2023-09-15 07:01:00
By Amy Walker
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The West’s sanctions once morest Russia are having an effect. But Russia is getting better and better at getting around them. A US think tank has suggestions for how the thumbscrews might be tightened further.
Washington – The Russian ruble is in free fall, the central bank’s stabilization measures are becoming increasingly drastic. Most recently, it raised the key interest rate sharply to 12 percent, from the previous 8.5 percent. This shows that the West’s sanctions once morest Russia are having an effect.
But Russia is also getting better at circumventing sanctions. For example, despite the embargo, Russia continues to sell oil that comes back to Germany and Europe via detours. In order to close these gaps and put even further pressure on the Russian economy, the US think tank Atlantic Council has developed five proposals for the West. The declared goal: to further isolate Russia economically.
1. Close loopholes in export controls
The think tank’s first and most important proposal concerns plugging the holes in the existing sanctions. The export of Western goods to Russia is subject to strict sanctions – and yet goods, especially those with Western technology, always find their way into the Russian Federation. This is presumably achieved via third countries that import the goods and then resell them to Russia.
In the opinion of the Atlantic Council, these loopholes must be closed. In order to do this effectively, an old system from the Cold War era might serve as a blueprint: At that time, a coordination committee was created made up of governments that supported the sanctions once morest the Soviet Union and jointly controlled the export of goods more closely.
At the same time, the think tank emphasizes: “Export controls will never be completely watertight.” After all, it is a tradition in Russia to steal Western technology in ever new ways. Still, better execution of export controls might have a big impact.
2. Tightening of the oil price cap
Since autumn 2022, the G7 countries have introduced an oil price cap for Russian oil. The price cap is $60 per barrel – countries do not pay more for Russian goods that come by sea. The aim of the cap was to force Russia to sell its oil below market value so that overall revenue would fall. According to the Atlantic Council, the oil price cap has also had an effect: Moscow’s oil revenues have fallen.
However, there are also increasing reports of sanctions being circumvented, which is why the think tank is proposing countermeasures. Russia is trying to increase its revenue by increasing the transport costs for oil. According to the think tank, traders in the G7 countries need to be more closely monitored as to whether they really stick to the $60 limit – and it should be made clear that demands for excessive transport costs violate the sanctions.
The Atlantic Council is also proposing to impose sanctions on commercial companies that repeatedly violate the sanctions, in the hope that this will deter other companies.
The authors also address the high imports of Russian LNG in Europe. Since it is assumed that the amount of LNG from other regions of the world will increase in the next two years, one might also consider sanctioning LNG from Russia at a later date.
Kremlin leader Vladimir Putin takes part in an economic forum in Vladivostok in the Russian Far East.
© Sergey Shinov/Roscongress Foundation/AP/dpa
3. Use Russian assets to rebuild Ukraine
Since the beginning of the war, there has been controversy over what Europe and other Western states should do with the frozen assets of sanctioned Russians. The Atlantic Council’s position is clear: the assets, which are estimated to be worth around $360 billion, must be used for the reconstruction of Ukraine. The EU has so far taken a position once morest it – it is not clear whether such a measure would be legal under international law.
But the think tank also makes it clear: This measure alone will have little impact on Russia in the short term. “But the symbolic significance of using over half of Russia’s assets to compensate victims of an illegal war of aggression would be enormous.”
4. Find hidden assets of oligarchs
Russian oligarchs and ruler Vladimir Putin himself use many different ways to hide their assets. One way is to buy up foreign companies – which also has the side effect of expanding the power of these people. According to the Atlantic Council, these practices need to be combated better.
Western countries should create more transparency regarding the ownership structure of companies. Various legislative proposals have been discussed for a long time – which, in the opinion of the think tank, need to be implemented in the fight once morest Russia.
5. Impose a general financial embargo
So far, Western countries have been very cautious and only imposed sanctions on certain banks and financial institutions. The fear was too great that a complete financial embargo once morest Russia would have catastrophic consequences for the global economy. But according to the Atlantic Council, the West should now act bolder and impose a complete embargo on Russia’s financial system. The measures that are already in force did not trigger a global economic crisis – but they are already profound.
“A formal financial embargo would further isolate the Russian economy – and the symbolic power would perhaps be even more significant than the actual impact.” This would also make it easier to monitor other sanctions: After all, it would be easier to simply stop all Russian transactions and exports rather than just those involving certain goods. Russia would be forced to switch to other currencies such as the Indian rupee or the Chinese yuan – but this would limit trade to only these countries. This would have major consequences for the Russian economy, which might possibly also lead to slow changes in Russian society.
Rubriklistenbild: © Sergey Shinov/Roscongress Foundation/AP/dpa
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