A week of haggling with Hungary ended on Friday with the member state's agreement to renew European Union sanctions against Russian individuals and entities, but not without getting something in return. A handful of people and estates were taken off the list at the insistence of Hungary, which has often been the obstacle to EU unity against Russia.
Sanctions against Russia, which are a response to its invasion of Ukraine, now include a phased ban on primary aluminium imports, though they will not take effect for another year. There are also restrictions on more equipment with potential military applications, particularly in drone operations.
An additional 73 ships have been designated as part of Russia’s "shadow fleet." The revised sanctions criteria will also extend to shipowners, operators, logistics providers and captains engaged in shadow fleet activities.
“We know that sanctions work, and we see more and more evidence that the Russian economy is not as strong as it would like to be perceived,” Polish Finance Minister Andrzej Domański said at a recent news conference.
What are sanctions?
Sanctions can take several forms. Economic restrictions include bans on trade, asset freezes and restrictions on access to financial markets. Diplomatic measures involve travel bans, visa restrictions and suspension of diplomatic relations. Arms embargoes prevent weapons exports to the sanctioned target, while other sanctions can hit key industries such as energy and finance.
“One of the motives [for the EU to impose sanctions] is to express condemnation and uphold international norms once they have been breached,” Clara Portela, a professor of political science at the University of Valencia, told The Parliament.
Ultimately, the decision to wield sanctions is a political one. Russia has been turned into a pariah for undermining Ukrainian sovereignty, whereas efforts to sanction Israel for its human rights abuses have themselves long been the target of Western governments.
In the EU, sanctions are proposed by the European External Action Service (EEAS), the bloc's diplomatic arm, and require unanimous approval from all 27 member states. The EU has over 40 sanctions regimes in place — either its own or in compliance with the United Nations Security Council.
In the best case, sanctions can “try and convince people in the middle of a conflict to de-escalate that conflict or negotiate a settlement,” Rebecca Christie, a senior fellow at Bruegel, a Brussels-based economics think tank, told The Parliament.
How are sanctions enforced?
Governments, financial institutions and law enforcement agencies are tasked with ensuring sanction compliance. European banks and financial institutions must block transactions and freeze assets belonging to sanctioned targets.
Border authorities monitor imports and exports to ensure that restricted goods do not enter or leave the EU.
Violating sanctions can lead to fines and other legal action, including prison sentences. Companies found in violation can face penalties based on their worldwide income.
The European Commission and EEAS help ensure that sanctions are applied consistently across all member states, but there are still challenges. Not all members have the same resources to enforce them, or competing national economic interests and legal loopholes can allow less-willing members to drag their feet.
The EU's unanimity requirement is “one of the big catches” to applying sanctions, Christie said. In Ukraine's case, Hungary has often stood in the way of punishing Russia.
In addition to maintaining closer ties with Moscow, Hungary remains more dependent on Russia for energy than other EU members. Prime Minister Viktor Orbán has reason to worry that sanctions could drive up national energy prices and threaten his country's economy.
“The EU has had to either negotiate with him and within the EU, or they've had to pick other things to do,” Christie said.
Some EU leaders have started advocating for a qualified majority to approve these decisions so that no single member can hold the sanctions process hostage. Another stumbling block: Most sanctions, such as those against Russia, typically have to be renewed every six months.
That means a country like Hungary can send the sanctions discussion back to square one every six months. When the process functions as intended, Portela said it is “good practice because it compels the Council to review and discuss how the sanctions regime is working at least once a year.”
An example of this is Syria. At the end of last month, the EU Council decided to suspend a variety of measures to support the country's political transition since the overthrow of Bashar al-Assad.
Do sanctions work?
The EU has had sanctions in place against Russia since 2014, when the country first attacked Ukraine. Russia has found plenty of ways to get around them.
Older tankers with obscure ownership constitute its "shadow fleet” that keeps oil exports flowing. Russia can also sell its fossil fuels or other sanctioned goods to countries not participating in the sanction regime, such as India or Turkey, which then re-sell products in the markets that Russia is barred from.
Targets of sanctions can challenge them in court or try to re-categorise banned goods to exempt them. Labelling a product as humanitarian aid can be the easiest way to try to evade sanctions.
To address this, the EU has increased funding for enforcement to track and investigate violations and established new rules to allow for easier confiscation of frozen assets through the Freeze and Seize Task Force. Additionally, the EU implemented a whistleblowing tool to help uncover efforts to violate sanctions.
All of these challenges make the efficacy of sanctions open to interpretation. Often, the problem is not the sanction, but the reason for using it. Sanctions have helped end apartheid in South Africa, while those against Cuba and North Korea have failed to topple their regimes or prompt major policy change.
In many cases, sanctions can harm ordinary citizens, which political elites can use to rally the public around them. Russia has built new trade networks, invested heavily in its military-industrial complex and deepened its own market as a way to counteract the West's financial measures.
That sanctions against Russia — the largest and most integrated economy ever targeted — have not produced the crippling effects hoped for shows just how difficult it can be to compel a country to correct bad behaviour. If anything, it is motivation to adapt.
Like in actual war, however, victory in financial battle is not always obvious or immediate. Sanctions can take a long time to leave their intended mark.
“Russia is a big place and has a lot of its own sort of self-supporting mechanisms. So, [sanctions] haven't been definitive, but I would say it has had an impact,” says Christie.
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