Newsletter of the main news 25.11/01.12

1️⃣ Russian frozen assets

We begin this digest with a statement by Donald Trump. In addition to his promise to end the war in Ukraine overnight, Trump suggested using $300bn worth of frozen Russian assets and attracting more financial support from Europe. According to him, this will allow him to reach an agreement with Vladimir Putin. Experts believe that this approach could strengthen the Western defence industry and ensure continued support for Ukraine, but it is a cause for concern in the EU and the UK, as a deal that weakens Kyiv's position could threaten Europe's security.

The European Commission proposes to allocate €1 billion of the second tranche of proceeds from frozen Russian assets to develop Ukraine's defence industry. These funds will be part of the large-scale support that the EU has already provided, in particular through the European Peace Fund, to provide Ukraine with ammunition, air defence systems and other types of weapons. European Commission spokesperson Didier Reynders stressed that support for Ukraine remains key to the security of the European Union itself, adding that the EU is also providing training for the Ukrainian military and working to coordinate additional arms supplies to repel Russian aggression.

Also, starting in January 2025, the EU plans to provide Ukraine with €1.5 billion per month, partly from the proceeds of frozen Russian assets. This was announced by the President of the European Council, Antonio Costa, during a press conference in Kyiv after his meeting with Volodymyr Zelenskyy. Also in December, Ukraine will receive an additional €4.2 billion to support the budget. Zelenskyy stressed the importance of these mechanisms, which will ensure Ukraine's financial stability and help in the fight against Russian aggression. In addition, the parties agreed to work on opening negotiating clusters on European integration in the first half of 2025.

French MEP Nathalie Loiseau said that $300 billion of frozen Russian assets should be used to arm Ukraine, counting them as reparations if Russia refuses to pay them. She emphasises that this is a legally justified step that can provide funding for the Ukrainian defence industry and is convinced that such a decision will not harm the financial stability of Europe. Loiseau emphasises that mobilising these funds is key to Ukraine's victory in the war.

Ukraine will receive $22 billion from frozen Russian assets in 2025, which will be part of the total amount of $50 billion planned to be raised. According to Finance Minister Sergii Marchenko, the rest of the funds will come in 2026-2027, but if necessary, this amount can be increased to cover military needs. Funding will depend on the terms of loan agreements and the positions of international partners, who have different attitudes to supporting military spending.

2️⃣ Circumvention and violation of sanctions

Latvia has recorded an increase in sanctions violations - 2,623 cases were detected in the first ten months of this year, which is more than last year's figure of 2,175 violations. According to Atis Pilāts, Head of Risk Management at VID Customs Administration, most of the violations are related to the circumvention of sanctions through third countries, including Central Asia, the UAE and China. To date, according to Artur Kovalenko, Deputy Director of the Tax and Customs Police Department, goods worth more than €662,000 have been confiscated, and criminal cases have been opened against major offenders, some of which have already resulted in fines and community service.

The UK has imposed only one fine for violating sanctions against Russia, said Giles Thomson, director of the Economic Crime and Sanctions Department at the Treasury. The £15,000 fine was imposed on Integral Concierge Services in September for helping a sanctioned person with money transfers. Thomson acknowledged that this was an insufficient result given the scale of the sanctions and expressed hope that more cases would be brought in the future. Currently, the Office of Financial Sanctions Implementation (OFSI), which has a staff of 150, deals only with violations in the financial sector.

In Poland, a German citizen was arrested on suspicion of illegally exporting dual-use technologies to Russia that were used for weapons production. According to the Polish Security Service, the man was detained in the Lubuskie Voivodeship, not far from the German border. According to the statement, he was trading in special equipment that was illegally supplied to Russian military factories. The suspect pleaded guilty.

Russia circumvents sanctions by purchasing US equipment for the production of military equipment through third countries such as Turkey, China, the UAE and Hong Kong, The Insider reports. In particular, Omax waterjet machines and spare parts for them are used to cut metal, including armour. Deliveries are made through intermediary companies, including those associated with Rosatom. Journalists' inquiries to the suppliers went unanswered.

Ukraine has provided international partners with all the necessary information about Russia's sanctions circumvention, President Volodymyr Zelenskyy said. According to him, Ukraine is collecting data on companies that supply products to Russia through intermediaries, as well as on the shadow fleet, propaganda, and components for strategic weapons. This information is actively communicated with partners at the bilateral level, in particular to unite the EU in countering such violations. Zelenskyy stressed that the decision now depends on European leaders.

3️⃣ Challenges to the sanctions regime

Turkish Energy Minister Alparslan Bayraktar said that Ankara is negotiating with the US to lift sanctions against Russia's Gazprombank, as the restrictions could have a negative impact on the Turkish economy. Gazprombank plays a key role in energy payments, and without its services, Turkey will not be able to pay for supplies from Russia. Russia is the largest supplier of gas to Turkey, accounting for about 42% of imports last year. In addition, Ankara and Moscow are planning to create a gas hub in Turkey.

Also in Germany, the right-wing radical party Alternative for Germany in its election programme calls for an end to sanctions against Russia, Germany's withdrawal from the EU and the creation of a new European community. The 85-page document, which is scheduled to be approved at the party conference in January, also calls for the re-launch of the Nord Stream gas pipeline, a return to the national currency, stricter abortion laws, and withdrawal from the Paris Climate Agreement. The AfD accuses the EU of trying to turn into a ‘superpower with a planned economy’.

4️⃣ Ukraine's sanctions policy

Ukraine's Ambassador to the United States Oksana Markarova said that new US sanctions against Russia's largest bank Gazprombank and other financial institutions significantly complicate Russia's international operations and undermine its ability to finance the war. She stressed that Ukraine is working to extend sanctions to all Russian banks, restrictions on the shadow fleet, sanctions against the military-industrial complex, Rosatom and a ban on the supply of high-tech equipment. ‘Both sanctions and more weapons are important for victory,’ the diplomat concluded.

The Ministry of Justice of Ukraine has filed a lawsuit with the HACC to impose sanctions on Yuriy Kot, a former TV presenter with pro-Russian views who now lives in Russia and spreads anti-Ukrainian propaganda. The sanctions include 4 land plots, 3 firearms, 1 vehicle, rights to 7 copyright objects, a share in Zolota Fishka LLC and funds in bank accounts.

In addition, the Ministry of Justice filed a lawsuit with the HACC to impose sanctions on Rodina, a leading Russian company that develops and manufactures high-precision aviation control systems for the civil and military industries. This company provides maintenance of aircraft for the Russian armed forces, contributing to the aggression against Ukraine. The lawsuit seeks the confiscation of the company's property, including components and spare parts for aircraft. ANTONOV Company is a third party in the case.