airlines” plane over Ukraine

Announcement Announcement of additional US, EU and Japan sanctions of US and EU sanctions

Extending G7 sanctions for another six months

Increase in EU PRICE FOR A BARREL and Canada sanctions OF BRENT OIL (LEFT AXIS) Extending EU Extending EU sanctions sanctions for RUSSIAN RUBLE (RIGHT AXIS) until July 2016 another six months

As the situation is yet to actively improve, the EU’s travel bans and asset freezes against 170 Russian individuals and 44 legal entities have been extended until 15 March 2020. In addition, a number of other economic sanctions targeting specific Russian economic sectors will be in place until January 31st, 2020. Economic sanctions stick to their traditional course. This, however, has allowed for Russia’s economy to adjust to the sanctions and even show growth in both its internal economy and in its export.

RUSSIA’S EXPORT DYNAMICS, IN MLN. USD 2

55000 50000 45000 40000 35000 30000 25000 20000 15000 2010 2012 2014 2016 2018

2 https://tradingeconomics.com/russia/exports

23 Sanctions against Russia

REAL GDP GROWTH IN RUSSIA, EU, USA AND UKRAINE, ANNUAL CHANGE IN´% 3

2010 2011 2012 2013 2014 2015 2016 2017 2018 6

-1

-2

-3

-4

-5

-6

THE CURRENT INTERNATIONAL MULTILATERAL MULTILATERAL THE CURRENT INTERNATIONAL -7

-8

-9

-10 SANCTION REGIME AGAINST THE RUSSIAN FEDERATION REGIME AGAINST SANCTION Russian Federation Ukraine USA European Union

Considering these trends, the following conclusions can be made:

Economic sanctions in their current form don’t trigger enough pressure and are incapable of causing a major blow to the Russian economy in today’s context. This allows for the Russian economy to develop itself almost more dynamically than in some European countries.

The sanctions aren’t dynamic, meaning that there’s no change or adaptabil- ity in objects and sectors to exercise pressure. This lack of dynamic and, subsequently, variety allows for the Russian Federation to better navigate the situation and adjust its economy.

Sanctions don’t take into account the current changing global trends and specific situations in other countries. This enables a situation where the Russian economy prospers and other countries suffer losses because of sanctions aimed only at the Russian Federation (remember the aforementioned oil prices).

Sanctions aren’t supposed to become a permanent phenomenon, but must rather remain an element of political will and influence. The mere fact that sanctions may or may not be extended allows for Russia to exercise pressure

3 https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/USA/EU/UKR/RUS

24 Current status, prospects, successes and gaps in the multilateral international sanctions regime against the Russian Federation

in the diplomatic arena and reduce the likelihood of their continuation. This SANCTION REGIME AGAINST THE RUSSIAN FEDERATION THE CURRENT INTERNATIONAL MULTILATERAL is fortified by the fact that sanctions have become an element of mutual bargaining and compromise, instead of an effective pressure tool.

Sanctions aren’t global in nature, allowing the Russian economy to refocus on other markets and other partners.

Sanctions target sectors that have a significant impact on the production of key goods and resources. These sectors are valuable, depend on a variety of factors and are a convergence of many differing interests. It’s therefore logical that sanctions affect the interests of all countries involved, not just the sanctioned country, and therefore aren’t naturally supported by a unified front.

Although sanctions initially had a significant impact on the Russian economy, their consequences are now being carried by ordinary Russian citizens and end up affecting them more than the authorities against whom they were directed.

The Russian Federation has mechanisms for compensation of sanction shocks and there’s room to maneuver at the expense of interest rates and foreign exchange reserves.

Unfortunately, sanctions lists are relative and lack a systematic approach, which allows certain companies and individuals to avoid being listed. Sanc- tions also risk to be used as a means to exert pressure or a way to manipulate other companies, benefiting other competitors on the markets. Considering flaws in the current regime of economic sanctions against the Russian Federation, the following can be concluded:

1) Sanctions should be strengthened and their enforcement should be ensured with the development of the global economy kept in mind. The use of «traditional» sanctions is yet to reach the desired effect, as the current sanctions packages don’t prevent further development – even growth - of the Russian economy. It’s paramount to continue the search for and limitation of additional factors causing economic prosperity in the Russian Federation. It may even be necessary to consider the most rigid measures, such as the complete exclusion of the Russian Federation from certain sectors of international economic cooperation. Russia’s access to investment and international financial markets should also be restricted. The option of disconnecting Russian banks from SWIFT, international payment systems and means for settlements abroad, in particular with the help of Visa and MasterCard, remains one to consider. However, as the latter step doesn’t only strike the Russian Federation but also impacts other countries, it must only be used as a sanctioning mechanism in a worst case scenario.

2) The goals and intentions of sanctions must be clearly defined. Simply harming the Russian economy doesn’t suffice. There must be a targeted approach, consistent application and thought-out conditions to either strengthen or weaken sanctions

25 Sanctions against Russia

on the basis of adherence to international agreements. This would minimize the risk of manipulation by the Russian side and other Kremlin sympathizers, which might actually lead to a positive result. 3) Serious efforts must be invested in the improvement of the common sanctioning policy against Russia, by both Ukraine and other allied countries, as well as the control and monitoring mechanisms for the implementation, continuation and alteration of sanctions. There must be a more active culture of consultation between partners on the conditions attached to possible revision of the sanction policy against the Russian Federation, in order to ensure continuity and consistency, and to avoid a clash of conflicts between these partner countries. Active monitoring should also prevent sanctions to have a minimal, merely formal or even beneficial impact on targeted individuals. It’s clear that economic sanctions must go hand in hand with other types of sanctions, particularly personal sanctions. Otherwise, the unity and consistency of sanctioning policies will suffer, causing little harm to the sanctioned state. To avoid frustrations, it’s important to keep in mind that sanctions rarely work on the basis of logic and simple action-reaction schemes. The hypothesis that the imposition

THE CURRENT INTERNATIONAL MULTILATERAL MULTILATERAL THE CURRENT INTERNATIONAL of sanctions would be so frightening to the authorities of the aggressor state, that it promptly changes its destructive foreign policy to a constructive one is an unrealistic scenario in the real world. Even though targeted sanctions are designed to influence the decision-making process, their impact is built up very gradually.

SANCTION REGIME AGAINST THE RUSSIAN FEDERATION REGIME AGAINST SANCTION The statistics of the last decades indicate that only once in every fourth case economic sanctions led to significant changes in the behavior of the state against which they were imposed. More often, in every third case, sanctions have helped to prevent the illicit use of weapons. Ukraine’s experience deviates from the norm, though: on the one hand, the introduction of the first sanctions on March 6, 2014, accompanied by threats of possible additional measures, didn’t stop Russia’s occupation of Crimea and the organisation of a so-called «referendum». On the other hand, the sanctions are likely to have weakened Russia’s ability to take drastic measures in order to further destabilize both Ukraine and regional security in general. When applied in order to destabilize the political regime, sanctions appear to have a 50% effectiveness rate. Yet even here we note significant caveats: authoritarian and to- talitarian regimes are much more difficult to destabilize, and external sanctions can, as already stated, be a factor in the consolidation of society around the ruling authorities. The unexpected and contradictory effects of sanctions should always be borne in mind. They can fuel sanctioned countries to find alternatives that will prove more successful over time – such as finding new markets or developing alternative technologies – causing indirect and unintentional benefits. Sometimes, sanctions have dual effects. Sectoral sanctions related to the supply of oil production equipment to Russia, for example, could lead to a reduction in the expected production of oil, which in turn could lead to an increase in the price of oil. Such growth could enable Russia to counteract

