March 27, 2023

Find out which countries are feeding Putin’s war machine with European products – Executive Digest

The European Union and G-7 countries have imposed several rounds of sanctions against Russia over its invasion of Ukraine on February 24 last year in an attempt to degrade Putin’s war machine and undermine the Russian economy. However, as shown by the Bloomberg agency, data shows that the real impact in some sectors is lower than Western expectations.

“Simply signing new sanctions is not enough,” said Daniel Tannebaum, head of the global financial crime practice at Oliver Wyman, an advisory firm. “Governments now need compliance mechanisms.”

China’s exports to Russia have increased as Beijing plays an increasingly important role in supplying Moscow, a diplomat told the agency, who asked not to be named.

The European Union has imposed sanctions on nearly 1,500 people, restricted the export of hundreds of goods and technologies and identified some of Moscow’s main sources of income: however, the authorities do not hide their concern about the inability of the EU bloc to create an effective mechanism to enforce these the limitations.

There is still a long way for the European Union to match the capacity of the United States in this area: the Americans not only approve sanctions, but are powerful enough to make a large part of these sanctions implemented and enforced through a central agency , more efficient processes for gathering information and tools for enforcing rules at home and abroad.

In the European Union, implementing and enforcing rules is an effort that falls within the mosaic of member states: while the European Commission, the bloc’s executive arm, oversees implementation and provides guidance, national authorities are responsible for detecting violations and sanctioning – and therefore the results are inconsistent.

“Our sanctions are strong and contribute to a lasting economic recession in Russia,” said Bulgarian Valdis Dombrovskis, vice-president of the Commission. “But their effectiveness also depends on how well they are implemented.”

From a distance, and on the surface, the sanctions appear to be effective: Russia’s economy has shrunk and many of its banks and companies remain isolated from the international financial system. There are also signs that technological constraints have weakened Russia’s main industries and hindered their ability to innovate in the future.

However, according to the Geneva-based Trade Data Monitor, some of the sanctioned products, particularly advanced semiconductors, are being diverted to Russia via third countries, many of which abruptly changed their trade habits after the Russian invasion.

In some cases, exports to Russia of technologies that can be used for military purposes have grown from zero to millions of dollars. Pay attention to the case of Kazakhstan: before the start of the conflict, it exported 12 thousand dollars worth of advanced semiconductors to Russia. In 2022, the bill increased to $3.7 million.

Russia bought, between 2017 and 2021, an average of $163 million in advanced chips and integrated circuits from the European Union, the United States, Japan and the United Kingdom. By 2022, exports are down to a third.

However, the figures show that Turkey, China, Serbia, the United Arab Emirates, Kazakhstan and other economies in Eastern Europe and Central Asia contributed to the shortfall – remittances from allied states to these countries rose by a similar how much. The pattern is recognizable in hundreds of product categories, but is particularly visible in chips and integrated circuits that can be used for military purposes.

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