Brussels considers export restrictions to close loophole in Russian sanctions

Brussels is discussing restrictions on exports of certain EU goods to countries it suspects are re-exporting sanctioned products to Russia to prevent critical components from reaching the battlefield in Ukraine.

The European Commission has privately explored a legal mechanism that would allow it to restrict sales of a narrow range of products to some third countries, people briefed on the discussions told the Financial Times as it seeks to close loopholes that allowed the diversion of prohibited products into Russia and contributed to its war effort.

The move would mark a significant escalation in EU efforts to curb sanctions circumvention and follows months of diplomatic efforts by Brussels and its allies to persuade countries such as Turkey and the UAE, as well as Central Asian states. take tougher measures.

Some member states are unhappy with the potential implications of the proposal, including how it could affect relations with third countries, the people added. It is scheduled for further discussion next week.

Under the mechanism being discussed, the EU will first develop a legal framework that allows the identification of products and countries of concern without naming them. After proper warning, he can then add the names of the target products and destinations to export controls.

The idea was floated during discussions between the commission and senior EU diplomats last week as Brussels prepares its 11th round of sanctions, according to people familiar with the process.

However, this raises big questions, including with regard to the geopolitical consequences of restricting trade with countries that are not directly involved in the conflict in Ukraine, even if the restrictions are targeted and temporary.

It is also unclear how to ensure the restrictions are compatible with global trade rules and what legal procedures would be required for them to come into effect, one diplomat said. Member States will retain the final approval of any specific measures.

“This will lead to a rather serious discussion in the EU whether it is convenient for us to do this,” the diplomat said. “How do you avoid the unintended side effects of pushing certain countries in a different direction than you want? You have to be very careful how you use the stick and the carrot.”

The proposed arrangement reflects a growing feeling among Western powers that application of existing sanctionsrather than new measures, is the right approach to further deterioration of the Russian economy.

Within the G7, the US is calling for a complete ban on exports to Russia after becoming frustrated with the number of loopholes Moscow used to import Western technology through third countries.

While the EU and Japan opposed this proposalthey are going to agree at the G7 summit next month to “close the loopholes that allow [third-country] jurisdiction to access and re-export restricted G7 goods, services, or technologies to Russia,” the draft statement read by the FT reads.

“It appears that the overall mechanism is widely supported by capital,” said a second EU diplomat. “But there are some doubts in some quarters about what the implications for partner relationships will be.”

The European Commission declined to comment.

Additional reporting by Laura Dubois in Brussels