Are there unintended consequences to European Union sanctions against Russia?
While rocked initially by the restrictions, Russia’s economy has shown remarkable resilience. Europe, on the other hand, is facing a year of glacial growth.
There are also growing concerns around the legitimacy of some of the embargoes being issued by Brussels, the adverse impact on European businesses and the wider humanitarian ramifications, both at general and individual levels.
As the fighting enters a third year, it is clear that a rethink may be required. A strong, united stance from the European Union is necessary — but so too is a clear, consistent and compliance-friendly sanctions regime that looks to minimize collateral damage wherever possible.
The diminishing impact of sanctions
With Europe’s 13th package of economic measures being introduced, Russia remains the world’s most sanctioned country by a considerable margin. Almost 2,000 Russian individuals and organizations have been hit with restrictions, and bans have been placed on a wide range of import and export goods, from luxury watches to crude oil.
Embargoes on the latter proved particularly effective when first introduced, contributing to a $25 billion deficit in the Russian budget at the start of 2023. But the impact of European Union energy sanctions has diminished over the past 12 months, with Moscow mobilizing a vast “shadow fleet” of tankers to serve alternate, non-European markets — namely China, India and Turkey.
As for action against individuals and entities, the approach resembles a game of whack-a-mole. Alexander Abramov, co-founder of Russian steel giant Evraz, has, for instance, been blacklisted by theUnited Kingdom for his involvement in the “funding of Russia’s military machine,” but no such measures have been taken by Brussels. Saodat Narzieva, sister of sanctioned metals and telecoms tycoon Alisher Usmanov, was, however, placed on Europe’s restrictions list, only for the decision to be reversed after Narzieva took the case to court. Despite the intended aim of sanctions, in this case, it may inadvertently come into conflict with fundamental human rights, namely the entitlement to equal protection of the law, and freedom from arbitrary interference with one’s property, privacy, family or home, especially when the fundament is unbiased according to national judicial decisions.
Counting the economic toll in Europe
The Russian economy, having weathered the initial shock of Western sanctions, has returned to growth mode. According to the Organization for Economic Cooperation and Development, Russia’s GDP will rise by 1.8 percent this year, equal to Brazil and not far behind the United States. In contrast, Europe’s three biggest economies — Germany, France, and Italy — are each predicted to have sub-1 percent growth (0.3 percent, 0.6 percent, and 0.7 percent respectively).
Honing in on the continent’s industrial powerhouse, Germany, the negative impact of European Union measures against the Kremlin is hard to ignore. In a survey conducted by KPMG, two-thirds of German businesses with ties to Russia or Ukraine reported that the “implementation of, and compliance with, a large number of fast occurring and complex sanctions” was the greatest challenge they faced.
Many European companies are still operating in Russia, which made the European Commissioner in charge of environmental affairs call for broader taxation for these companies.
Humanitarian considerations
Alongside the economic and commercial fallout, there are mounting concerns about humanitarian consequences of Europe’s sanctions regime.
Both Russia and its ally Belarus are key suppliers of food and fertilizer to large parts of the world — particularly in Africa, where a deepening food security crisis continues to rage. Though the European Union has not officially imposed restrictions on food and fertilizer, research points to a trend of “over-compliance” where companies are reluctant to participate in the flow of non-sanctioned goods — despite their legality — over fears they may run afoul of an unforeseen restriction, struggle to receive payment from designated Russian sellers or fail to obtain vessels and insurance.
The side effects of sanctions have spilled over to citizens of other countries, including the sanctioning countries themselves. The cost of living in the European Union significantly raised levels of unhappiness among farmers and other interest groups.
Restrictions on Russian commodity exports have driven up prices on global markets, putting pressure on poorer countries that rely on imports, including from Russia, to sustain their populations.
Less attention was paid to the impact of sanctions on philanthropic projects funded by targeted individuals to support humanitarian and social causes. Several major charitable projects were sponsored by individuals who are now on the European Union sanctions list. Although the direct effect of sanctions on these projects is difficult to calculate, restrictions placed on major donors likely hinder their ability to continue to support efforts that help vulnerable populations across the world, especially in poorer countries neighboring the European Union. And that, in exchange, is a net contributor to increased illegal migration toward the European Union.
Paving the way for de-escalation
As the Russia-Ukraine conflict continues, re-evaluating the effectiveness and consequences of European Union sanctions is crucial. While seeking to curtail Russian aggression, overly broad sanctions have strained European economies and humanitarian aid efforts. The time has come for more surgical measures.
Streamlining restrictions to unambiguously target the Kremlin’s war machine will increase compliance and reduce vulnerabilities. At the same time, assistance mechanisms that support affected European industries would help address economic weaknesses plaguing large parts of the continent. Finally, if carefully put together and publicized, a clear exit strategy from sanctions could help pave the way to wider de-escalation.
Rethinking restrictive measures to minimize collateral damage, while maintaining pressure on Russia, represents Europe’s best chance at upholding its values and interests in the long term.
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