Evasion of Russia Sanctions: EU Commission Takes Action Against Companies, Urges Member States to Hold Accountable

The European Commission is poised to disclose details regarding the evasion of Russia sanctions by companies, with plans for a follow-up in April to assess government actions. EU Finance Commissioner Mairead McGuinness issued a stern warning, asserting that sanctions evasion within the bloc is enabling Russia to sustain its conflict in Ukraine. McGuinness highlighted that European products were reaching the Kremlin through indirect trade routes involving other countries.

In a letter addressed to EU member states, McGuinness urged governments to hold companies accountable, emphasizing that Europe's credibility is on the line. She stressed the need for immediate and concerted action to halt Russia's acquisition of sensitive western technology for its military.

"The Commission is prepared to target entities and individuals presenting a continuous high risk of acting to undermine the EU sanctions framework," the letter warns.

Sanctions evasion, McGuinness pointed out, involves exports to intermediary countries like Armenia, Kazakhstan, Kyrgyzstan, Uzbekistan, Turkey, the UAE, and Serbia, which then channel goods to Russia.

"The EU sanctions were being circumvented by exports to Armenia, Kazakhstan, Kyrgyzstan, Uzbekistan, Turkey, the UAE and Serbia, which are then sent onwards to Russia," the letter reads.

McGuinness also highlighted the sale of battlefield items by EU companies' subsidiaries located outside the bloc, which can be re-exported to Russia through other countries.

She noted a drastic decrease in direct EU exports to Russia of goods and advanced military technology, countered by a substantial increase in exports to other countries, often destined for Russia.

"Direct exports from the EU to Russia of goods and advanced technology that can be used on the battlefield or to develop Russian military systems plunged by 97 per cent in 2023 compared to the same period a year earlier, dropping from €2.8BN to €69M," McGuinness pointed out.

The letter raised alarm over clear patterns suggesting sanctions circumvention in imports of sanctioned products by Russia from subsidiaries of EU companies based outside the bloc.

"Trade information on imports by Russia of sanctioned products that are made by the subsidiaries of EU companies based outside the bloc suggests 'clear patterns … that may suggest sanctions circumvention'," the letter warns.

Executives and staff members who are EU citizens, regardless of their location, can be held responsible for breaching sanctions, along with EU parent countries influencing subsidiaries outside the bloc.

"The EU can impose asset freezes or ban the sending of money to those found in breach of sanctions, as well as adding their names to a list of operators that cannot be sent sanctioned goods from the EU," the letter states.

McGuinness urged governments to inform operators of the risks associated with exporting sanctioned goods to intermediary countries and remind financial institutions of their legal obligations under EU sanctions.

"The Commission has told EU countries of the names of operators and companies that exported banned products to Russia from interim countries, and has urged them to 'exercise vigilance' 'in view of the risk that the products may be re-exported to Russia'," the letter says.

Countries are called upon to hold EU operators accountable for undermining EU sanctions, publish relevant cases and penalties to deter circumvention, and inform the public accordingly.

By fLEXI tEAM