The Need for New and Better Sanctions Against Russia

Sanctions have achieved some positive objectives but much more needs to be done.

May 17, 2024

Two years ago, in response to Russia’s brutal invasion of Ukraine, we formed the International Working Group on Russian Sanctions. I serve as the coordinator of this group.

This week we published on 19^th Working Paper called “Action Plan 3.0 Strengthening Sanctions Against the Russian Federation.”

Your can read the entire paper here: https://fsi9-prod.s3.us-west-1.amazonaws.com/s3fs-public/2024-05/actionplan_3.0_5-14-2024_final2.pdf

Source: Ministry of Defense of Ukraine via Wiki Commons.

The goal of our group is to provide the world with ideas on sanctions that will reduce the resources of the Russian Federation and thereby hasten the end of Russia’s invasion of Ukraine. Tragically, over two years later, the Russian leader Vladimir Putin still has the means to continue his war and brutal occupation of parts of Ukraine. Over the last year, Ukraine has struggled to strengthen its defense capabilities and rebuild its economy, particularly the shattered energy sector. Delays in Western military support and the subsequent deficit in artillery munitions and air defense missiles, compounded by the inherent challenges in rapidly scaling up Ukraine's military production capabilities amid ongoing war and lacking support, have caused Ukraine’s army to now fight largely on the defensive. In the meantime, Russia has regained its momentum.

But it would be incorrect to say that Ukraine is losing the war. Russia after all controls far less Ukrainian territory than it did in 2022. Putin has also not achieved many of the other war aims that he had declared on multiple occasions, including the removal of President Volodymyr Zelenskyy and his government, “demilitarization of Ukraine,” and “stopping NATO expansion.” At the same time, Ukraine has not achieved its war aims either — the liberation of all Ukrainian territory and an end to this war. To help Ukraine achieve these objectives, the democratic world must do more by first and foremost, providing more and better weapons to the Ukrainian Armed Forces. The new $61 billion aid package signed into law by President Joseph Biden in April 2024, coupled with the recent launch of the €50 billion four-year European economic support program for Ukraine and pledges to provide more military aid, will provide a new and much-needed surge in Ukraine’s economic and military capacities.

In parallel, the sanctions coalition needs to escalate the sanctions efforts to ensure the strongest possible advantage for Ukraine in economic and military terms. Significant sanctions have already been imposed on Russia, for which the sanctions coalition should be applauded. Sanctions have had a major impact on the Russian economy and have constrained Russia’s military and financial capabilities. In particular, the international sanctions coalition –around 50 countries – has substantially reduced Russian export markets and revenues. In addition, the Kremlin’s inability to access roughly $300 billion in central bank reserves has dramatically limited its policy maneuvers. But more efforts are needed. Weak implementation of existing sanctions has contributed to Russia’s ability to generate higher revenues from oil exports. To evade the price cap, Russia assembled a shadow fleet of aging, poorly maintained, and dubiously insured oil tankers, which has increased oil spill risk for coastal communities globally. 1 Weak implementation of sanctions has also enabled Russia to bolster its military production. Extensive use of Western components in its military industry, sourced through a network of agents, has allowed Russia to increase missile and drone production. By exploiting loopholes in the sanctions regime and the negligence or complicity of Western companies, Russia has continued to import Western equipment and technology. Despite an extensive sanctions regime and isolation from international financial markets, Russia found additional defense spending and increased its stockpile of weapons by engaging partners like Iran and North Korea. All these have in turn led to increased attacks on Ukraine, creating a critical situation in Ukraine’s energy sector.

This is a sober description of facts, not despair. The implementation of existing sanctions needs to be more effective, and more sanctions with tougher, longer-term economic implications for Russia should be imposed to help end this war. Specifically, the sanctions coalitions should:

Confiscate Frozen Russian Assets Abroad to fund military and financial aid for Ukraine for the duration of the war.
Impose New Sanctions on Russian Exports to undermine Russia’s ability to fund the war. Specifically, we propose (1) extending sanctions to cover pipeline gas, LNG, nitrogen fertilizers, and metals like nickel; (2) tightening sanctions, including a full embargo on uranium, aluminum, and steel products; (3) imposing across-the-board tariff on all remaining imports from Russia; and (4) enforcing the oil price cap, including through sanctions for using Western maritime services and shipping Russian oil above the oil price cap. Once credible price cap compliance has been achieved, the oil price caps should be lowered by $10/barrel, meaning a crude oil price cap of $50/barrel. Regarding the critical oil and gas sector, we propose restricting Russia’s access to Western oil and gas software applications hosted outside of Russia and introducing a comprehensive ban on exporting oil and gas technologies and services to Russia.
Introduce Import Tariffs on All Remaining Russian Exports. The West no longer applies the Most Favored Nation tariffs to Russia, and the allowed WTO-bound tariffs are very high.
Strengthen Technology Bans, including tighter restrictions on Russian access to microelectronics, Computer Numerical Control (CNC) machines, software, and components used in the defense sector. We suggest recreating the Coordinating Committee for Multilateral Export Controls (CoCom), established by the Western Bloc in the first five years after the end of World War II, during the Cold War, to impose a technology embargo on Comecon countries.
Tighten Financial Sanctions by further restricting international financial transactions, squeezing liquidity and credit availability, and systematically applying full blocking sanctions on all Russian Banks and key financial institutions. Western banks in Russia should no longer be allowed to indulge in war profiteering by offering Russia a big loophole in financial sanctions.
Impose More Sanctions on Russian Companies to reduce their ability to fund military operations, including especially key Russian firms in the energy and metals sectors. Specifically, this should include dominant companies in Russia, like Gazprom and Rosneft, vital to Russian government revenues and military operations. Rosatom must also be sanctioned.
Impose More Personal Sanctions, including on all senior figures in the government and private sector who help finance and support Russia’s war. Personal sanctions should be coordinated and standardized. Preferably all major sanctioning jurisdictions — the U.S., the EU, the UK, Canada, Japan, Australia, New Zealand, and Switzerland — should coordinate their sanctions. They should also exchange information on why they are sanctioning a particular individual so that they can all defend their verdicts in court.
Prevent Lawyers from Enabling Sanctions Evasion. Western lawyers help sanctioned individuals gain entry to lucrative Western markets by masking their identities through complex corporate structures and other tactics. American lawyers are especially attractive to sanctioned clients due to an extremely high level of confidentiality, lack of reporting, and client due diligence obligations.
Designate Russia as a Sponsor of Terrorism to reinforce the legal and moral costs for countries that continue to trade with the aggressor.
Stop Western Companies Doing Business with Russia. All Western companies should leave Russia for the duration of the war and should face sanctions if they continue to profit from operating in Russia or with Russian entities. This particularly applies to prominent Western companies, like Schlumberger and Raiffeisen, which have undermined the impact of sanctions in critical sectors such as finance and oil.
Strengthen Enforcement of Existing Sanctions. This means providing (1) more resources for government agencies responsible for imposing and enforcing sanctions, and (2) sanctioning Western service providers, including law firms that facilitate sanction evasion.
Expand Secondary Sanctions. Persons and companies in other countries — such as UAE, Turkey, Central Asia, the Caucasus, and China — that aid sanction evasion must be held accountable and be deterred from continuing to supply and support Russia’s war.