EU settles down on watered-down Russia sanctions over German concerns

 

BRUSSELS – EU member states have agreed to a new package of sanctions on Russia, aimed largely at cracking down on loopholes that circumvent existing measures, the Belgian EU presidency announced on Thursday.

“This package provides new targeted measures and maximises the impact of existing sanctions by closing loopholes,” the Belgian presidency posted on X.

However, the latest salvo of sanctions was watered down to secure the agreement of all member states, after Germany pushed through measures to protect the German export-led economy, according to EU diplomats.

Since the full-scale Russian invasion of Ukraine, the European Union has targeted the Russian economy, institutions and officials linked to the war with multiple rounds of sanctions.

Worries about sanctions loopholes

As the invasion drags on, Russia has worked hard to circumvent the punitive measures, to secure more resources for their military and to keep their economy running.

The EU and other Western countries, including the United States, are concerned that loopholes in the sanctions undermine compliance from companies doing business with Russia.

The EU punitive measures are intended in particular to prevent Russia from obtaining Western technology that the defence industry can use to manufacture weapons for the war in Ukraine.

European Commission President Ursula von der Leyen said on Thursday that the latest round of sanctions “will further deny Russia access to key technologies,” in a post on X.
German hesitancy

Approval of the 14th sanctions package was delayed by several weeks, as diplomats in Brussels cited German concerns over business regulation. Berlin’s main point of contention was that the crackdown on sanctions evasion went too far, according to EU diplomats. German businesses had apparently warned of excessive administrative costs and a loss of sales.

German Chancellor Olaf Scholz acknowledged at the weekend that Berlin was concerned such sanctions could potentially penalize Germany’s export-oriented firms.

EU countries pushing for decisive action on sanctions evasion however pointed to European Commission estimates that products worth millions of euros were still being delivered to Russia via subsidiaries of European companies, despite sanctions in place to stop this.

 

Compromise reached on “NoRussia” clause

EU diplomats said a compromise was eventually reached, allowing measures halting exports to Russia – the so-called “No Russia” clause – to not apply to subsidiaries for the time being.
Under the “No Russia” clause, EU companies are obliged to contractually prohibit the re-export of certain categories of sensitive goods to Russia, including goods related to aviation, jet fuel, and firearms.

The issue may be revisited, however, amid difficulty in interpreting the “No Russia” clause.
Part of Thursday’s sanctions deal involves an impact assessment from the commission of the “No-Russia” clause on the EU economy, with the possibility of returning to the question of enforcement.

EU foreign ministers meeting on Monday must formally adopt the latest sanctions package for it to take effect. An EU diplomat said more than 100 new persons and organizations linked to the Russian invasion of Ukraine have also been targeted, bringing the total to more than 2,200.

 

Russian LNG sanctioned for the first time

EU diplomats said the latest package contains plans to target Russia’s multi-billion dollar liquefied natural gas (LNG) sector for the first time.

The sanctions do not prevent EU countries from importing Russian LNG. But they ban ports such as Zeebrugge in Belgium from shipping Russian LNG to countries outside the EU, according to diplomats.

A spokesman for the commission said around four to six billion cubic metres were shipped to countries outside the bloc via EU countries.

Von der Leyen said on X that the punitive measures “will strip Russia of further energy revenues” and said the sanctions will tackle Russian President Vladimir Putin’s “shadow fleet” of oil tankers.

Russia has used ships not owned by Western companies or insured by Western insurers to avoid an oil price cap imposed by the EU, US and others on Russian energy exports.
Belgium chaired the negotiations on the new round of sanctions as current holder of the rotating EU presidency.