As part of an organized group of seven – Newspaper Kommersant No. 33 (7478) dated February 27, 2023
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The G7 countries, which have approved a number of sanctions measures, from bans on the export of technological products to the Russian Federation to a price ceiling for Russian oil and petroleum products, are preparing to tighten control over their implementation – the participants of the G7 virtual summit agreed on this last week. The United States, European Union, United Kingdom and Canada presented new sanctions lists from Thursday to Saturday, including additional restrictions in the Russian Federation on the supply of products that can be used for military purposes, and individuals, according to the G7 governments, involved in circumventing sanctions. Representatives of authorities and business in the Russian Federation are waiting for complications in supplies from abroad, but the actual impact on imports will depend on the spread of secondary sanctions – while there are practically none, their main target may be Chinese companies that have sharply increased exports to Russia last year.
The G7 countries intend to tighten control over the implementation of sanctions restrictions, primarily in relation to technological exports to the Russian Federation, the relevant measures are listed in the communiqué following the results of the G7 virtual summit, timed to coincide with the anniversary of the start of the Russian military operation in Ukraine, published on Friday. The statement was of a general nature, since the EU sanctions were approved late on the evening of February 24 and with great difficulty. Formally, they were blocked by Poland as “too weak,” in fact, by a number of Eastern European countries, including Poland: according to news agency sources, it was not satisfied with the new restrictions on the import of synthetic rubber from the Russian Federation. Canada’s sanctions were announced first, followed by US and UK sanctions, followed by Australia and New Zealand. In terms of new measures, the lists of “sanctioned” in them are still different.
The paragraphs concerning the general sanctions regime contain a promise to actively prevent its circumvention by creating a coordination mechanism to increase the level of compliance. Companies from third countries in case of violations will face “significant costs”, restrictions will apply to both services and the possibility of transiting goods. The G7 countries also intend to block new ways of supplying components to the Russian Federation that “support the defense sector and industry.” To reduce the proceeds from the export of petroleum products, the G7 will continue to apply price ceilings and bans on the supply of equipment to increase production in general.
The US and EU sanctions restrictions primarily expand the bans on the supply of industrial products to the Russian Federation (including electronic components, including drones) and are aimed at breaking the supply chains of military and dual-use products and components (through the inclusion of Russian companies and their counterparties in the sanctions lists ). The European Commission has valued its package, along with bans on the import of bitumen and synthetic rubber, at €12.7 billion. In the financial sector, in turn, the G7 countries plan to leave only channels for the “necessary” transactions for servicing imports and exports that are not prohibited in relation to the Russian Federation (see the text next to it).
In the government of the Russian Federation, the new G7 sanctions, judging by yesterday’s conversations between Kommersant’s correspondents and interlocutors in the White House, were perceived as serious restrictions requiring a prompt response, but officials mostly refused to discuss its details for the obvious reason: information about countermeasures could complicate their implementation and harm Russian companies. According to Kommersant, the Ministry of Industry and Trade is already holding consultations with individual companies affected by the new technology import restrictions. “Now the next, fifth edition of the list of parallel imports is being prepared, there will be both new brands and exclusions of certain brands. Work is also underway to fine-tune the mechanism in terms of the transition from inclusion in the list of brands to the inclusion of copyright holders there. This will make it easier to administer the procedure. As for the revision of the list based on the sanctions, then, of course, when preparing a new edition, products prohibited for export to Russia by new sanctions restrictions will be taken into account, ”the ministry said.
The Ministry of Economy, which is responsible for the regulatory framework of counter-sanctions activity (recall, in this context, for example, the lifting of the ban on the creation of matryoshka companies in the Russian Federation is being discussed, see Kommersant-Online dated December 21, 2022, the last closed meeting on the topic was held in the RSPP in mid-February, the details of it are not disclosed in the union), they refused to talk about progress in this work. “The task of the ministry is to create conditions, tools for businesses that will allow them to adapt,” adviser to the minister Daria Levchenko told Kommersant. They also refused to discuss the topic in the secretariat of the government of First Deputy Prime Minister Andrey Belousov, who oversees the economic bloc. This state of affairs is understandable, but it creates an internal conflict between the general economic and counter-sanctions policy of the government: it is difficult to fit into the transparency of the regulatory environment, for which the White House has fought in recent years, about measures to circumvent and counter sanctions, but there is no alternative.
China, first of all, played a significant role in mitigating the effect of restrictions and the voluntary withdrawal of Western companies from the Russian market – it became one of the main exporters of goods to the Russian Federation, including those for which the G7 countries and the EU imposed export bans. The country’s share in Russian imports increased from 20% to 45% in the period from March to September 2022, the total trade turnover during this time increased by $27 billion compared to the same period in 2021, experts from the Institute of International Finance noted earlier (official data on foreign trade of the Russian Federation are closed). Kommersant’s interlocutors associate the possibility of additional intensification of bilateral ties with the visit of Chinese President Xi Jinping to Moscow – on February 22, Russian President Vladimir Putin said that he was waiting for the arrival of the head of China, without indicating the date of a possible meeting.
Kommersant’s interlocutor at the RSPP found it difficult to give an unambiguous assessment of the possible consequences of tightening control over the application of sanctions, referring both to the current possibilities for circumventing them and to the position of the Chinese side, which opposes unilateral sanctions. “We don’t know the details of the discussion within the G7, but it can be assumed that these countries want to strengthen the regime of secondary sanctions, primarily against China,” he adds. New restrictions, of course, will complicate the conditions of supply, the interlocutor of Kommersant believes.
Based on the proposals of the PRC last week regarding the “truce formula” between the Russian Federation and Ukraine, at least now the political position of the PRC cannot be called “pro-Russian”. The situation may change by the summer of 2023 with the approaching visit of Chinese President Xi Jinping to Russia, but so far the changes are rather in the other direction – earlier, the position of the PRC was more evasive and, in principle, allowed it to be interpreted in a pro-Russian vein.
Sanctions are now more focused on “patching holes” in the measures already taken. This also applies to the ban on the export of critical technologies and industrial goods, although additional restrictions have appeared related to movement and transit through Russia, said Igor Rebelsky, founder of VIG Trans. The latter measure, according to him, may further complicate the export customs clearance of such goods in the EU and the passage of the EU borders with Belarus and Russia. “Russian business will look for workarounds and carry out import substitution, as it was the entire previous year 2022, in other words, Russia and the EU will continue the “confrontation” in working mode,” the head of the company expects.
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