Interview: Navigating the Complexities of Sanctions

The foremost inquiry regarding sanctions often revolves around their efficiency. Could you elaborate on this debate?
You are right saying efficiency is the main question when it comes to sanctions. I may be incorrect, but one of the studies I dealt with even claimed that roughly 90% of all literature on sanctions is dedicated to the basic question ‘does it work?’ One must understand that Western policy making fell in love with sanctions shortly after the end of the Cold War. Now sanctions serve basically as a to-go instrument in practically any international crisis – from human rights violations to full-fledged military conflicts. The question is: did this love pay off ultimately? Or, as in many romantic relations, do we face here some great expectations which ultimately cannot be met?

The issue of sanctions efficiency is a multifaceted one. You can approach it in many ways, but speaking in roughly scientific terms, one talks about quantitative and qualitative approaches.

So, how do you and others navigate these complexities to understand the true nature and limitations of sanctions?

Sometimes competent sanction authorities give their assessments of sanctions effectiveness. These are figures-based, but it does not really provide an answer. For instance, if you want to kill some time and read the annual reports of Office for Foreign Assets Control in the United States or Bureau of Industry and Security, which are dealing with financial and trade sanctions respectively, you see they take pride in the number of restrictions imposed, the number of proceedings against sanctions busters opened, the sums confiscated during the investigations, etc. All that tells more about their job, not the nature of the instrument they are enforcing.

In a nutshell, no one really knows how to answer this question definitively. We, researchers, normally hide behind the reservations and methodology we present, and therefore expect some humility at how our conclusions are perceived. But the public rarely is ready to pay close attention to disclaimers and ‘different shades of grey’, so to speak. Politicians are also always looking for some silver bullet which could achieve results without affecting their electorate, political standing and national economy.

I stopped looking for a definitive answer about sanctions effectiveness and instead started to look deeper into the nature and limitations of the instrument as it is. I approach sanctions from the perspective of numerous intervening factors and contexts, which overall lead me to the following idea: sanctions cannot be treated and assessed in vacuum, without paying attention to the environment they are taking place in, in all possible dimensions. And in the current international system, sanctions are not the instrument which bring some meaningful deliverables, but rather they create a specific milieu, a pot with water slowly boiling, which help to achieve results, but through other means.

Talking specifically about Russia, this is precisely how sanctions work in this context. Restrictions do not kill the Russian economy (which was promised and much anticipated in March 2022), they do not turn elites or the average Russian against Putin, they do not isolate Russia from the world as a whole. But, here and there, you have to pay more, you have to encounter many hurdles, and tensions are rising. But tensions alone do not constitute what sanctions are expected to bring, at least as envisioned by their authors.

Some critics argue that sanctions primarily hurt ordinary citizens rather than the targeted government or elites. How do you respond to this criticism, and what measures can be taken to mitigate the humanitarian impact of sanctions?

I would not say this is commonplace today. The majority of sanctions today are ‘smart’, targeted, designed specifically to evade collateral damage, a stark contrast compared to 1970-1990s. Usually, when sanctions are introduced now, for instance, against Russian oil and Western insurers of oil tankers are prohibited from insuring tankers transporting Russian oil, special licenses are normally issued, saying that this does not relate to tankers shipping mineral fertilizers or ships carrying grain etc. No sanctions have been related to the pharmaceutical or medical goods and services, and foreign companies providing those have not been pushed to exit the Russian market, for instance. The problem is, however, that sometimes even targeted sanctions create strains and complications for civilian sectors, mainly in costs and timing. Russian people are not denied access to the Western medical equipment or meds, but they have to pay more for that, wait for them because of the collateral damage done by restrictions in banking, logistics, insurance, etc.

Are there examples from history where sanctions have successfully brought about desired political or behavioral changes in the targeted entities? And what lessons can be drawn from these cases for the current situation with Russia and other sanctioned states/entities?

I know only one really successful case – when the United States denied the United Kingdom financial credit line after it intervened militarily with France and Israel during the Suez crisis in 1956. The United States could not be bothered more with British attempts to cling to the Suez Canal, especially when Soviets started to show their nuclear muscles to support Nasser. Faced with a dire economic situation, the United Kingdom had to withdraw forces and comply. Again, it was not spelled out outright, but denial of financial support is one of the sanctions forms. This case teaches us a peculiar lesson – your allies are more likely to comply, as they probably value your overall relations more than one particular crisis (or are just too dependent and weak).

Some also claim sanctions against South African apartheid were successful. I disagree, again, because there are too many intervening factors, and one has to avoid false attribution of some goods political deeds to sanctions simply because they were also present in this case.

The European Union continues to adopt sanction measures, with the most recent package in February 2024. In your estimation, what additional measures are needed? In which domains/areas do you perceive deficiencies in the current sanction framework?

It is very difficult to criticize the European Union on sanctions because what is a normal step in sanctions policy for the United States is almost a quantum leap for the European Union. What do I mean by that? It is that since 24 February 2022, the European Union has undergone a huge transformation in its perception of Russian policy towards Ukraine and in many structural, foreign policy aspects. For example, before the 11th sanctions package, the European Union did not consider secondary sanctions to be in line with international law. Now it is applying them. The European Union has recently adopted a directive of the European Parliament on the harmonization of the legislation of the Member States on criminal liability for the circumvention of sanctions. The European Union also plans to launch an early reform of the export control system. All these structural changes are groundbreaking. So, all of this clearly makes the European Union my personal leader in terms of how far it has gone to transform itself in order to adapt to the new realities.

