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Trap Aggressor analysts have found more than 30 ways for Russia to bypass sanctions

The group of Trap Aggressor analysts has found 31 ways used by the Russian government and businesses in order to avoid sanctions restrictions which have been introduced following the annexation of Crimea and military aggression in the Donetsk and Luhansk regions of Ukraine since 2014 until today.

This is what the analytical research Sanctions Policy Against Russia in 2014-2022: Gaps and Circumvention Schemes conducted by Trap Aggressor with support of the International Renaissance Fund concludes.

The analysts have singled out four blocks of “weak points” in the sanctions policy against the Russian Federation which lead to the breaching of the restrictions. These are different schemes to circumvent the sanctions, gaps in the sanctions policy, exceptions in the sanctions as well as ignoring the sanctions by private businesses.

The schemes to bypass sanctions and other drawbacks in this context have been revealed in different spheres such as defense industry, oil, gas, metallurgy, sea commerce, finances, cryptocurrency, hotel business, construction, etc.

According to the analysts, the gaps in the sanctions policy include:

Continuation of business projects launched before the sanctions were introduced. Despite the embargo to conduct business with the Russian defense sector, European contractors found it possible to prolong all contracts entered into before August 1, 2014, when the first sanctions were introduced. This loophole enabled French companies to sell Russian military equipment in the total amount of 152 million euros under contracts concluded before the embargo, which came to 44% of export of the European weaponry to Russia.

No prohibition to buy and sell dual-use goods. Reporters of the Ekonomichna Pravda wrote how

“the German Bosch was convincing that it was selling its automotive equipment solely for peaceful purposes, but its devices were found in the Russian combat infantry vehicle captures by the Ukrainian Army.”

Conducting activities contrary to the sanctions lists. Being on the list of sectoral sanctions did not prevent Rosneft from buying a minority share of the Indian energy company Essar Oil in the amount of 49% so that its stake was not controlling and, therefore, not subjected to sanctions.

No exhaustive list of sanctioned activities. While the West banned assisting Russia in developing shale reservoirs, partner companies of the Russian Federation managed to switch into development of less known “non-traditional deposits” and legally continue their cooperation with the Russian Federation.

Discretion to interpret sanctions restrictions led to finding in 2017 no fault with subsidiary companies of the American ExxonMobil which entered into contracts with Igor Sechin, director of Rosneft, who was on the sanctions list. ExxonMobil sent an explanatory note to the White House saying that the personal sanctions were aimed at

“identifying individuals and freezing their assets rather than persecuting companies they manage.”

No liability due to “ignorance”. In accordance with the Regulations of the European Council of 2014, if a party

“did not know or had no reasonable grounds to suspect that its actions would violate the measures specified in the Regulations,”

such a party may refer to this justification to prove its innocence. This provision was made advantage of by the American Enerpac Heavylifting which supplied elevators used during the construction of the Crimean bridge.

The Trap Aggressor analysts have divided the discovered schemes to circumvent the sanctions into the following categories:

  • hiding origin of goods (changing flag or ship destination, switching off identification system, changing producer’s marking, packaging, smuggling and customs violations),
  • hiding a sanctioned company, its beneficiaries or links with its beneficiaries (transferring assets to CEOs who are not under sanctions, in particular business partners, family members or friends, using intermediary companies which are not under sanctions, using offshores as well as sham companies),
  • hiding final destination of goods,
  • conducting business activities in non-sanctioned jurisdictions,
  • conducting business activities by foreign companies in the occupied Crimea through local retailers,
  • conducting business activities by foreign companies in Russia and the occupied Crimea through their subsidiaries,
  • circumventing sanctions through third countries or their resident companies,
  • circumventing sanctions through adoption of legislative changes.

The key recommendation of the analytical research is to create in Ukraine a specialized body to coordinate the sanctions policy, conduct non-stop monitoring and assessment of economic, political, legal and other effects of using, changing or lifting sanctions.

The Trap Aggressor has conducted its research of at least 160 cases when Russia circumvented the Western sanctions imposed during 2014-2022. The data was taken from reporters’ investigations, analytical materials and news published in Ukrainian and foreign media.