31st May 2023

Internal memo highlights glitches in EU's Russia sanctions

  • Brussels: sanctions-busting tipsters need to supply own evidence (Photo: European Commission)
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The EU has been receiving anonymous tip-offs on Russia-sanctions violations, but European capitals are doing little to share information on frozen assets.

The European Commission's "whistleblower tool", created last March, "is quite successful in the number of reports received", EU officials reported in an internal memo circulated on Monday (8 May).

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But "COM [the Commission] is very selective in the referrals that are sent to member states (only those based on evidence)", it added, indicating a rather passive approach to follow-up investigations.

The commission has also created a special sanctions task-force, called "Freeze and Seize", which meets once a month.

But its efforts to curb circumvention rely mostly on trawling through customs data, rather than access to hard intelligence.

Its work focused on "data analysis in particular in the custom and trade sector to trace trade redirection and possibly circumvention cases" by identifying "suspicious trade flows", the memo said.

Meanwhile, the commission is also building a new IT platform called SIER on which EU capitals can share "notification of frozen assets" and "authorisations granted" for derogations, for instance, on humanitarian grounds.

This should be ready "by the end of the year", the memo said.

For the time-being, they are using a beta-testing "messaging board" called FSOR instead, but "only five or six member states had tested the functionalities so far", the memo noted.

EU countries' ambassadors also held first talks on an 11th round of Russia sanctions in Brussels on Wednesday.

These are to focus on blocking Russia sanctions violations by Moscow-friendly states, such as China and Iran.

But frontline EU countries, such as Lithuania and Poland, were disappointed by initial commission proposals on new blacklists, which don't cover any new Russian oligarchs, or its nuclear, liquid gas, and diamonds exports — auguring tough talks ahead.

When asked if the sanctions would be finalised by EU foreign ministers meeting informally in Stockholm on Friday, one senior EU diplomat told EUobserver: "The 11th package is simply toothless".

"So, it doesn't matter when — before, during, or after — Gymnich it will be agreed, if at all," the diplomat added. (Gymnich is an EU term for informal meetings organised by the rotating EU presidencies.)

But whatever EU countries agree in the end, the internal sanctions memo also outlined other problems on implementation.

One of these is how to keep up with Russian oligarch's shell games on company ownership and how to minimise job losses in Europe.

Officials spoke of "the difficulties member states may face when an EU company is controlled by a sanctioned person, like establishing who holds control or avoiding bankruptcy".

"A possible solution to dissociate control from the designated person could be to establish firewalls," they added, referring to legal structures that would enable a Russian-owned factory in the EU to keep running under caretaker managers, even if its Russian owner was persona non grata.

Another problem was the complexity and scale of EU sanctions — a recent "consolidated list" of EU financial sanctions already in place, seen by EUobserver, ran to 934 pages.

These contained at least five different types of derogations to unfreeze money on humanitarian grounds, creating potential loopholes amid the confusion.

The EU memo said its media "lines to take" on sanctions should also be "less technical and more political, pro-active and offensive" in order to "better counter the Russian narrative".

EU messages should be "insisting for instance on the [EU] donation of fertilisers to African countries — countering the false narrative that the EU is making money out of it [its Russia and Belarus sanctions regime]," the memo suggested.

EU lines should also "ideally target specific groups by taking into account the local context", it added, alluding to Russian mercenaries and their human rights violations in Africa.

But some ideas being batted round in the internal EU talks suggested Moscow was way ahead in terms of propaganda creativity.

As EU diplomats pondered how to hone their PR "counter weapon", at a meeting in March, one "delegation suggested to use 'restrictive measures' rather than 'sanctions', due to their negative connotation", the memo said.


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