Clarification of the passed – Newspaper Kommersant No. 37 (7482) dated 03/03/2023

The second year of hostilities in Ukraine, which began a week ago, in the economic dimension of the conflict between the Russian Federation and the West, will look clearly different than the first. Western officials working “in the direction of the sanctions” describe 2022 as a “giant experiment”. “No one has ever sanctioned such a significant economy as Russia, and even so quickly. We ended up in an economics textbook and a sci-fi novel at the same time,” explains one of them.

As the scale of hostilities quickly exceeded any expectations, the prepared sanctions ended almost immediately. The United States and its allies had to improvise on the fly, responding to the demands of Western societies and Ukrainians to “do something already.” Many sanctions were imposed only after long and painful discussions, related not only to the interests of individual countries like Hungary, but also to the need to somehow assess the consequences and avoid the collapse of the world economy, as was the case with the embargo on Russian oil.

At the end of the year, the picture turned out to be contradictory. On the one hand, one of the toughest sanctions regimes in history is operating against the Russian Federation, and it was introduced swiftly. On the other hand, a combination of high commodity prices, skillful actions of the financial and economic bloc of the Russian government, and selective enforcement of sanctions by large economies such as China and India has led to the fact that so far the effect on Russian GDP looks insignificant. In the meantime, there are few objects for sanctions. The proliferation of individual blacklists is of little use, and even fewer sectors that can be sanctioned without harming the global economy.

As a result, now the emphasis will be on improving the effectiveness of the already imposed sanctions, say my interlocutors on both sides of the Atlantic. First, the US, EU and their partners want to create a system for sharing information about sanctions violations that is more integrated than financial intelligence consultations. Secondly, to deal with intermediaries, entire countries and individual companies through which sanctions are bypassed. Prosecution of violators is planned loudly, setting painful precedents, such as the recent EU sanctions against the Dubai tanker operator SUN Ship. Finally, my sources say, “lawyers, auditors, accountants and other white-collar workers, including nominee directors in shell firms, will be dealt with properly.”

Most of the top officials in the U.S. administration’s sanctions bloc are likely to sit out a significant portion of Joe Biden’s presidency, tightening the screws on the sanctions weapon and testing it on Russia. Moreover, given the growing tension between, for example, the West and China, there will clearly still be a chance to apply the developments.