At its 11th emergency special session on February 23, the UN General Assembly, after an overwhelming vote in favor, adopted a resolution demanding again that the Russian Federation immediately, completely and unconditionally withdraw all of its military forces from the territory of Ukraine within its internationally recognized borders, and calling upon the cessation of hostilities. Subsequently, on February 24 which marked the first anniversary of the Russia-Ukraine conflict, the EU countries reached an agreement on the 10th package of sanctions against Russia. On the same day, the US Treasury Department also announced its latest sanctions against Russia. All these represent a continuation of last year’s sanctions against Russia with a larger scope and more precise targeting, further limiting Russia’s channels for circumventing the existing sanctions.
Larger scope of sanctions and more precise targeting
The new sanctions imposed by the US and Europe against Russia focused on the following three aspects.
First, secondary sanctions targeting Russia’s defense industry have been extended. The EU claimed that the new round of sanctions will restrict the export of more than 50 key components in Russian weapons, including drones, missiles, helicopters, as well as specific rare earth elements, electronic integrated circuits, and thermal cameras.
Over the past eight years, the neighboring countries which have friendly relations with Russia (Armenia, Kazakhstan, and Kyrgyzstan) have increasingly imported dual-use products from Europe, while at the same time also increased their exports to Russia. These “parallel imports” helped Russia obtain a large number of components produced in the US and Europe. However, in the 10th package of sanctions, the EU has explicitly proposed secondary sanctions to completely cut off Russia’s access to dual-use equipment such as drones from a third country. For example, seven Iranian companies which provided drones to Russia were added to the EU’s sanction list, and some individuals and entities from Italy, Germany and Switzerland were also included in the sanction list for assisting Russia in its “clandestine acquisition of sensitive Western technology and equipment”.
Faced with these sanctions, Russia will inevitably hit rock bottom in producing defense products in the short term. The reason behind this is obvious. Currently, most Russian defense products are highly reliant on the supply of Western components. For example, Russia’s most advanced ground devices, such as the T-90M and T-14 Armata tanks, and the Sosna-U tank jointly produced by Russia and Belarus are equipped with French thermal imaging systems. The country’s MLRS Tornado-S missiles rely entirely on American-produced fiber optic gyroscopes. In addition, its 3M-54 Kalibr cruise missiles and Iskander-M missiles are equipped with electronic components produced in Britain. Not to mention the Russian aerospace industry that uses a great deal of engines and avionics equipment supplied by the US and Western companies.
Second, sanctions against Russian banks and the financial sector have been tightened. Seven financial institutions, including Credit Bank of Moscow, Metallurgical Investment Bank, Primorye Bank, Ural Bank for Reconstruction and Development, were added to the sanction list and excluded from SWIFT, a key financial messaging system. At present, the majority of Russian banks are on the sanction list with their payment methods in import and export transactions being further reduced. This means that the Western countries’ financial sanctions against Russia are approaching the extent and scope of those against Iran.
Third, focused sanctions were enforced against Russian technology companies and technology-based funds. The US Department of Commerce added about 80 Russian technology companies and R&D and investment entities to its sanction list, including the famous Zelenogorde Nanotechnology Center, Keldysh Institute of Applied Mathematics (Russian Academy of Sciences), and the Skolkovo Foundation. Even the Russian communications giant MegaFon is not immune to the undeserved sanctions. The narrowing of technical communication channels and the intensified financing difficulties have undoubtedly made the Russian policy of “import substitution” in the field of science and technology harder to implement.
These sanctions are not harsh enough to strangle Russia’s economy
Notably, in discussing the specifics of the new sanctions against Russia, the Western countries also had disputes. Poland and Lithuania called for the toughest sanctions against Russia, while Italy and Hungary were more lenient. For example, on the issue of importing Russian synthetic rubber, Poland proposed a total ban, while Italy preferred to extend the transition period to ease the pressure on its domestic manufacturers to switch orders. The European Commission finally made a compromise and set a quota limit of 560,000 metric tons for synthetic rubber imports. Luckily, the sanctions temporarily excluded the Russian nuclear industry due to Hungary’s objections.
The US has included in the sanction list some Russian metal and mineral companies involved in the supply chain of military products, such as Burevestnik Central Research Institute which is capable of designing artillery systems, and the Mtsensk Forge Plant that produces military alloy components. However, as to strategic metal minerals and products such as nickel, palladium, rhodium and titanium, Russian companies that hold the vast majority of the world’s sources and production capacity of these minerals are free from the sanctions, as the US and Western companies depend on Russian supplies.
It is clear that when deciding on the joint sanctions, the US and European countries also need to guarantee the normal functioning of their domestic enterprises and take into account the interests of all parties. That’s why the sanctions against Russia haven’t been tightened to the strangling point at once. Rather, they have been imposed step by step, thus giving Russian domestic and third-party enterprises an opportunity to make adjustments.
Overall, the joint US-European sanctions against Russia actually haven’t produced “the most powerful and far-reaching impact ever” as the U.S. and European countries claimed. However, they did close many loopholes in last year’s package of sanctions and lifted them from comprehensive primary to secondary level. As such, Russia and foreign companies in direct collaboration with Russia are doomed to suffer huge losses.
This year, facing these new sanctions, Russia is not able to take enough countermeasures as it did last year. On February 26, Russia stopped supplying oil to Poland through Druzhba Friendship pipeline, which has been the most important channel for EU-Russia energy transportation since its completion and was exempted from EU sanctions on Russian energy in 2022. Despite the significant effect of Europe’s “de-Russianization” energy policy last year, Poland still relies on the pipeline for the supply of nearly 10% of its oil. The sudden cut-off by Russia may lead to another rise in energy prices in Poland and even another spike in the already eased inflation in Europe.