26 Current status, prospects, successes and gaps in the multilateral international sanctions regime against the Russian Federation

the economic effect of sanctions. US President Donald Trump’s sanctions against SANCTION REGIME AGAINST THE RUSSIAN FEDERATION THE CURRENT INTERNATIONAL MULTILATERAL Iran and Venezuela have led to increased demand for Russian crude oil and therefore increased its export revenues. Subsequently, Russian oil companies have received at least 905 million USD in additional revenue between November 2018 and July 2019, and the value of the Russian Urals barrel has reached a higher level than Brent. There are three main ways to minimize or avoid the devastating effect of economic sanctions: finding alternative markets or sources of supply; the use of counter-strategies such as smuggling, import substitution or accumulation; or divide sanctions-related economic problems between different groups of the population. The application of sanctions against the Russian Federation over a long period of time forces or stimulates business entities to adapt themselves in order to avoid these restrictions and suffer too many losses. The case of third parties supplying equipment of German manufacturer «Siemens» to the occupied Crimea became a rather well-known example. This was one of the first cases to demonstrate that transnational businesses are always looking for opportunities to make money and are not ready to fully suffer losses because of political semantics. It is also worth noting the resistance of the individuals against whom personal sanctions were declared. In March 2019 the EU removed the head of the Presidential Ad- ministration during the time of Viktor Yanukovych, Andriy Klyuyev, from the sanction list. Officially, this was done because in adherence to a decision of the European Court of Justice. There have been claims, however, that this judgement was the fault of Ukrainian law enforcement officers, who allegedly failed to justify the imposed sanctions against him by accurately summing up Klyuyev’s crimes. This was one of the first occasions where it was pointed out that the sanctions regime against Rus- sia would also call upon Ukrainian law enforcement agencies to prove the involvement of the sanctioned individual in criminal activity. Hoping that the sanctions regime, on its own, will save anything is a common misconception in Ukraine’s political establishment. US sanctions against the companies of Russian oligarch Oleg Deripaska are another good example of this. The imposition of sanctions on the aluminum giant «Rusal», its holding company «En+» and the energy firm «Eurosibenergo» in April 2018 was considered, by some political observers, to be a «demonstrative execution» of Deripaska, a close friend of Vladimir Putin. However, these sanctions lasted only a year and were lifted in early 2019. The US Treasury’s official explanation was that the goal of these sanctions had been achieved, as Deripaska supposedly had lost the majority stakes in these companies. According to The New York Times, however, Oleg Deripaska was able to secure an amicable settlement with the US government, while maintaining full control over the group’s key assets. Prior to this, The New York Times had reported that Oleg Deripaska was seeking to lift US sanctions on himself and his companies with the help of Great-Britain’s ex-prime minister David Cameron, Lord Gregory Bark- er, and other lobbyists. The targeted individuals’ refusal to simply submit themselves to the imposed sanctions doesn’t necessarily mean that they are therefore de facto useless, but it does

27 Sanctions against Russia

THE CURRENT INTERNATIONAL MULTILATERAL MULTILATERAL THE CURRENT INTERNATIONAL

SANCTION REGIME AGAINST THE RUSSIAN FEDERATION REGIME AGAINST SANCTION constitute a warning for the West that constant scrutiny and vigilance are necessary to ensure the continuation of the sanctions’ effectiveness. The abovementioned cases indicate that maintaining the status quo in the sanctioning policy against the Russian Federation cannot be considered the most effective way to force Russia’s compliance to international law. The support for the current sanctions regime is partly countered by resistance from the targeted individuals, as well as those who refuse to put political necessity over business opportunities and therefore ignore sanction-induced restrictions. It’s even more discouraging to assess the reaction of the Russian Federation as a state. Russia’s foreign policy remains one of waging a global geopolitical war, where it pursues redistribution of influence and power. To obey the demands of Western countries de facto instils a feeling of failure in the Russian mind-set, meaning its outcome will be very difficult to obtain.

