The main innovation of the 11th package of EU sanctions was the consolidation of the practice of secondary sanctions, which demonstrates Europe's alignment with the sanctions path established by the United States. Ekaterina Arapova, Director of the Center for the Sanctions Policy Expertise of MGIMO, discussed the impact of the new package of EU sanctions on Russia, as well as the most likely next steps of the EU sanctions policy.
Signals indicating that the EU would expand its sanctions regime beyond its own jurisdiction, similar to the United States, emerged last fall, told Arapova in an interview with BUSINESS Online. The introduction of measures to exert pressure on companies from third countries in order to prevent attempts to circumvent anti-Russian sanctions is the primary innovation of the new package of sanctions, according to the expert. The remaining measures, such as transportation restrictions and limitations on oil flow along the northern branch of Druzhba, were expected. Many of these measures were already in effect before the introduction of new sanctions, so their legal consolidation in the 11th package of sanctions can be viewed as an attempt to create a sense of escalating pressure on Russia.
However, Arapova states that the peak severity of the sanctions pressure was expected to occur around September 2022. Since then, Russian businesses and contractors from other countries have either chosen to leave the country or adapt to the new situation. Business processes are already 90 percent adjusted to the new circumstances, so the consolidation of the EU secondary sanctions regime is unlikely to significantly impact foreign companies, according to the expert. She predicts that the new sanctions will increase companies' compliance with sanctions, but being subjected to sanctions will not result in the suspension of cooperation with Russia. Instead, it will lead to a more detailed development of interaction strategies.
Regarding the potential content of future EU sanctions packages, Arapova suggested that the next step could involve limiting Russia's diamond trade, strengthening compliance control of previous sanctions regimes, and expanding the list of dual-use goods as well as foreign companies held accountable for circumvention.
Despite the ongoing potential for sanctions, they are now operating on the principle of «decreasing marginal efficiency». Each subsequent package proves to be less effective than the previous one, and the negative impact on European countries themselves becomes more significant, the expert explains.
In general, the Russian economy has adapted to the sanctions through three key measures, according to the analyst. Firstly, the implementation of currency control led to the freezing of non-residents' funds in the exchange market. Secondly, the introduction of a settlement scheme in rubles helped stabilize the exchange rate and strengthen the investment capacity of the ruble. Finally, the imposition of a moratorium on bankruptcy and the implementation of incentive measures for Russian businesses allowed many companies to continue their operations.
«While there is damage from the sanctions, no one denies it, but it is not significant enough to paralyze the economic system and deprive it of its objective competitive advantages, as our opponents had anticipated», concludes Arapova.
Source — BUSINESS Online
