The European Union (EU) is currently in the process of drafting its fourteenth package of sanctions, set for adoption in the upcoming months. This new package is primarily focused on reinforcing the existing thirteen rounds of sanctions rather than introducing novel measures.
In a recent speech, EC Vice-President Valdis Dombrovskis announced the initiation of preparations for this new package, expected to be finalized in the spring. The proposed measures are aimed at combating sanctions evasion, particularly concerning the Russian Federation’s persistent violations related to oil export prices.
Efforts are also underway to address the circumvention of sanctions through subsidiaries of EU companies operating outside the EU. Dombrovskis emphasized the potential liability of EU parent companies for any sanction-busting activities conducted by their overseas subsidiaries.
Acknowledging that the short-term impact of previous sanctions has been less significant than anticipated, Dombrovskis highlighted ongoing challenges, including the ineffectiveness of certain sanctions, such as those targeting oil and technology trade.
The forthcoming sanctions package is likely to expand the list of sanctioned individuals and entities and enhance enforcement mechanisms. However, discussions among EU member states regarding additional punitive measures are proving increasingly challenging.
Meanwhile, the Office of Foreign Assets Control (OFAC) has begun implementing smart sanctions independently from EU actions, targeting specific companies, banks, and specialized products. These targeted measures are proving more impactful compared to previous blanket bans.
Despite these efforts, criticisms have been raised regarding the effectiveness of EU sanctions, which have been criticized for containing numerous exemptions and carve-outs to protect European companies and sectors. Certain recent sanctions, such as those concerning the diamond trade, have faced practical challenges and unintended consequences.
OFAC’s actions have led to tangible consequences, including Indian refineries refusing Russian crude shipments and major Chinese and Turkish banks severing ties with Russian companies, complicating trade arrangements.
Moreover, the US has imposed specific sanctions targeting the export of advanced liquefied natural gas (LNG) technology, affecting projects such as Novatek’s Arctic LNG-2. This has resulted in delays and potential downsizing of the project due to limitations in accessing foreign-made equipment.
Despite challenges, Russia continues to pursue LNG projects, albeit facing obstacles such as transit difficulties and technological limitations. These developments underscore the complexity of international sanctions and their impacts on global energy markets.
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