28 RUSSIA’S REACTION 29 - The Russian government’s reaction to the current sanctions regime signifies that regime sanctions the current to reaction The Russian government’s eliminate it plan to nor does law, comply with international to Russia is not planning the and EU The place. first the in imposed been had sanctions the why reasons the to Crimea returns Russia until force in will remain sanctions» «Crimean that state US time, assert at the same question that the Crimean Russian representatives, Ukraine. Feder on sanctions is that the Russian Their official position is not up for negotiation. commu- Nevertheless, actions. the state’s any unwanted into ation cannot be forced a certain evolution. on sanctions has undergone nication strategy disguise to attempts the Russian Federation regimes, As many authoritarian political image offake a creating thus procedures, principles and democratic behavior with its instance, was accompanied of Crimea, for The annexation processes. «democratic» the seize which served as an illusion to referendum», by the so-called «democratic - democrat as a Russia positioned the «referendum» After state. of a sovereign territory as part of Russia, the Russian «self-determination» Crimea’s that led to ic procedure employs a stance on the issue. The state its general from now cannot stray Federation Republics. Russia’s Luhansk People’s with the so-called Donetsk and similar strategy are no Russians in LPR/DPR, at the same time calling keep insisting that there officials sanctions «confusing» and ungrounded. change to unwillingness country’s sanctions highlights the regarding rhetoric Russia’s actually the idea that sanctions actively propagates The Kremlin its line of behavior. that stated Putin has numerously this message, Vladimir To promote «benefit» Russia. the negative effect decreases the policy of import substitution industrialization in large shape national public opinion has also tried to Putin sanctions may hold for the state. the At think clearly in light of the sanctions regime. to by noting that Russians started the sanctions’ its confusion regarding stresses same time, the Russian Federation While the state’s law. within international claiming it has been acting purely reasoning, is likely rhetoric law norms, Russia’s actions do not truly comply with the international similar statements aimed at underlining its unwavering geopolitical course. Moreover, by the «unfair» sanctions Russians in light of the challenges provoked mobilize help to by ene- surrounded the «we are strengthens Such a communication strategy regime. among Russian citizens. by the Kremlin mies» theme, which is heavily promoted that im- the message that the countries Russia actively communicates As of today, that stated Putin than Russia does. In June 2019, Vladimir pose sanctions lose more other hand, lost Union, on the Russia lost 50 billion dollars since 2014. The European of these numbers 240 billion dollars, Japan – 27, and the US – 17. While the credibility than we do». Rus- is «you lose more questionable, the main point here appears rather advantageous thus starting a more this message within the EU, spread sia seeks to discourse. Current status, prospects, successes and gaps in the multilateral international international the multilateral and gaps in successes prospects, status, Current Federation the Russian against regime sanctions RUSSIA’S REACTION RUSSIA’S 30 RUSSIA’S REACTION becoming activeindifferent crisisareas. international lawupuntiltheannexation point)forced theKremlin to raise the stakes, and anineffectivesystem ofsanctions (theRussian Federation figured itcould violate Ukraine. increase Thefurther inpressure (largely provoked bytheMH-17tragedy) ous reaction to the annexation ofCrimea andthebeginningofconflictinEastern a compromise – at leastinthepost-Sovietregion. Thisexplains the world’s ambigu- global player status.At to thattime,the US andEUbelieved itwas necessary achieve annexation ofCrimeawere tools inawiderstrategy to secure itsinterests andthe this, With from Russia’s perspective, the state’s aggression against Ukraine and the allowed Moscowto ensure itsinfluenceonRussia’s geopolitical periphery. suppliers to the European markets. The war in Georgia and gas conflicts withUkraine point, theRussianFederation secured itsstatusasoneofthemainnatural resources internationalthe globalunderstandingthatRussiaisanimportant partner. At that theKremlin’sNevertheless, inclusioninG8,NATO-Russia Council,andG20marked ment onitsarea ofinterest. tocountry theEast.Moscow, however, perceived anakinreaction asthe encroach- the ideaofRussia’s Western expansion. Thus,theysoftly influencedanddirected the sia asacounterweight to Chinaanditsallies,theWestern countrieswere notkeen on inEuropeportunities dueto theBalkans’crisisandNATO expansion. Perceiving Rus- as well as tried tosupport, expand into Central Asia, all the while limiting Russia’s op- affect thepost-Sovietcountries.Theyimplemented projects onGeorgia andUkraine country’s position.At thesametime,Western states continuedtheirattempts to duction andthestabilizationofRussia’s internal politicalsituationthenenhancedthe an influentialglobalplayerthroughout the2000s.Theincreasing profit from oil pro- Despite lackingtheeconomicpotential, theRussianFederation hadformallyremained tools. the needto improve boththesanctionsregime andaseriesofothercomplementary find means to bypasscurrent limitations. At thesametime,lackof results signifies in theinternational arena. productive Without alternations, theRussianFederation will Continuing theexisting sanctionsregime willnoteffectivelyinfluenceRussia’s behavior was ableto inducemisunderstandingsbetweentheEUandUS. provoking disputes inWestern society. Russiaunofficiallywonthisconfrontation,it as ly supported as a successful example by Germany and opposed by the US, serves of ening thestate’s geopoliticalpositions.For instance,«Nord Stream 2»,whichisactive- institutional weakening oftheEU. Countering the sanctionsisonlyatool forstrength- ments to destabilize theEU’s internal politicallife.Primarily, Russiaisinterested inthe The mainindicator ofRussia’s truereaction to sanctionsisasetofactionsitimple- European ofcertain import andAmericanfoodproducts. intends to closetheinternal market forimported goods.In2014, Russiabannedthe imposes personalandeconomicsanctionsagainsttheUSEU. this,it With «counter-measures» againstthecountriesthatsanctionRussia.For instance,Russia Except fortheactiveinformationpolicies,RussianFederation utilizes aseriesof Sanctions againstRussia RUSSIA’S REACTION 31 - - - - - It approved the development strategy of transport engineering until 2030 engineering until 2030 of transport strategy the development It approved (August 17, 2017); ed on August 10, 2019); until 2030; the maritime development strategy It redesigned for food and processing development strategy the engineering It adopted industry until 2030 (2019); 2018); (December 2035 until strategy development base mineral the adopted It It revised the development strategy of the energy complex until 2035 (cur complex the energy of strategy the development It revised until 2030 is in force); the development strategy rently (adopt 2035 until complex grain the of strategy development the approved It ation with leader-states; migrant to attractive and strong be to has economy the Asia, Central stabilize this region. from workers On the other hand, the state that supports certain the balance of power in a On the other hand, the state To coun fulfill this function. it needs to may access the technologies region hand. To upper technological a needs one expansion, North Korea’s teract In light of the global economic transformation, the suppliers of natural re the suppliers of natural transformation, economic global of the In light cooper technical secure and obtain new technologies struggle to sources Thus, implementing the «stakes raised» policy and entering new crisis areas, new crisis areas, policy and entering raised» Thus, implementing the «stakes it the best negotiation positions. Ideally, secure seeks to the Russian Federation thus having become an important in a series of crisis areas, stakeholder strives to players. different appeals to separate for the lift of sanctions. level, Russia prepares the same time, on the national At various countries, the Russian Federation’s in Including economic transformations investors conditions for potential the most attractive create government aims to the particular, In ones), Chinese Japanese and European, American, (especially rated (analyzing June 2012-June 2013 time-period) Doing Business-2014 ranking Doing Business-2019 112th. In comparison, scored Russia 92nd, while Ukraine 71st. Russia 31st and Ukraine ranked In a series of industrial development programs. In the past 4 years, Russia adopted particular: At the same time, Russia utilized the difference in key states’ interests, appealing to appealing interests, key states’ in the difference utilized time, Russia the same At the develop- Russia used France, plan. With compromise with a different each one in the Medi- terrorism fighting markets, African to expansion joint programs, ment of Russia offered To Germany, and support in the Libyan conflict. Sea region terranean the and a solution to relationship of a trade reinvention project, 2» Stream the «Nord crisis. refugee - the table (in Ven to mutual concessions brought With Russian Federation the US, the and Iran). North Korea, Afghanistan, the Arctic, Libya, Syria, ezuela, and the global world order in its role secure to Russia aims approach, Employing this weakness: for its technological compensate Current status, prospects, successes and gaps in the multilateral international international the multilateral and gaps in successes prospects, status, Current Federation the Russian against regime sanctions 32 RUSSIA’S REACTION nores therequirements setforliftingthesanctions Russia’s goalsandfuture Russia-EU-US relations in casetheRussianFederation ig- and precise criteria ofitseffectiveness.Italsoneeds to includeaclear vision ofboth Consequently, thesanctions regime againstRussia requires asystematic reinvention sia’s lineofbehavior, theygrow progressively unpopularwithsomeoftheEU states. countering Russia.Assanctionshavearather limited effectanddonotchangeRus- sanctions regime asasuccesscriterion forthecountry’s international strategy and hostilemove.TheUkrainianevery politicalsociety,atthesametime, perceives the Ukraine callsonitsinternational to partners increase sanctionsinresponse to Russia’s the sanctionsregime. Interestingly, thesameconcernsUkraine, theUS,andEU. new destructiveactionsillustrates theabsenceofasystematic approach regarding The chaoticreaction ofUkraine’s international to partners theRussian Federation’s panded thecurrent sanctions,suchasvisalimitationsandEU assetfreezes. the uncontrolled territories –didnotprovoke anewsanctionsregime. Theyonlyex- sia’s andholdingelectionsin actions–like theissuanceof«localpassports» further imposed orincreased inresponse to thefirststagesofRussianaggression, Rus- more and effective economic limitations. Whilethe sanctions were important usually question. Thisstrategy wouldkeep theCrimeansanctionsactive,allwhilelifting regarding thepoliticalinfluenceinUkraine, in exchange forabolishingtheCrimean Russia countsontheDonbascompromise, potentially