The fourth package of EU sanctions heats up the pressure on the Russian economy, but leaves the door open to further restrictions, experts say.
The European Council announced on Tuesday (March 15) the imposition of a fourth package of economic and individual sanctions against Russia, which includes a ban on credit rating services, additional trade restrictions, and freezing assets of a new group of Russian oligarchs.
The package is expected to further increase the already significant pressure on Russian decision-makers and the Russian economy, Jan Dunin‑Wasowicz, counsel at Hughes Hubbard & Reed, told VIXIO.
“The EU moves one step up the ladder of possible sanctions against Russia, but likely has not reached the top of it.”
Since the start of the large-scale invasion of Ukraine, G7 countries have joined forces to swiftly impose an unprecedented number of sanctions on Russia. The measures include freezing the country’s central bank reserves and cutting off some of its largest banks from the SWIFT international messaging system.
However, to date, there is no outright ban on trade with the country, and Europe continues to rely on Russia for its energy supply.
Although the fourth EU package shows “the steady and continuous EU commitment towards the most important goal, which is to cut out Kremlin from the funding of its war machine, there is still potential for sanctions to hit the Kremlin to its core”, said Ruta Bajarunaite, expert at the Centre of AML Excellence in Lithuania.
“Discussions on the embargo of oil and gas are undergoing, but we are still lacking uniform support from all EU countries,” she added.
“In this context, we must understand that sanctions work two-ways, and we shall not forget that there will be a price to pay for all of us if we aim to stop the Russian war machine from the further war escalation in Ukraine and we must be ready to pay that price,” Bajarunaite noted.
The latest EU measures now prohibit the provision of credit rating services to any Russian person or entity, prohibit all transactions with certain state-owned enterprises and add further individuals to the sanctioned persons list.
The European Council said these measures target key oligarchs, lobbyists and propagandists “of the Kremlin’s narrative”, as well as firms in the aviation, military and dual-use, shipbuilding and machine building sector.
Among the persons designated is Roman Abramovich, owner of the Chelsea FC in the UK, whose assets had been frozen in the UK last week, ahead of the EU measures.
“This fourth package of sanctions is another major blow to the economic and logistic base upon which Russia relies on to carry out the invasion of Ukraine,” said Josep Borrell, high representative of the EU for foreign affairs and security policy.
The aim of the sanctions is that President Putin stops the war, he added.
The new package also includes a prohibition to make new investments in the Russian energy sector and further trade restrictions concerning iron and steel, as well as luxury goods.
Simultaneously, the US Department of the Treasury also designated four individuals, including the wife of Belarus President Alyaksandr Lukashenka, and a Russian government entity.
Although there are nuances between the various sanctions regimes in the US, UK and the EU, they largely converge and follow a shared strategy, Dunin‑Wasowicz noted.
“The fourth package of EU sanctions is no exception. It was adopted in close coordination and alignment with G7 partners, as described in the March 11 G7 statement on this topic,” he added.
This level of coordination “plays a critical role when ensuring that Russia loses abilities to fund its war against Ukraine”, Bajarunaite stressed.
Since the invasion of Ukraine started, a growing number of international companies have announced they are pulling out entirely from Russia, citing their disagreement with the Russian aggression.
However, the scale, speed and the way these sanctions are being introduced also pose challenges to the successful implementation of the measures, potentially leading many businesses to choose over-compliance and cut all ties with the post-Soviet country.
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