We now have in place a range of sanctions against Russia the breadth and depth of which we have never seen before. This is unprecedented. We now need to focus on effective implementation, and here the primary obligation is domestic. It is up to us in the EU, and the Member States in particular, because they are responsible for the implementation of sanctions.
Of course, we have issues in that respect as well. But let me stress one thing first: Our credibility vis-à-vis those countries will be a direct function of the seriousness with which we are tackling this issue here in Europe. Yes, we have had suspicions that there could be leakage through third countries. For example, we have seen a dramatic fall-off in our exports to Russia and our imports from Russia. But at the same time, there are significant increases in trade with countries that are neighbours to Russia where previously we didn’t send these goods. I am not saying that there is necessarily something untoward happening. But there is a prima facie case for asking questions, and that’s my job.
There is now a sanctions coordinator in each Member State, and we are trying to bring the competent national authorities together on a regular basis here in Brussels. We work with them on how to align practices in the different Member States so that the application of EU sanctions is as consistent and uniform as possible.
"We have had suspicions that there could be leakage through third countries"
We need to engage with them, show them the numbers and the trade-flows that concern us, and start a dialogue to identify if there is a real problem behind these numbers. Sometimes we do not have data about what is happening to these goods once they arrive in the country. Do they stay there? Or are they re-exported? If so, to where? Is it to Russia or somewhere else? So, one of the first things we want to do is simply collect the data.
Firstly, we take at face value what they say. And what they usually say is that they don’t want to align with EU sanctions, but at the same time they don’t wish to be a platform for circumvention or evasion of sanctions, and therefore they will cooperate with us in trying to prevent that. That’s the starting point for the conversation.
The question is to establish first if there is evasion and if there is, what can be done about it. You used the term “leverage”, but we don’t start off by threatening people. I prefer to have a good starting point, such as the common objective of not facilitating the evasion of our EU sanctions and then see what the problem is, what the countries in question propose to do about it and if we think that is an adequate response.
We often hear that from industry. The problem is that business, for example, don’t get identical interpretations from the different authorities in the Member States. That is not entirely surprising, and I hope these are teething problems rather than structural problems. We are working towards identifying the areas where there are significant differences in application of sanctions and encourage Member States to speak to each other rather than have everything settled by Brussels. For instance, if one Member State has an issue with the way another state implements the sanctions, they should talk directly to one another instead of going through us.
"We should not get too distracted and should not rush to create new things."
We have noted with great interest the non-paper, actually from a number of Member states in which they suggest some kind of new structure. I don’t think there’s any consensus yet about exactly what that should look like, and to be very honest, it will take some time to set something like that up, if that’s the direction in which everyone wants to travel. In the meantime, we have to work with what we have. In my personal view, it is clear that we are not organised optimally yet to oversee the implementation of the sanctions, at least not on this scale. That is self-evident. What would be the best response to that is a discussion that has to be had does not fall into my responsibility. We should not get too distracted and should not rush to create new things.
Because the more immediate issue is that there is a war going on. People are dying – and our sanctions are in part designed to cripple Russia’s military capabilities, by denying them the technology needed on the battlefield. That is the immediate problem on which we need to work. If there is evidence that intermediate or advanced technologies are still finding their way to Russia through alternative routes, we need to stop that. So, let’s talk about how we do it better in the future, but in the coming weeks, let’s focus on what we can already do with the system and structures that we have.
Looking at EU sanctions policy, what has changed since the Russian invasion of Ukraine?
The difference is that both in extent and scope the measures we have adopted against Russia surpass anything that was done previously. These sanctions affect not just Russia, but our domestic economic activity and our foreign trade in a way no previous set of sanctions has ever done. Just compare the ten Russia packages to the other restrictive measures, including the human rights or Magnitsky sanctions, or the economic sanctions against Iran prior to the JCPOA. None of them ever had an impact on our domestic industry like the Russia sanctions do. It does not come as a surprise that this poses a number of challenges.
How long are the Russia sanctions to stay in place? Until there is a ceasefire?
The sanctions will remain in place for a long time. Even if we have a cessation of hostility – which is not obvious in the short term – a whole range of other issues will have to be discussed with Russia before we can see any significant lifting of the sanctions.
What are the criteria for blacklisting, for example, a Russian oligarch? Is that done purely on the basis of him being Russian and pro-Putin? And does it also concern people who hold citizenship of an EU country?