involvingmutualconcessions Republics». negotiations andeventrade. Notably,itallowedshipmentsfrom theBaltic«Soviet situation. For instance, the Welles declaration allowed for the US-USSR cooperation, the annexation ofCrimeayetnotimplementinganymeaningfulactionsto changethe to theWelles declaration ontheBalticStates. Thispolicyfocusesonnotrecognizing eration iscontent withPompeo’s declaration regarding Crimea,inwhichhereferred Russia doesnotintend to return theCrimeanpeninsulato Ukraine. TheRussianFed- conclude thatRussiacountsonthesanctionsbeinglifted Itisobviousthat bythen. vestments, aninfluxof technology and technological cooperation. Thus,onecan preparatory stage. After 2025,the Russiangovernmentaimsto increase foreign in- In addition, all the documents list 2023-2025 asatimeframe for completing the first, subsidies, loans,nationalgrants, etc. as well.Thefirststageisdesigned to maximize theuseofnational resources, suchas for anyindustry’s growth. Theakinruleconcernsentering foreign borrowing markets each strategy notes thattheinfluxofforeign asasource investmentscannotserve islation to make theinvestors’ jobeasierandprotect theirinterests. At thesametime, alization stages,withthefirstonealwaysinvolvingsimplificationofRussia’s leg- technological development.Alltheaforementioned strategies includeacoupleofre- All thesedocumentsindicate challengeto thatthesanctionsposeaprimary Russia’s 2014). It adopted thetransportation developmentstrategy until2030(approved in ing until2030(July2017); It developed and adopted the development strategy of agricultural engineer Sanctions againstRussia - FLAWS IN THE CURRENT SANCTIONS REGIME 33 The USA, EU and other countries of the multilateral sanctions regime have been have been sanctions regime and other countries of the multilateral The USA, EU financial Russian 2014. However, sanctions on Russia since imposing consistently these economic threats to reaction cold-blooded an incredibly demonstrate markets these developing certain immunity to assets are Russian Gradually, and restrictions. of business opportunities and the freedom to with regard restrictions sanctions. New on the Kremlin pressure will increase politicians and oligarchs movement of Russian of list the why That’s countries. other and Ukraine against aggression Russian stop to with business partners and companies found- be updated individuals has to targeted Pu- of Vladimir Sanctions against the supporters of Russian officials. ed by relatives possibilities of reduction freezes, asset include and extended be should regime tin’s prevention of obtaining conflicts’ financing as well as for business development and countries visas for Western eventual lifting of sanctions, public activism which aims to and weakening prevent To initia- is useful. The international regime existing sanctions in the the flaws eliminate platform on which an international It’s example. tive Sanctions2020 is a noteworthy information of those involved in the annexation the names and available people share sanction Syria, etc., forming an up-to-date in Donbas, of Crimea or the armed conflict The purpose of the initiative who should be targeted. list of persons and companies - exist avoid the already manages to whom Russia identify the persons through is to God Nisanov, Roldugin, Ivan Savvidi, Sergey are ing sanctions. Among such persons junior, Ivanov Sergey Shuvalov, Igor Shoygu, Sergey Gerasimov, Valeriy Iliyev, Zarakh Sobyanin. and Sergey Trutnyev Yuriy Chayka, Ruslan Rostovtsev, Igor Chayka, Yuriy at violating actions aimed to contributed or indirectly, All those people have, directly and the destabilisation of international and sovereignty integrity territorial Ukraine’s Investment Bank, also incorporated The International region. security in the Europe escape managed to of a legal entity which has also in this list, serves as an example sanctions for some reason. - individuals shouldn’t be underes The importance and influence of all aforementioned - aggres the in involvement and role person’s each to appropriate Sanctions, timated. should be imposed. sive plans of the Kremlin, Maria. and godfather of his daughter Roldugin – is a childhood friend of Putin Sergey musician, be a mere to and is known of politics on the side-lines remains Roldugin nevertheless. him an influential person, makes but his status as close friend of Putin Koval- Yuri officials and powerful such as people, He has contacts with many top - Pu to According and many other. brothers the Rothenberg chuk, Suleiman Kerimov, so-called the of publication the After business». in «dabbles also Roldugin himself, tin «business» that Roldugin’s became clear it journalists, by OCCRP Papers» «Paradise to launder their most influential individuals out of aiding Russia’s mostly consisted and avoid personal sanctions. dirty money, evade taxes Current status, prospects, successes and gaps in the multilateral international international the multilateral and gaps in successes prospects, status, Current Federation the Russian against regime sanctions FLAWS IN THE CURRENT CURRENT IN THE FLAWS REGIME SANCTIONS 34 FLAWS IN THE CURRENT SANCTIONS REGIME and personalendorsement oftheRussianpresident. Itisalsohighlyunlikely thatthe ducers eagerlydonate theirmoney to Kovalchuk’s mediaassetswithouttheexplicit of Roldugin’s offshore companies, itseemsunlikely thatthelargest oilandmetalpro- operations. Although his direct engagement can’t be deduced from the documents toOne starts wonderto whichextent VladimirPutin ispersonallyinvolvedinthese STS, Channel5andanumberofotherassets. the moneyto fundthembycallinguponotheroligarchs. Thishappened for NTCS, some mediaassetswhichare to important Putin, butas hisfundsare tiedhecollects «Dacha Winter» (referred to inthemedia as«Putin’s Cottage»).Yuriy Kovalchuk has «Igor’s» (where SkiResort Putin’s daughter celebrated herwedding),andthehotel related specifically to Kovalchuk’s International», assets,including«Video SkiResort old friendofVladimirPutin, Yuri Kovalchuk. MuchofPutin’s offshore operations are some attention. Investigativereports showthatthiscompanyisdefacto runbyan «Sandalwood Continental»,anotherofRoldugin’s companies,alsoattracts quite personal funds. since 2018, such a «gift» was most likely meant to whitewash Suleiman Kerimov’s USD, from Kerimov himself. Given the fact that Kerimov has been under US sanctions estingly, Roldugin’s offshore received thelargest gift,foragrand total of259million garch ArkadyRothenberg, andbusinessmanSenator SuleimanKerimov. Inter which are connected to steel magnate Alexei Mordashov (Putin’s oli- judopartner), trace such«donations»,findingtransfers to Putin’s offshore funds from structures of thesegiftsare deposited directly into offshore accounts.TheOCCRPwasable to make generous donations to close friends of the Russian President, and that 35% previously provided informationonthisscheme.Heexplained thatRussianoligarchs Russian businessmen.Sergei Kolesnikov, abusinessmancloseto theKremlin, has Other steady sources of money into Putin’s offshore accounts are «donations» from sive businessconglomerations. a scheme to withdraw this amount of money and whiten it through Roldugin’s exten- USD, whichwaspaidto «International MediaOverseas».Mostlikely, thiswassimply total sumofthese«fines»eventuallyaddedup to thestaggeringamountof69million was expected to breach terms andkeep payingthestipulated compensation.The no onewasevermeantto actuallyfulfilthe terms ofthecontract, butthat«Rosneft» way thattheyprovided large finesforallegedfailure to comply. Onecanassumethat 750 000USDascompensation.Theterms ofthecontract were stipulated insucha was terminated becauseofbreach ofcontract. Roldugin’s firmimmediately received agreement to buy«Rosneft»’s shares inanotheroffshore entity,buttheagreement 2010, «International MediaOversea»s,ownedbyRoldugin,wasto enter into an possibly eventhrough direct theftfrom state-owned enterprises. For example, in The moneyappeared intheoffshore accountswiththehelpofsuspiciousschemes, holds about2billionUSDinaplenitudeofoffshore accountsin Panama. purchases forVladimirPutin. According to anOCCRPinvestigation,Vladimir Putin not findthemselvespointingatRoldugin,whoseoffshore firms arefundingvaluable In theirattempt to find Putin’s personalassets, Western journalistsmore often than Sanctions againstRussia - FLAWS IN THE CURRENT SANCTIONS REGIME 35 - - - , also known as the , also known as Ruslan Rostovtsev Russian businessman a known name in the coal industry«Coal King», is the num- and - of Rostovt of Donbass coal. The case export ber two in illegal to in order – reconstruction – elaborate sev deserves a separate to as their outreach of his activities, as well pinpoint the illegality coal industry the in to countries. He was introduced Western export of the the official in charge Trubnikov, Donbass by Sergei Versia.ru cite Trade, PIF or Iridium. These companies are on Trubnikov’s list of authorized authorized of list on Trubnikov’s are companies These PIF or Iridium. Trade, cite made are on these contracts with the DPR. Payments conduct trade companies to companies managed by DUR: PAO Shakhtoupravlenie Donbas and GP Shakhta Shakhtoupravlenie companies managed by DUR: PAO the to by railways transported Most of these coal deliveries are Komsomolets. region DPR and the Rostov between – on the border station of Uspenka border between agreements purchase sale through re-designated is coal The Russia. in Anthra Rostovtsev: by controlled companies three the of one and Limited Coliner tiny, the coal is bought by Coliner Limited, Rostovtsev’s company registered in company registered Rostovtsev’s tiny, the coal is bought by Coliner Limited, (DUR), a public with RP Donbassuglerestrukturizaya Cyprus, which signs contracts on behalf of the DPR contracts export sign coal in DPR authorised to corporation by two mining is delivered Coal for these contracts Ministry of Coal and Energy. Europe under a Russian label. The coal is then bought by European buyers, who buyers, European by bought then is coal The label. Russian a under Europe to and, according republics separatist unknowingly and illegally funding the are scru- avoid To fighters. separatist for weapons of purchase the funding reports, favours the Kremlin’s interests. His operations are therefore under the patronage under the patronage therefore are His operations interests. favours the Kremlin’s formed by the Contact Group on high representative Putin’s of Boris Gryzlov, Ukraine the conflict in Eastern resolve to Russia and Ukraine Germany, France, also the for He’s in the Minsk peace process. and the main Russian negotiator Rostovtsev is responsible for a third – around 700.000 tons per year – of the coal 700.000 tons – around for a third is responsible Rostovtsev by the of Donbass coal is protected His export in the Donbass region. production DPR controlled the separatist funnel money back into him to and enables Kremlin turn in which territories, these of support legitimacy the activities His LPR. and mer Minister of internal affairs, speaker of the Duma (lower house of parliament) affairs, speaker of internal mer Minister Russia. and chairman of United to sent and relabelled repackaged, it’s where Russia, to transported is coal This photo: the of of DPR minerals and steel to Russia in the office of Vladimir Ustinov, the presidential the Ustinov, Vladimir of office the