On the other hand, a lot of questions still remain open. There are many goods targets – Russian nuclear fuel, liquified natural gas, titanium, metal products exempt from previous bans etc. The European Union does almost nothing to target companies in the third countries (e.g. Türkiye, Georgia, China) engaged in the procurement of the sanctioned goods, and Russian wholesale buyers of certain goods related to the military complex. Even the Russian military complex has not been sanctioned in its entirety!

But first of all, I would not talk about new sanctions targets, but rather about working on existing restrictions. In particular, we see many individual, personal and trade sanctions, but their enforcement is inadequate. The European Union pays insufficient attention to combating sanctions circumvention, investigating violations of the sanctions regime and fighting intermediaries in third countries. As I said, although the instrument of secondary sanctions already exists in European practice, it is still used very sporadically. This is what should now become the main focus for the European Union – working on the mistakes and loopholes of previous packages.

Could you elaborate on the methods employed in evading sanctions?

If we talk about any specific patterns that circumvent the existing restrictions, it is actually much easier to circumvent sanctions or violate sanctions with impunity than to prove the fact of violation. I say this from my own experience (not that I am involved in sanctions violations), but from the fact that in my working experience there have been three major cases of sanctions violations, the investigations into which began in 2022, and none of them have been brought to a conclusion yet, despite the fact that we have demonstrated an absolutely complete supply chain, all other necessary documents from the formal lawsuit itself to absolutely all supporting checks, invoices, trade declarations, schemes of interconnection between participants, and so on. Despite the fact that our organization has actually carried out the investigation for the competent authorities, the investigations are still ongoing. It is incredibly difficult. And imagine that there are tens of thousands of such cases, just as about 10,000 companies were set up by Russians in third countries after the full-scale invasion began.

If we talk about how to circumvent the sanctions effectively and what methods are used, there are several options. If you are located inside the Russian Federation, you create a neutral company that is engaged in wholesale trade and has no links to the military-industrial complex. Accordingly, you can import virtually all the technologies that are under sanctions through this company if you can prove that they will not be used for military purposes. Currently, proving that certain technologies will not be used in military applications is just a declaration by the end user. No one has any real control over what happens to the goods after they are delivered to the distributor or this wholesale company. You can also import critical goods under the humanitarian presumption, i.e. for medical or other purposes, while in practice you can use them at your own discretion, in particular, sell them to a real end user – a Russian military plant, for example. At the same time, I would not forget the fact that many civilian Russian enterprises – from confectioneries to sewing shops – have now become part of the military-industrial complex, while not being under sanctions and being able to buy sanctioned goods almost without any obstacles.

If you are located or can afford to operate outside of the Russian Federation and want an additional level of protection, you also set up a company that will be engaged in wholesale trade and which is located in a country where it is easier or more profitable to trade with the Russian Federation simply for logistical or financial reasons. Accordingly, if we are talking about Türkiye, Armenia, or China, you do not even need to try too hard. Again, at the moment when the transaction has taken place and the goods have been delivered to the company that bought them, no one carries out post-transactional due diligence. What happens next to these goods, in principle, is of no interest to anyone, as long as the money has been paid for them. In principle, it is the responsibility of the current owner to decide what happens to it. The situation may change, because the European Union now requires exporters to include a clause in their contracts that prohibits re-exporting the goods to the Russian Federation, but it is still just a contractual clause, and it is unclear how it will be controlled.

How do you foresee the evolving landscape of sanctions policy in the coming years, considering factors such as technological advancements, shifts in global power dynamics, and emerging geopolitical challenges?

In my opinion, we should not expect a decrease in the intensity of sanctions or a quick lifting of sanctions against the Russian Federation in the coming years, even if it loses the war against Ukraine, because sanctions are gradually becoming an integral part of the international landscape. If not against the Russian Federation, sanctions will definitely become one of the major tools in the confrontation between the United States and China, where they will be used not so much to punish and influence the behaviour of a particular actor, but rather to protect their own national security in an extremely broad sense, such as sovereign technologies. In this case, we can talk about artificial intelligence, the semiconductor industry, additive technologies, and so on. I am convinced that there will be more secondary sanctions, and this can be seen in the policy of the United Kingdom and the European Union, which have started to apply secondary sanctions, which they did not do before the full-scale invasion of Ukraine by the Russian Federation.

On the other hand, I think that the more the Western powers use sanctions and use them precisely because of the enormous advantages and role they have in the global financial system and the trading system, the more it will be a signal to the rest of the countries to form alternative systems of interaction. For example, alternative systems of banking messaging or attempts to operate in other currencies, including national currencies, in foreign trade. We can already see this in the trade relations between Russia and India, Russia and China, and Russia and certain African countries. A rather aggressive use of sanctions can also lead to the formation of a new type of blockade. For example, the BRICS has been quite active in talking about creating a common currency or forming alternative platforms. Therefore, in a broader context, the widespread use of sanctions could weaken the influence of Western powers.

I also think that sanctions should be fundamentally rethought, and now is the time to reform sanctions bodies, review their powers, review their logistics and staffing, because in absolutely every country, even in the US, this area is currently underfunded and cannot cope with the existing volume of sanctions, and even other sanctions regimes. We will most likely have to watch all of this over the next few years.

Thank you for your time!

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