We identify people who are actively aiding the war effort in Russia. It doesn’t necessarily matter what their nationality is.
"What can eventually be done with frozen or immobilised assets is a very complex legal and technical debate"
That is still subject to discussion. Some believe these assets can be used for the rebuilding of Ukraine. This also relates to the legally much more complex issue of the Russian Central Bank assets. What can eventually be done with frozen or immobilised assets is a very complex legal and technical debate. We have not reached the end of it yet.
I think it is very difficult to make any direct comparison between the way the Americans are organised and the way we are organised or could be organised in the future. These are two very different structures. We always look at what the Americans are doing because they do have a vast experience of this and they’ve been using restrictive measures for a long time. The OFAC started shortly after the World War II. But I don’t think we’re going to try and do a kind of copy-paste of the American system. It just wouldn’t work within the EU. But let me repeat: We should not stray too far from our current task, which is to try and make sure that we minimise evasion and circumvention and that we maximise the impact of the very extensive sanctions that we have in place right now.
We remain extremely reluctant and hesitant about that, for well-known reasons. It is true that we have moved the cursor a little bit in that direction. For example, we are now saying that we could sanction entities in third countries that have been proven to be aiding and abetting European companies evading our sanctions. But we would still say that there has to be an EU nexus, i.e. an EU company must be involved. We are not sanctioning third parties on their own.
Off the top of my head, I think we have something like 43 different sanctions regimes. In the case of Russia, we are dealing with a particularly egregious breach of international law and a very nasty war. Of course we do not disregard other situations, and we are constantly looking to see – whether for human rights reasons or other reasons – if there is a need to use sanctions elsewhere. But the current focus is on how to deprive the Russian military of the technology to wage this war, to deprive the Kremlin of the resources to finance the war and to impose significant economic costs on the Russian economy as a whole for their aggression and unacceptable behaviour.
Our measure for the effectiveness of sanctions is to look at what their objective is. And on all three counts that I have mentioned before there is a lot of evidence that Russia is struggling to find the kind of technologies that it could previously import from the West. They are now cannibalising washing machines and other things to try and get chips. In other words, we see a constant lowering of the technological level. At the same time, the Ukrainians are benefitting from the supply of sophisticated NATO military equipment. The balance on the battlefield is tilting technologically in favour of Ukraine. Does that stop the war immediately? No. Does it give Ukraine a tactical advantage? Yes.
"Russia is struggling to find the kind of technologies that it could previously import from the West."
In terms of denying the Russian state the resources, they have already had an effect. Russia’s resources are being constrained, their liquidity is down, a fact they have admitted themselves. On the other hand, they did get a boost in financial liquidity from rising energy prices, so they have a certain stock of money they can still play with. However, they are forced to put everything they have into the war machine and starve other bits of their economy.
And in terms of economic cost, we can debate by how much percent the Russian economy is shrinking. But the fact is in the next couple of years, the Russian economy is going to contract. It will be much less successful than it would have been if we did not have these sanctions in place.
Will that make Mr. Putin change his mind? Probably not in the short term. Does it create public pressure on him to change his mind? Well, probably not, because in an autocracy, he does not face an election, he is not held accountable. But over time, we believe that these sanctions have an impact on the three areas I mentioned, and that will change the direction of travel. Sanctions do not solve all the problems. There are other things we do to help Ukraine: military assistance, macro-financial assistance, and helping refugees. However, sanctions are an important part and their efficient implementation is absolutely crucial.
The interview with the EU Sanctions Envoy and former secretary-general of the European Commission was conducted by Michael Thaidigsmann and Nenad Jurdana.
David O’Sullivan is a former secretary general of the Commission and senior EU diplomat.
He was the chief operating officer of the European External Action Service from 2010 to 2015 and responsible for establishing the EU’s new diplomatic service. He also served as director general for Trade from 2005 to 2010, where he was also a Chief Negotiator for the Doha Development Round and was in charge of overseeing a number of free trade agreements and of concluding the EU’s trade agreement with South Korea.
Prior to becoming secretary general of the Commission, O’Sullivan was the head of Cabinet of Commission President Romano Prodi and director-general for Education and Culture.
In 2019, he retired from the Commission, but was appointed sanctions envoy in January 2023.
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