in Russia to steel and minerals DPR of control to said is latter The District. Federal Southern the to envoy plenipotentiary - relat all matters DPR and LPR, controlling to agenda related most of the operational Russia. Russian business- DPR to from and steel resources of mineral exports ed to deal Rostovtsev, Borisovich Ruslan with the DPR and with trade want to men, who office. with Ustinov’s directly tant link in the laundering enterprises of many sanctioned Russian officials. sanctioned Russian officials. of many laundering enterprises tant link in the dodgy schemes which are pumping funds from «Rosnafta» and «VTB» to Roldugin’s Roldugin’s to and «VTB» «Rosnafta» funds from pumping are which dodgy schemes Putin. Vladimir knowledge of without the place put into were offshore be included should Roldugin schemes, Sergei all aforementioned account into Taking sanctions, as he forms an impor EU and US personal subject to in the list of persons Current status, prospects, successes and gaps in the multilateral international international the multilateral and gaps in successes prospects, status, Current Federation the Russian against regime sanctions Source 36 FLAWS IN THE CURRENT SANCTIONS REGIME Rostov regional brank ofSberbank.Kaproben –inthisstory –canbeseenas Emirates NDBinDubaito Rostovtsev’s three companies’accountsatthemain for those contracts from its accounts atTallinn Business Bank Limited and at coal volumeswithoneofthethree companiesandmakes settlementpayments Bank Limited. Simultaneously,Kaproben signscontracts forthecorresponding by RBR’s companiesto ColinerLimited’s accountinEstonia atTallinn Business Rostovtsev to laundermoney, reveal thatbetweenAprilandJuly2015alone $16 throughout Europe. Loan agreements betweenforeign companies,owned by Rostovtsev’s blackmarket coalenterprise haslaundered millionsofdollars Trading intheUK. AG andStadtwerke Flensburg in Germany,Orsted Bioenergy inDenmark,Jera AB, Fortum Power andHeatOyTeollisuuden Voima OyjinFinland,Enercity UGMK origin must be concealed. These deliveries go to inter alia Alholmens Kraft EU-based powerfirmsandEUtraders mustbe routed onlyviaTTKandthatits ers. Kudriashkin’s directive specificallystates thatanyUGMKcoaldeliveries to to Carbo One,Kaproben HandelsAG and insomecasesdirectly to endcustom The coalisthenshippedviaMaritimePort Ust-LugaandVysotskiyMaritimePort KRU butwasproduced atTTK’s AO Shakhtoupravlenie Taldinskoe-Kyrgaiskoe. fortheseshipmentsshowingthatthecoalisnotfromorigin paperwork UGMK/ coal purchase agreements between TTKandKRU. ThenTTKsuppliesproduct interest. For theseshipmentstheCEOof TTK,ElenaStebeneva, signsdomestic via OOO TGK/TTK, in which UGMK and its principals do not hold a beneficial Denmark, Netherlands,Italy,Turkey, Slovenia,France, Ukraine, SpainandBrazil place, instructing the firm to re-route all significant KRU shipments export to 2018 a directive from UGMK commercial director Igor Kudriashkin has been in as ahedgeagainstpossiblesectoral andpersonalsanctions.From 15October project to transform the group’s coal export operations. The project was set up ders from IskanderMakhmudovaspresident ofUGMK,havebeen executing a Since earlyNovember2018UGMKHoldingandCarbo OneLtd, ondirect or Handels AG. which are under Rostovtsev’s control – and also trades through Kaproben shipments from OOOTaldinskaya (TGK/TTK) inKemerovo anditsmines– – ownedbyAndrei Bokarev andIskanderMakhmudov –receives coalexport Trading documents show that the Cyprus-based company Carbo One Limited ofGryzlov’sness partner formeradviserUmarKremlev. Interestingly, SDSGroup ownerFedyaev isdescribedasaclosefriendandbusi is then mixed with MIR Trade’s coal, which is designated for export to Europe. the SDS Group – is predominantly active in the coal market. Kaproben’s cargo of SDSGroup, MikhailFedyaev, whoseSwisscompanyMIRTrade AG of –part sale purchase agreements betweenKaproben andtheKemerovo-based owner TerminalExport ofRostov Merchant Port, where itisreceived inaccordance with The coal is then transported by Russian Railways as Kaproben’s cargo to the Coal the intermediary andasthemainsource ofRostovtsev’s profit. Sanctions againstRussia - - - FLAWS IN THE CURRENT SANCTIONS REGIME 37 - - sts by legitimising the DPR and sts by legitimising the DPR and Ivan Savvidi parliament, or – a former member of the Russian Russia and throughout extends empire Duma, whose business the accession to Macedonia’s sabotage tried to Savvidi Greece. EU and NATO. - Balkans, but also built a rep isn’t just infamous in the Savvidi particularly on the is- clergy, utation for himself in the Athos’ is Savvidi Church. Orthodox sue of an independent Ukrainian the back of his illicit coal trade. Without the imposition of sanctions, this trade will Without this trade the imposition of sanctions, the back of his illicit coal trade. intere and Western continue, harming Ukraine Ukraine. policy in foreign the Kremlin’s LPR while reinforcing helped «strengthen international relations and a positive image of the Republic and a positive image of relations international helped «strengthen arena.» within the international and sup must be done. He is not only a sympathiser Something undoubtedly on them helped finance actively has he but republics, breakaway the of porter with multiple Sottish LPs to launder millions of dollars made by the coal from the made by the coal from launder millions of dollars to LPs with multiple Sottish Donbass. DPRset up bogus embassies for the uses the money to subsequently Rostovtsev legitimacy in internation solidify the DPR’s to attempt in an Turin in Marseille and claiming he award, received a personal his efforts, Rostovtsev For al spheres. million was transferred offshore through an account at the Latvian ABLV bank. ABLV at the Latvian an account through offshore transferred million was has accused Corruption and European Maladministration Against The Campaign along Ltd, Systems company, Grandwood using a UK-registered of Rostovtsev close to the «United Russia» party and has close ties with the closest associates of Russia» party ties with the closest associates and has close the «United close to with the leadership of the Greek also maintains close relations Savvidi Vladimir Putin. enjoys his and builds churches He finances some of their projects, Church. Orthodox Ponomar claims that, ever since it became clear Blogger Oleksandr influence there. Ivan autocephaly, Church Orthodox Ukrainian the grant Bartholomewthat to decided working actively with the bishops of the Greek started on behalf of Moscow, Savvidi, support Bartholomew. to refuse them to urging Church, Orthodox - ex to smuggle goods subjected a channel to has also successfully created Savvidi - the Middle East. These goods include tobac ports to the Montenegro cise tax from under the Greek in Montenegro that have been illegally manufactured co products years. In this for over ten that has been out of production – a brand «Brooks» brand – are citizens – sometimes Ukrainian well-established smuggling scheme, trustees of of the nature not aware that are ships with crews registered Ukrainian chartering Organised Lebanon. to Bar (Montenegro) from plying the route and are the cargo oversee the smuggling operations by Savvidi, controlled Russian criminal groups, on these routes. Current status, prospects, successes and gaps in the multilateral international international the multilateral and gaps in successes prospects, status, Current Federation the Russian against regime sanctions Photo: Getty Images 38 FLAWS IN THE CURRENT SANCTIONS REGIME Images Photo: Getty Nisanov isalsosuspected to recruit fighters fortheDonbasconflict. lethal weaponsfortheseparatists were sentbytheenterprises ofNisanovandIliyev. gions inUkraine. According to Ukrainian Intelligence sources, food trucksfilledwith called humanitarianconvoysto theoccupiedterritories ofDonetskandLuhanskre- billionaires. Theirpresence inthatlistcanalsobeexplained bythemfinancingso- as anargument forseveral European countriesto refuse citizenship to theRussian companies as well. The fact that Nisanov and Iliyev were included in the report served lations, thoseenlisted bytheUSAshouldbeperceived aspossibleriskbyEuropean their toxicity to UScompanies,includingbanks.Becauseoftight-kniteconomicre- decision ismadebyCongress. However, appearinginthe«Kremlin report» indicates 2018. Appearingonthelistdidnotmeanautomatic imposingofsanctions,asthis oftheTreasurypartment after theirrelations withtheRothenbergs were signalledin Zarakh Iliyevwere includedinaso-called«Kremlin report» prepared bytheUSDe- of counterfeited goods of famous brands and money laundering. God Nisanov and they havemadebillionsofdollarsthrough illegaloperations withregard to thesale God Nisanov and Zarakh Iliyev – according to Western and Russian journalists, operations infavorofKremlin’s policy. doesn’t appearonthelistofactivesanctions,whichallowshimto continueillegal 2018. However, despite thefact thatSavvidi’s activitiesare well-known;hisname spent overoneandahalfyearsinprisonGreece. Theywere released onlyinJune Ivan Savvidi, 6citizens ofUkraine –crew membersoftheUkrainian vessel «RS-97»- whichgetapercentagespecial services, from theturnoverasareward. Becauseof These criminalgroups comefrom Sevastopol and tightlycooperate withRussian conflicts inUkraine and Syria outRussia’sto try equipment and tactics. newmilitary separatists and approved Russia’s intervention military in Syria. Shoygu used the Crimea in the spring of 2014. He also signed Gerasimov’s plans to Ukrainian support tics whichare usedinRussia’s hybridwar, withwhichGerasimov managedto seize Sergei Shoygu–asRussia’s Minister ofDefence,Shoygu hassignedoffonthetac- inresponseRussian military to theSecondChechenWar. to followsuitGerasimov, whohasalsobecomeknownbybeingincommandofthe uous interference inEastern Ukraine. However, forunclearreasons, the USAhasyet tions on Gerasimov as a response to the annexation of Crimea and Russia’s contin- The European Union, Canada, Australia, Switzerland andLichtenstein imposed sanc- state ofinternal conflict and unrest. aim oftheDoctrineisto wreak keeping itinaconstant havocinthehostilecountry, have dubbedhisactionsthe«Gerasimov Doctrine».Thegeneral writes thatthemain the Democratic Party strategy. isinlinewithhismilitary Analysts tions in2016.Hackingthee-mailsofNationalCommittee of the Syrian warandtheinterference intheUSpresidential elec- oftheseparatistport mutinyinEastern Ukraine, interference in proved theplansforannexation ofCrimeain2014,thesup- the Russianarmedforces since2012.Hedevelopedandap - Valeriy Gerasimov –Gerasimov isageneral, responsible for Sanctions againstRussia FLAWS IN THE CURRENT SANCTIONS REGIME 39 was a deputy to both Vladimir Putin and Dmitriy and both Vladimir Putin to was a deputy Igor Shuvalov He Ministers. times as Prime their respective Medvedev during insen- and general scandals corruption for rod» «lightning was a the Russians during ordinary of fate the about statements sitive accumulated Shuvalov that claim journalists Western 2000s. - en also while career, his during dollars of millions of hundreds He be- joying a government salary of 140 000 USD per year. came the chairman of the Russian bank «Vneshekonombank» after resigning from his from resigning after bank «Vneshekonombank» came the chairman of the Russian occupy the positions of board to in 2018. He managed Minister post