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Key to the latest round of sanctions against Russia: What impact do they have on the Kremlin?

Key to the latest round of sanctions against Russia: What impact do they have on the Kremlin?

The United States, the European Union and the United Kingdom announced new sanctions against Russia under Vladimir Putin this week on the second anniversary of the invasion of Ukraine. The additional trade restrictions also come a week after the death of the Russian dissident Alexei Navalny in the Arctic prison where he served his sentence. A factor that has sharpened the reaction of Kiev’s Western allies.

What is it made of?

The White House announced this Friday 500 new measures intended to impact the Russian economy. It is the largest round of sanctions since the start of the war. The President of the United States, Joe Biden, who expected in 2021 after a meeting with Putin in Geneva that Navalny’s death in prison would have “devastating consequences” for Russia, said the day before that the new measures were aimed at undermining the Kremlin’s financial infrastructure; limiting energy production and exports; prevent the evasion of sanctions; restrict mining and metals revenues; limit Russia’s defense capabilities and track users of malicious software.

For this purpose, the Ministry of Finance imposes sanctions to almost 300 people and organizationswhile the Commerce Department adds 90 companies to the sanctions and the State Department refers to more than 250 companies and individuals.

The European Union, for its part, has adopted a new package of sanctions that includes the largest set of measures in one package and is also directed against Chinese companies. According to the EU Council, a total of 194 names will be added to the sanctions list, meaning that it will have more than 2,000 members, including the Russian president and the foreign minister. Sergey Lavrovsanctioned since the beginning of the war.

The EU was primarily included in the 13th sanctions package to people connected to the Russian military network – some involved in the supply of weapons from North Korea to Moscow – to judges, authorities in occupied territories – particularly in connection with the deportation of children – and companies that were involved in the supply of weapons. The restrictive measures include freezing any assets they may have in the EU and banning their access to Community territory.

Sectoral sanctions focus on combating sanctions evasion. It was decided to add 27 new units to the regulation prohibiting the export of dual-use items (civil and military). Up to 17 come from Russia and ten from other countries: four from China, one from Turkey, one from Thailand, one from Kazakhstan, one from Serbia, one from Sri Lanka and one from India.

In the same week, the British Foreign Secretary said: David Cameron, has announced another 50 new sanctions against individuals and companies that support Putin’s war. They are intended for those who supply missile, rocket and explosive launch systems. These measures also target key sources of Russia’s revenue by restricting trade in metals, diamonds and energy and cutting off Putin’s war funding from all sides, the rehabilitated former prime minister adds.

The sanctions include the state-owned company Sverdlov, the largest company in the Russian ammunition industry, as well as key Russian importers and manufacturers of machine tools that play along a critical role in the production of vital defense systems and components, from rockets and engines to tanks and fighter planes. Also taking part is the oil trader Niels Troost and his company Paramount Energy & Commodities SA. Troost, which allows unrestricted trade in Russian oil beyond the reach of UK and G7 sanctions. Also, Fractal Marine DMCC, Beks Ship Management and Active Shipping, which operate in the Russian energy sector as part of Putin’s fleet, and Pavel Alekseevich Marinychev, the new CEO of Alrosa, Russia’s largest state-owned diamond producer.

What other sanctions have been imposed against Russia?

The US, EU and UK, as well as countries such as Australia, Canada and Japan, have imposed more than 16,500 sanctions against Russia in the last two years. Foreign exchange reserves worth $350 billion, about half of its total reserves, were frozen. According to the EU, 70% of Russian banks’ assets have also been frozen and some excluded from SWIFT.

Western countries have also banned the export of technology that Russia could use to make weapons; import gold and diamonds from Russia; flights from Russia; sanctioned the oligarchs and confiscated their yachts. Another main target was the Russian oil industry. Washington and London have banned Russian oil and natural gas. Meanwhile, Brussels has banned imports of crude oil by sea, and the G7 has imposed a cap of $60 a barrel on Russian crude to reduce its revenue.

Which Western companies have failed Russia?

Hundreds of Western companies have taken the step. For example, McDonald’s, Coca-Cola, Starbucks and Heineken have stopped selling and manufacturing products in Russia. Others, however, have maintained their activities in the country. This is the case with PepsiCo, Leroy Merlin, Auchan, Unilever or Nestlé.

How was Russia able to escape sanctions?

Russia managed to sell oil abroad at a price that was above the price ceiling set by the G7 countries Think tank North American Atlantic Council. According to the International Energy Agency, Russia continues to export 8.3 million barrels of oil per day after increasing shipments to India Narendra Modi and to China Xi Jinping, with which he strengthened his bonds. Moscow can also import many sanctioned Western products by purchasing them through countries such as Georgia, Belarus and Kazakhstan. At the same time, China has been an important supplier of high-tech products as an alternative to those made in the West, says Maria Snegovaya, an analyst at the Center for Strategic and International Studies (CSIS).

How have the sanctions affected the Russian economy?

In 2022, the first year of the war, the Russian economy contracted by 2.1%, according to the International Monetary Fund. However, the agency estimates that the Russian economy grew by 2.2% in 2023 and forecasts growth of 1.1% in 2024. The US Treasury Department instead claims that the sanctions would hurt Russia by cutting by 5% the economic growth that could have been achieved in the last two years.

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