Economic Statecraft
What to Expect from the EU Special Envoy on Sanctions?

It is necessary to abandon the capricious moods regarding the newness of EU policy. While lagging far behind the US in terms of experience and enforcement, the EU will continue to invest in its sanctions policy, writes Valdai Club Programme Director Ivan Timofeev.

The European Union bureaucracy has established a new position: the International Special Envoy for the Implementation of EU Sanctions. This post will be held by David O’Sullivan, who previously served as Ambassador of the European Union to the United States. What does the appointment mean, what will the new official do, and how effective can his activity be for the political goals of the EU?

The establishment of this post is directly related to Russia. Sanctions against Moscow are one of the most important priorities for the EU. The volume of restrictions imposed against Russia far exceeds everything that the EU has imposed on all other jurisdictions combined. This includes large-scale financial sanctions, severe restrictions on the supply of a wide range of goods and technology, bans on the purchase of an impressive range of Russian goods, transport restrictions, visa bans, and so on. EU sanctions are closely coordinated with the restrictive measures of the United States, UK, Canada, Switzerland, Japan, Australia and a number of other Western countries. The level of such coordination has few precedents. Before the start of the Special Operation in Ukraine, there were more differences between the US and the EU on sanctions against Russia. Now Western initiators of restrictive measures are marching in lockstep.

The first task of the special representative on sanctions, in all likelihood, will be precisely to work with allies. Despite the high level of consolidation, many questions remain about the application of the adopted sanctions, the mutual agreement on new packages, and the calibration of sanctions, taking into account possible damage to the initiators themselves. At the same time, the special envoy can be used to solve other problems.

First of all, we are talking about diplomatic work with countries which have not implemented the sanctions against Russia and actively continue to do business with Moscow, thereby undermining its isolation. The primary task in this area will be to persuade as many countries as possible to formally implement the EU sanctions regime. The model of procuring compliance has been worked out for a long time. But grand results are not to be expected. Each such country has its own political and economic interests. The EU is extremely limited in the set of “sticks” and “carrots” it can offer that would alter their partners’ positions. Brussels can still twist the arms, for example, of the Balkan countries. But it will be much more difficult to compel Turkey. The European Union has nothing to offer Turkey that could outweigh the benefits of trade with Moscow, especially since sanctions against Russia have become a huge boon for Turkish business. It will be even more difficult for larger players such as China or India. The special envoy can direct his efforts to post-Soviet countries such as Georgia, Armenia, Kazakhstan, Kyrgyzstan, Uzbekistan and others. But even here the EU has little leverage. Neither the “sticks” nor the “carrots” of Brussels outweigh the benefits of trade with Moscow under the new conditions.

Modern Diplomacy
Motives of the Anti-Russian Coalition: Are There Cracks in the Monolith?
Andrey Sushentsov
The search for cracks in the anti-Russian coalition of Western states is futile. Washington securely holds the initiative and literally twists the arms of states that risk raising their voice in favour of peace rather than war, writes Valdai Club Programme Director Andrey Sushentsov.

Along with government structures, the special envoy will also have another target audience — financial institutions, chambers of commerce, business associations and entrepreneurs themselves. Here, the special representative will have more scope and prospects for securing compliance. Unlike government structures, business is showing much more nervousness and caution. Business fears secondary sanctions. If earlier the EU opposed secondary sanctions, today it is ready to apply them against Russia — such a legal mechanism has already appeared in Council Regulation (EU) No 269/2014. In addition, the European Union is working to harmonise the legislation of the member states aimed at the administrative and criminal prosecution of those who violate the sanctions norms of the Union. The application of such regulations would require a link to the EU jurisdiction.

The special envoy will bring information about the possible consequences of circumventing the sanctions. Such meetings and clarifications may well have an impact on the determination of business to cooperate with Russia. Many companies are hobbled by “overcompliance” — the fear of violating sanctions even where working with Russia is not prohibited by law.

However, the added value of such clarifications is unlikely to be high. The Americans have already done significant work here. The United States has a much more substantial apparatus of “sanctions diplomacy” and experience with its application. The Department of State has a separate Office for the Implementation of Sanctions. Its tasks, in addition to the application of individual sanctions, political expertise and justification of decisions on the application of specific measures, also include information work through the US embassies and other American institutions abroad. Representatives of the US Department of the Treasury and the US Department of Commerce, which oversee financial sanctions and export controls, are actively involved in explanatory work with foreign government circles and businesses. Individual members of Congress are periodically involved in such activities. They gain political points for themselves, and for one thing they assist the Administration in solving foreign policy problems. Unlike the EU, the US has many more tools with which to influence business. Given the role of the US dollar in world trade, the size of the US market, and the concentration of a wide range of technologies in their hands, the threat of secondary sanctions and trade restrictions from their side is perceived as more serious. In addition, the US authorities have many precedents of administrative and criminal prosecution for violation of their sanctions regimes. Unlike the EU, where this practice is only being developed.

Of course, the presence of a “big brother” like the United States is unlikely to stop the EU from improving its sanctions machine. Even before February 2022, Brussels intended to significantly increase its capacity in the field of economic restrictions. The appointment of a special representative on sanctions is one of the indicators of such an increase. It can be expected that a larger group will be formed around the special representative, or he will rely on the expertise of various directorates of the European Commission. Diplomats, by themselves, often do not have sufficient knowledge of the legal and technical subtleties, without which the policy of sanctions is unthinkable. Therefore, there will certainly be serious technical expertise behind the special envoy’s official statements. It should also be expected that the special envoy will use in his work the expertise of think tanks of the EU, the US and other Western countries. In the European Union itself, the expertise in the field of sanctions has taken a big step forward in the last 20 years, both in application and in the academic sense. Therefore, it is necessary to abandon the capricious moods regarding the newness of EU policy. While lagging far behind the US in terms of experience and enforcement, the EU will continue to invest in its sanctions policy.

It can also be assumed, that the tasks of the special representative will include the preparation of proposals for the use of sanctions in a possible bargain with Russia on the Ukrainian conflict. However, such a prospect can be considered extremely remote. So far, there are no prospects for a sustainable agreement on Ukraine. In addition, Moscow reasonably believes that any promises to ease or lift sanctions will turn into political manipulation, as happened in US-Iranian relations after the US pulled out of the “nuclear deal.” Moscow continues its course towards autonomy from Western transnational economic networks. Regardless of the new appointments in Brussels, Russia’s tasks will remain the same: the search for and development of new markets, the development of its own industry, interaction with new suppliers, the establishment of reliable channels of financial transactions independently of the West.

Economic Statecraft
Is It Possible to Lift Sanctions Against Russia? - No
Ivan Timofeev
Every conflict sooner or later ends in peace. Such is the conventional wisdom that can often be heard from those who, amid the current situation of the sanctions tsunami and confrontation with the West, are trying to find hope for a return to "normality". The logic of such wisdom is simple. At some point, the parties will cease fire and sit down at the negotiating table. The end of hostilities will lead to a gradual reduction in sanctions pressure on Russia, and our businesses will be able to return to work with Western partners.
Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.