as Vice Prime «Rosatom»,»Sovkomflot» such as «Gazprom», member and chairman in companies Corporation». Aircraft and «United has been a . His father – Ivanov Senior – Ivanov Junior on the list is Sergey Next Since Putin in the 1980s’. the KGB both working for since they were friend of Putin positions – De- administrative has held several in 2000, Ivanov Sr. became president Admin- Presidential the of Staff of Chief and Minister Prime Deputy Minister, fence his in 2016. Using of Environment the Minister become to left the latter He istration. the age of 22, he At made fast strides in his career. Ivanov Jr. famous name, father’s was and Export at «Gazprom» became the Head of the Department of International of Board the of Chairman became He 24. of age the at vice-president its appointed – «Sberbank» of ViceSenior and the 2011 in company President insurance «Sogaz» at the age of 36, he institution in Russia – in 2016. A year later, financial the largest Rus- diamond mining company – «Alrosa». largest of the country’s became president interference separatists, of Crimea, its support for Easter-Ukrainian annexation sia’s elections in 2016 should be enough and the US presidential referendum in the Brexit buying Russian diamonds. The higher consumers from Western prevent motivation to the possibility likely on Russian businessmen and politicians; the more the pressure Ukraine. changing its policy towards of the Kremlin Chayka. of Russia, Yuriy General Igor Chayka – the younger son of the Prosecutor lists. He be included in the sanctions Artyom, Igor has yet to his brother to Contrary capital and thrives in the busi- significant accumulate name to has used his father’s The company in Crimea. «PKB» company LLC construction He founded ness world. but it also operates of houses and hotels, not only in the construction is engaged 40 types of activities (engaging in around bureau and excursion operator as a tour of the centre Chayka have become Yuriy prosecutor Both sons of general overall). pub- Navalny Alexey of Fund the Anti-Corruption in the public eye after attention they hold and estate real the foreign lished its investigation on their Business Empire, the scandal However, criminal group. their connections with the infamous Tsapko business endeavours. in their prosper to continuing from the brothers prevent didn’t a politician Oleg with In August 2018 it became known that Igor Chayka, together The Syrian intervention was downright barbarous, with Russian regular airstrikes on on airstrikes regular Russian with barbarous, downright was intervention Syrian The of the deaths non-militaryhave led to which and hospitals, including schools objects, Shoygu’s by was so impressed Putin Apparently, of civilians. of thousands hundreds of his candida- consideration announced the news organisations work that Russian in 2024. resignation Putin’s the RF after of President for the position of ture Current status, prospects, successes and gaps in the multilateral international international the multilateral and gaps in successes prospects, status, Current Federation the Russian against regime sanctions Photo: Getty Images 40 FLAWS IN THE CURRENT SANCTIONS REGIME Images Photo: Getty who died shortly afterwho diedshortly sharingthisinformation. – andotherquestionablefunds.Thiswasdiscovered bylawyer Sergey Magnitskiy, which wasstolen from theRussianState Treasury –asumofover230millionUSD aged through the accounts of Ukio. These companies were used to launder money ing» – a networkof companies and accounts created by «Troika Dialog» and man- after on«Triple thepublicationofinvestigationbyOCCRPandpartners Launder of theLithuanianbankUkio,drew theattention oftheEuropean Parliament deputies of Russianinvestmentbank«Troika Dialog»andVladimirRomanov, previous owner laundering across theEU»assoonpossible.RubenVardanyan, aformerpresident of bankers, the deputies proposed to authority against money set up a «supervisory United Kingdom,Belgium,Finland,SwedenandPoland. from Apart thesanctioning by 21deputiesoftheParliament from 14different EUcountriesincludingGermany, the LithuaniandeputyofEuropean Parliament Petras Aushtravičius andsigned have transferred billionsofdollarsfrom Russiato West. Thedemandwasinitiated by against twobankers, whosebankswere involvedinmoneylaunderingschemesthat In March 2019more than20membersoftheEuropean Parliament calledforsanctions accused of.Hisbank«Ukio»appeared infewmoneylaunderingscandals.. bank whichheheaded.Russiaoffered himasylum,knowingfullywellwhathewas ago to avoid being prosecuted for the appropriation of 35 millions USD from the Vladimir Romanov–acitizen ofRussiaandLithuania,whofledLithuaniafiveyears circumvention ofsanctions. ofChayka’sa part businessstructures. Itisoneoftheexamples ofthe«intra-family» trans» (BET)–thatbelongedto OAO «RZHD»–to the«T-Industry» company,whichis railroad manufacturer inRussia.Itwasaboutthesaleof25%shares of«Bele- togovernment allowedthecompanyofIgorCharyka consolidate 75%ofthebiggest Mitvol, wasplanningonbuildingawater desalinationstationinIran. InOctober the ter, Sobyaninbecame Putin’s DeputyPrime Minister. tion. After Medvedev’s victory and the appointment of Vladimir Putin as Prime Minis- for Putin to become president again without having to change the Russian Constitu- inthetemporarypart transferal ofpowerfrom Putin to Medvedev, opening uptheway anin headedtheelectioncampaignofcandidate DmitriyMedvedev. Thisway,hetook er inthehandsofPutin’s entourage. Duringthepresidential electionsin2008, Soby- of independentmedia,thesuppression ofoppositionandthemonopolisation ofpow- and assisted intheelimination of civilrightsandfreedoms inRussia,thedestruction Throughout his career Sobyaninhasremained an avid supporter of Putin’s regime of democratic institutes, corruption and his avid cooperation in political repression. in thislistishiscomplicityaggressive revolutions, usurpationofpower, destruction Palestinian Society. The main reasons why Sobyanin is included committee ofthehonorary membersoftheImperialOrthodox the HighCouncilofUnited RussiaParty andisalsointhe mayor of Moscow. Since 2001 he is a member of the Bureau of the governingsystem. SinceOctober 21,2010he’s beenthe many yearsSobyanonheldavarietyofmanagingpositionsin Sergey Sobyanin–oneofthekey figures in Putin’s regime. For Sanctions againstRussia - FLAWS IN THE CURRENT SANCTIONS REGIME 41 . Despite his presence on the CAATSE list, Trutnyev was list, Trutnyev CAATSE on the his presence . Despite 4 - Federa of Russian Minister Deputy Prime he was appointed – in 2013 Trutnyev Yuriy District. Federal Eastern Far in the President of representative plenipotentiary tion – a Department Treasury US the by formed list, CAATSA the in included was he 2018 In quite reacted Trutnyev news portal the Russian TACC, to According for Congress. be a pity not to it would have been in the list, stating that « his inclusion positively to company» included in such never targeted with specific sanctions. never targeted Bank (IIB) was founded Investment International Russian state-owned The de facto remained intact service used as a financing in 1970 and originally COMECON. It for its moved IIB the 2019 of beginning the At Union. Soviet the of collapse the after regu- financial or to IBB isn’t subjected Budapest. The Moscow to from headquarters or comply with apply audit standards supervision or audits, nor does it have to latory the the bank from protected Its IFI status obligations. or registration authorisation 2014 on Russia by the EU and the US from imposed financial sanctions which were including states EU communist former are shareholders nine IIB’s Among onwards. Hungary,Vietnam,and Cuba well as as Bulgaria, and Romania to continue which individual the largest Russia remains However, be governed by communist regimes. in the Bank. shareholder an international As it’s though, that the bank is still under Russian influence. clear, It’s EU banking supervisionit is used as a legal loophole and from exempt institution, it’s all transactions that paramount on Russia. It’s avoid economic sanctions imposed to their legitimacy ensure to be placed under scrutiny to the IIB are which pass through regulations. under international https://tass.ru/politika/4913426 Current status, prospects, successes and gaps in the multilateral international international the multilateral and gaps in successes prospects, status, Current Federation the Russian against regime sanctions 4 42 BENCHMARKING BENCHMARKING ginning nificantly. Allthe while,maintainingtheunityofallieswasapriorityfrom be- thevery elections territory, Russia’s actionsinSyria, andRussia’s attempts to interfere intheAmerican with complications:theshootingdownofaircraft MH17overUkrainian occupied of success.Thesanctionregime’s trajectory wasbecomingmore andmore riddled calation. Onecouldstate thatthesegoalswere reached, degree albeitwithvarying ation inUkraine andsendamessageaboutthesteep priceto es- payforfurther The impositionofsanctionsin2014aimedto destabilize Russia,improve thesitu- which extent acter can’tbedenied.WhetherRussianpolicieswillchangeornotand,ifso ments. It might work for a while, maybe a couple of decades, but its temporary char It wasevidentfrom thatanti-Russiansanctionsare thestart onlytemporary instru- imposed againstoneofthebiggesteconomiesinworld. challenge theremnants oftheworldorder inthe future. cient justificationwould sendanunambiguoussignal to allthosewhowouldwish to gether wouldbetoo short-sighted. Weakening orliftingthesanctionswithout suffi- to influence thosewho threaten regional security, simply questioning sanctions alto- fectiveness ofpossiblefuture sanctions.Giventhelackofalternative, peacefulmeans destabilisation. This ideology has toand minimizing further be maintained for the ef- security. Theideologyof sanctionsistwo-fold:punishmentforthecauseddamage byRussiatowardsdertaken compensation ofthedamageitcausedto international First ofall,anylooseningsanctionsshould bedirectly linked to specificsteps un- politics. For that,thefollowingcontemplations are considering. worth fromsignal, apart otherthings,theformationofnewstatusquo ininternational tion wouldhave a significantpolitical, diplomatic and symbolicalmeaning thatwould tions should be an integral of the overall part sanctioning regime. A step in this direc- Bearing thisinmind,itseemsnomore thanlogicalthatmechanismsto weaken sanc - the pragmatic considerations ofindividualstates threaten theunifiedfront ofsanctions. gy ortrade spheres. Theeventssurrounding the«Nord Stream‑2» project indicate that from sympathy,there are alsocommoninterests to beconsidered, forinstance, inener Greece,Hungary, where forvariousreasons sympathytowards Russiaisstronger. Apart lic acceptance.ThisisespeciallythecaseinEuropean countries,suchas France, Italy, In somecountriessuchcallsenjoymore andmore andpub- significantpoliticalsupport the first place.It can be assumed that the popularityof this rhetoric willcontinue to grow. pears occasionallyontheagendaofthosecountrieswhointroduced thesanctionsin The questionofrelaxing orevencompletely liftingsanctionsagainstRussianowap- «success» impliesachangeofRussia’s policies. power. Everything pointsto thefactthatitwouldbedifficult tosucceed,especiallyif few dozens ofcountriesandaimsto hitanauthoritarianstate withabigeconomic regime ofanti-Russiansanctionsisacomplicated one:itrequires politicalunityofa

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it was a fundamental condition for the relative effectiveness of sanctions,

all these episodes widened and complicated the sanctions regime sig-

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is a very interestingis avery question.From thetheoretical pointofview, the Sanctions againstRussia

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to to - - BENCHMARKING 43 particularly with regard to Russia’s non-compliance with Russia’s to particularly regard with

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- the re and territory Ukrainian from of troops withdrawal the

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Secondly, the best strategy would be to weaken diplomatic sanctions before altering altering before diplomatic sanctions weaken would be to the best strategy Secondly, against place in sanctions of types four are there moment, the At ones. economic the Parts the sanctions of diplomatic. and personal/corporate financial, trade, Russia: Russia’s of a result them are some of whereas of Crimea, the annexation concern Ukraine actions in Eastern the Minsk Protocol. After all, the mechanism of introduction of sanctions varies, de- of sanctions varies, of introduction all, the mechanism After the Minsk Protocol. every months six extended are sanctions EU The entities. imposing the on pending in the lack of progress by the their continuation is guaranteed and, in most cases, or lift sanctions against to loosen Even those who wish Ukraine. conflict in Eastern an utter remains states the unity of European that the maintaining Russia recognize poli- partbecome have sanctions anti-Russian USA, the In a long-term of priority. to related and extensive diverse, are themselves Russia. The sanctions cy towards The mechanism for their necessarily include Ukraine. conduct that doesn’t always House and between the White on the interactions implementation or change depends structural Russia’s reduce sanctions aims to The package of diplomatic Congress. politics, including via participation in global power and its influence on international of these sanc- The weakening organisations. governance formats and international engage in discourse with Russia, of possibilities to tions would allow for an extension conces- Accordingly, further destabilisation limited. potential but would also keep be made only at the very should and tiring end of this long sions in the financial sector Russia. targeting in strategically role as these sanctions play a crucial process, of things, the return sanctions concerns, among other of diplomatic The softening formats. This year saw the restoration various international to the Russian Federation Assembly of the Council of power in the Parliamentary of the Russian delegation’s countries, but was made some from sharp criticism It was a move that drew Europe. isolation, which could end up hurting diplomatic Russia’s counter nevertheless to same logic will possibly be applied than Russia itself. This of the world more the rest the G8 will arise. to return when the issue of Russia’s Crimea should be directly of sanctions that do not concern the alteration Thirdly, As these sanc- of the Minsk Protocol. made in the framework progress the to linked positions in the asymmetrical conflict negotiating Ukraine’s improve a way to tions are concessions. In this until Moscow makes unaltered with Russia, they should remain would be the A first approach can be proposed. two differing approaches context, with issues conflict the links consistently that «roadmap» large-scaled of a creation be weakened which sanctions will to the Kremlin specific sanctions. It should be clear by the Minsk process. foreseen concessions and steps for the appropriate in return a of the hostages or establishment of constructive stance on the exchange A more - direc made in the opposite the same time, steps At sound truce could be rewarding. should tion, such as the distribution of Russian passports in the occupied territories, of sanctions. be met with aggravation in of the regulation process lies in the assessment of the general Another approach negotiations with In this case, Moscow can, either alone or through Ukraine. Eastern lies key The steps. constructive the of sequence the and volume the determine Kyiv, result the desired in Current status, prospects, successes and gaps in the multilateral international international the multilateral and gaps in successes prospects, status, Current Federation the Russian against regime sanctions 44 BENCHMARKING position of secondary restrictionsposition ofsecondary A promising measure to strengthen further thesanctioningmechanismisim- bly narrow scopeandintensity ofthesanctions ism partmentalize theusageofsanctionsaccording to itsstrength. Inthisregard, civicactiv- In this context, it’s to important improve the existing sanctioning mechanism and com- in aggressive behaviourfrom Russia. new sanctionsshouldalsobeusedindiplomaticspheres, whenjustifiedbyasurge into account their interests andmaintain the unity. Well-founded threats to impose amplify thesignalssentbythem;improve waysofinteracting withalliessoto take It wouldbeexpedient forWashington to systematise thealready existing sanctions; are eagerto collaborate withRussiainsensitiveorsanctions-affected spheres. and can be strengthened in several ways, including extending them to third that parties in theEastern-Ukrainian conflict.USsanctions,ontheotherhand,havemore potential the internal diverging positions of member-states and the lacking change in dynamic ened. ThisconcernsEUsanctionsto alesserextent, especiallywhentakinginto account Sanctions, incaseofabsenceprogress onRussia’s canandshouldbestrength part, - tilateral anti-Russiansanctionsregime. damage doneto Ukraine canbeaconditionto permanentlyt and onlycomplet beginning ofgradual weakening ofsanctionsagainsttheRussianFederation, control byKyiv oftheORDLO overtheterritory canbeaprerequisite forthe gaining ofborder control byUkraine. Onlyfullrestoration ofdejure anddefacto sanctions policyinthe State orcreating Department anewpostwithsimilarauthority. cedural and organisational aspects,such asrestoring thepositionofacoordinator of Lastly, it’s notingthatsanctions canbemademore worth effectivebychangingpro - energy exports. than 130billionUSD)aswellastablesource offoreign exchange earningsthrough insignificant governmentdebtin relation to GNPandasignificant trade surplus(more the RussianFederation, havelimited chancesofsuccessatthispoint.Russiahasan On theotherhand,sanctions,related to theSWIFTsystem orthesovereign debtof mayhavetoRussian shipbuildingindustry beconsidered. Black SeaandAzovSea,aseparate set of sectoral sanctions,directed againstthe threats, shouldbestrengthened. from Apart this,withregards to theescalationin that financedisruptiveandaggressive sources activitiesorsupport ofcyber-activity sanctions. Targeted sanctionsagainstRussianbankinginstitutions,especiallythose ue to cooperate withRussiainareas whichhavealready beencovered byexisting therefore al. The2018U.S. sanctionswhichtargeted solely7oligarchs and17state officials are, if they’re imposedsternly andconsistently, thoroughly targeting involvedindividu- every policy. Itmustbeunderlinedthatindividualsanctionsonlyhaveachanceateffectiveness tion andcritiqueto whichgovernmentsshouldadhere, incorporating themintheirforeign

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like theSanctions2020campaign

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because oflackingcoordination withotherWestern powersandtheincredi- e restoration ofcontrol overCrimeaandcompensationforthe

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intimidate andwarnthird thatcontin- parties —

is an important andreliableis animportant source ofinforma-

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to beconsidered aweakattempt. Sanctions againstRussia erminate themul- RECOMMENDATIONS 45 - Finding the balance between engaging in a sanctions regime of a wide Finding the balance between engaging in a sanctions regime - should be on the agenda. Sanctions should also be flex all those measures

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ticular. This doesn’t suffice. The scope of possible sanctions covers import and ticular. quotas, non-tariff barri- restrictions, tariffs, embargo, financial restrictions, export ers For now, the main focus lies on targeted sanctions, personal sanctions in par the main focus lies on targeted now, For of effective than the actual use more often politics are in international Threats force, using direct from couldn’t refrain methods. In its time, Russia coercive reputation, and paying for it with a deteriorating order violating the international position. In the its international of weakening loss of soft power and a general - by ex The use of threats account. into this experience Russia might take future, some influence over help retain all, sanctions can, after or strengthening tending so New sanctions should also still be introduced, the decision-making process. seriously. would be taken that further threats Sanctions have a comprehensive impact and can simultaneously create vari- impact and can simultaneously create Sanctions have a comprehensive the main function of these However, country. ous negative effects on the target a behaviour, at all times: punishment, change of in mind sanctions must be kept anti-Russian of current etc. In the case warning for other possible perpetrators, a of destabilising solutions looks like the price sanctions, focusing on increasing success. goal with the most chance of be linked the period of their validity and allow themselves to to ible with regards combine sanctions with important and effective to It’s specific steps. Russia’s to as well. of subsequent sanctions and with other instruments of pressure threats further format of anti-Russian sanctions requires The issue of the multilateral in investigation. On the one hand, the unity of as many countries as possible costly or risky their application less of anti-Russian sanctions makes the matter of such unity the other hand, the maintenance On in particular. for each state each within effort,interests given the dynamics of political much more requires country. DETERMINING THE OPTIMAL CHARACTERISTICS OF THE SANCTION OF THE SANCTION DETERMINING THE OPTIMAL CHARACTERISTICS REGIME. USING THREATS AND SANCTIONS IN A MORE ACTIVE AND WIDE- IN A MORE ACTIVE AND SANCTIONS USING THREATS SPREAD MANNER. - INTERNA VIOLATING FOR PRICE THE OF AUGMENTATION THE SETTING RE- SANCTIONS OF TODAY’S GOAL TIONAL NORMS AS THE PRIMARY RUSSIA. GIME AGAINST 3. 2. 1. - pres exert way to a unique remain wars and worlds», «between as a tool Sanctions, for potential its destructive restricting Russia while policy of on the external sure mechanism lies in its flexibility of the sanctions The strength security. international the de- on exerts it influence little the is however, weakness, critical Its scope. and experience five years of over account into Taking in Moscow. powers cision-making than forty as well as all the countries, against Russia by more in applying sanctions for the practice application in international sanctions regimes’ nuances of theoretical recommendations: past thirty the following years, we offer Current status, prospects, successes and gaps in the multilateral international international the multilateral and gaps in successes prospects, status, Current Federation the Russian against regime sanctions RECOMMENDATIONS 46 RECOMMENDATIONS 6. 5. 4. KEEPING SANCTIONS DIVERSEANDEXTENDINGTHEM PERIODICALLY. TRIES, INCLUDING UKRAINE. MAINTAINING AMEANINGFULDIALOGUE BETWEENALLIEDCOUN- ATTENTION TO POSSIBLEGEOPOLITICAL IMPLICATIONS. INCLUDING SANCTIONS INLONG-TERM PLANNINGANDPAYING MORE ence onspecificbehavioural changes. on Russianpolitics,while theirperiodicextension would signalisetheirdepend- Combining varioustypes ofsanctionswouldallowformore systematic influence ti-Russian sanctions. can beaconditionforthedefinitivetermination ofthemultilateral regime ofan- ration ofcontrol overCrimeaandcompensationforthedamagedoneto Ukraine weakening ofsanctionsagainsttheRussianFederation. Onlythefullresto- not controlled canbeapr territory that planning for a To to minimise such risks, it is necessary countries thathaveimposedanti-Russiansanctions. the answersto theseandsimilarquestionsmaydiffersignificantlyamongthose influence onnuclearweapons,armscontrol andregional security?Overtime, pursued soasnotto provoke itsalliancewithChina?Whatto dowithRussia’s HowcanthepolicyofRussiancontainmentbe by sanctions,benecessary? ened? At whatpointwilldialoguewithRussia,whichisalready heavilydamaged prehensive policies concerning Russia.To whatextent shouldRussiabeweak - will of abroad coalitionofstates thathaveimposedanti-Russiansanctions,there initially planned,asitisdependentonamultitudeofconditions.Inthepresence long after theirintroduction. This political effect isoften different from whatwas Sanctions are atool forlong-term actionandcanhavemaximumpolitical effect the Western coincideswithUkraine, agendapartly butthiswon’tlast. simply protect theirinterests, nottheirnationalandterritorial sovereignty. Today, enjoy afarmore favourable position regarding Russia.Sanctions are atool to be taken bysurpriseifthesanctionsare weakened orlifted. Western countries will help to reap the most benefits for Ukraine and, at the same time, avoid to A moresupport. sober and pragmatic attitude towards anti-Russian sanctions from theaspirations itwillhaveto andvisionofitspartners, dealwithlacking sire to maintainanti-Russiansanctionsinsomespecificformwillbegin to differ this context, it’s to alsoimportant note that,from themomentthatUkraine’s de- must refrain from wrongly identifying its needs in the interests In of its partners. cooperation betweenthealliedcountrieswillbe.Onotherhand,Ukraine positions onanti-Russiansanctions,themore productive andlong-lastingthe The deeperthecommonunderstandingofeachstate’s interests andconflicting gime isoneofthecriticaltasksincontext ofanti-Russiansanctionsstrategy. range ofcountriesandupholding the reliability and effectiveness ofsucha re - likely beagradual divergence ofpoliticalgoalsandthestates’ visionofcom- only afullrestoration ofthedejure anddefacto control ofKyiv overthe broader Russian policy for 5—10 years. It should be made erequisite forthebeginningofgradual agree on the key elements of strategic Sanctions againstRussia clear RECOMMENDATIONS 47 - - on the on should

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must be communi- influence the calcu- the influence

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particularly of the augmentation

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destructive effects on inter that has had destructive effects a complex, sometimes contradictory and costly, sometimes contradictory a complex,

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ability to determine this moment and to modify sanctions depending sanctions modify to and moment this determine to ability of competition on the food market prices by a reduction as well. Not only the international, but also the domestic political cost of as well. Not only the international, cated active, and even aggressive, with a more Kremlin sanctions will be higher for the against Russia. of information about the sanction regime spread the asymmetry of Ukrainian-Russian relations account the asymmetry of Ukrainian-Russian taking into tool, of two strategies: settling the conflict in Eastern Ukraine and deter Ukraine settling the conflict in Eastern of two strategies: be a synergy con- the overall with Russia. The balance of power, mining the format of relations of interdependence and the degree regimes security, international of regional text both tasks. that will be of the utmost significance in addressing the factors are should be aimed at Ukraine conflict management in Eastern terms, In strategic resolving con- evacuating Russian influence in all its forms, accompanied by political space and paving the way for post-conflict in the Ukrainian tradictions can sanctions strategy, a such implementing In settlement. signif- will become more Their role lation of opportunities and risks for Moscow. main- benefit of in which the point, the equilibrium we approach the closer icant diminishes. This, in the Kremlin’s Ukraine in eastern presence taining Russia’s and economic losses. political, reputational equal to eyes, will be approximately The The application of sanctions to prevent Russian authorities from turning these sanctions into into turning these sanctions from Russian authorities prevent important to It’s This so-called «rally-around-the-flag»- regime. the internal strengthen to a tool economy in every possi- on Russia’s effect will diminish the impact of sanctions damaged. can be severely sanctions, in particular, The effects of trade ble way. - pros long-term Russia’s will significantly impair Financial sanctions, however, what. These assessments should be no matter pects and slow its development the Russian population. The fact that Russia is also to clearly communicated being harmed by its own counter-measures of those punishment at direct aimed type of restriction a are sanctions Personal decision-making process involved in the persons subjected to personal sanctions personal to though the list of persons subjected Even national security. persons like 14 natural at least currently are there being expanded, is continuously EU govern- avoid sanctions. US and managed to that have Roldugin or Rostovtsev sanctions and adapt their lists accordingly. these gaps in the ments should review SANCTIONS CONVEYING THE MESSAGE TO THE RUSSIAN POPULATION THAT THAT THE RUSSIAN POPULATION TO MESSAGE CONVEYING THE RUS- THAN THEY SEEM AND THAT EFFECTIVE ARE MORE SANCTIONS POPU- THE RUSSIAN TO ARE DAMAGING SIAN COUNTER-SANCTIONS ITSELF. LATION EXPANDING THE LIST OF PERSONS SUBJECTED TO PERSONAL TO PERSONS SUBJECTED OF LIST THE EXPANDING SANCTIONS. main criterion for their success. decisions of the Russian leadership will be the main criterion 9. 8. 7. Current status, prospects, successes and gaps in the multilateral international international the multilateral and gaps in successes prospects, status, Current Federation the Russian against regime sanctions International Centre for Policy Studies Telephone: +38 (044) 334-30-57 Е-mail: [email protected] www.icps.com.ua