Newsletter of the main news 16.12/29.12

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Date

29 Dec 2024

1️⃣ Frozen Russian assets

The World Bank has approved a $2.05bn loan to Ukraine for financial stability, reforms and investment promotion, partly funded by frozen Russian assets. Of this amount, $1.05 billion will be provided through IBRD resources with the support of Japan and the United Kingdom, and another $1 billion will be provided as a grant from the F.O.R.T.I.S. Ukraine FIF. The programme aims to strengthen economic policy, macro-financial stability and bring Ukraine's economic level closer to EU standards.

Ukraine will receive €18.1 billion of macro-financial assistance from the European Commission, the first tranche of which will be disbursed in January 2025. EU Commissioner for Economic Affairs Valdis Dombrovskis confirmed this support as part of the G7's Revenue Acceleration Initiative. The parties also discussed the creation of a recovery mechanism based on the Marshall Plan principle, which combines frozen Russian assets and EU funds to rebuild Ukraine on a mutually beneficial basis.

In addition, as part of the G7 initiative, Ukraine received the first tranche of $1 billion from the US frozen assets of the Russian Federation. In total, the United States plans to provide $20 billion to support Ukraine through frozen Russian assets. These funds will be used to rebuild the country and ensure justice.

2️⃣ International sanctions policy

The European Union is preparing the 16th package of sanctions to be adopted on the third anniversary of Russia's invasion of Ukraine. According to Welt, the measures will be aimed at Russian propagandists involved in undermining the territorial integrity of Ukraine, as well as those involved in espionage and disinformation campaigns, particularly in Germany. Brussels notes that it is difficult to prove involvement in hybrid attacks, so the final list of sanctions has not yet been determined.

At the same time, Switzerland joined the last 15th package of sanctions against Russia and Belarus. The Swiss Federal Department of Economic Affairs has expanded the sanctions list by adding a ban on entry and transit for newly sanctioned persons. In addition, financial sanctions were imposed on the Belarusian regime. The new restrictions will come into force on 24 December, the Swiss government said.

Sanctions pressure on the so-called “shadow fleet” of the Russian Federation is also increasing. Following the damage to the Estlink 2 electric cable in the Baltic Sea and the detention of an oil tanker in Finland, the EU has begun work on a new package of sanctions against Russia's ‘shadow fleet’. The EU claims that the vessels of this fleet pose a threat to security, the environment and finance Russia's military budget. According to preliminary data, the cable could have been damaged by the anchor of the Eagle S tanker, which is linked to the shadow fleet. Another incident occurred on 26 December in the Bosphorus Strait, where the breakdown of the Cordelia Moon tanker, which was heading to Novorossiysk, temporarily halted shipping.

The UK is also stepping up pressure on Russia's shadow fleet, including sanctions against 20 ships that illegally transported oil, including the Ocean Faye, Andaman Skies and Mianzimu, which transported more than four million barrels this year. In total, more than 100 vessels transporting Russian energy are under sanctions. In addition, the government has allocated £35 million to restore Ukraine's energy system and support the most vulnerable citizens, Prime Minister Keir Starmer said.

At the same time, the US plans to impose new sanctions against Russia by the end of 2024, targeting the energy sector and more than 100 tankers used by Russia.

Lithuania plans to extend national sanctions against citizens of Russia and Belarus until 2 May 2026 due to Russia's ongoing aggression in Ukraine. The draft law provides for the preservation of existing restrictions, such as a ban on issuing visas and residence permits, additional national security checks, as well as restrictions on the purchase of real estate and imports of products from Russia and Belarus. The Speaker of the Seimas, Saulius Skvernelis, did not rule out the possibility of toughening sanctions, stressing the priority of national security.

3️⃣ Challenges to the sanctions regime

Hungary succeeded in removing Patriarch Kirill and Russian Permanent Representative to the UN Vasily Nebenzi from the sanctions list of the 15th package adopted by the EU Council on 16 December. The sanctions cover 54 individuals, including Russian military personnel responsible for strikes on civilian infrastructure, and 30 organisations from Russia, China and North Korea that support the aggression. The list includes propagandists, heads of energy companies, and individuals involved in the deportation of Ukrainian children.

Moreover, Hungarian Prime Minister Viktor Orban said that he was not ready to support the extension of EU sanctions against Russia until after Donald Trump's inauguration in January. This decision, which is usually taken routinely every six months, requires the unanimous consent of all EU member states. EU leaders are concerned that Orban could ally himself with Trump in an attempt to undermine the bloc's unity in support of Ukraine. The move complicates EU and US efforts to increase sanctions pressure on Russia in the final weeks of the Biden administration.

4️⃣ Violations and circumvention of sanctions

BMW has revealed irregularities that allowed it to export more than 100 premium cars to Russia from its Hanover branch despite EU sanctions. The company conducted an internal audit, halted sales and dismissed the employees responsible. BMW stressed that it was countering grey imports, which often circumvent sanctions, and called for stricter controls. EU sanctions prohibit the supply of cars to Russia because of its aggression against Ukraine.

BMW is not the only one whose premium cars are being shipped to Russia despite the sanctions. A recent investigation by the Financial Times revealed how Russian oligarchs continue to buy luxury goods through intermediaries, dealers and smugglers from different countries. Popular personal shopper services and smuggling routes ensure the flow of Western brands, including Ferrari and Rolls-Royce, to Russia.

Also in 2024, 28 aircraft, including passenger Airbus, Boeing, and Bombardier, were imported into Russia in a bid to circumvent sanctions. Most often, deliveries were made through Turkey, the UAE and Kazakhstan, using schemes with intermediary companies. Some aircraft were dismantled for transport by land or sea, and then reassembled and registered in Russia.

Russian oligarchs not only continue to buy foreign goods, but also trade freely in the Western market. In particular, oligarchs Deripaska, Usmanov and Abramovich circumvent EU sanctions by reducing their stakes in companies or transferring assets to relatives. These schemes allow them to export aluminium, fertilisers, metal and other goods to the West despite the sanctions. For example, Rusal, Fosagro, and Evraz continue to supply products to the EU, generating billions of dollars in profits for their owners. At the same time, the wealth of these individuals has doubled in two years, bolstering the Russian economy and military operations.

In addition, Russia has begun using bitcoin and other cryptocurrencies to circumvent sanctions in international trade, legalising them in 2024. Finance Minister Siluanov confirmed the transactions and announced the expansion of this practice, especially in trade with China and Turkey. Putin called cryptocurrencies an alternative to the dollar, emphasising their independence from global regulators.

Finally, Russian and Belarusian propagandists are actively using social media despite the sanctions. According to a report by the Disinformation Action Network, 83% of sanctioned accounts remain accessible in the EU, including official media pages that create content for European audiences. Such accounts can even generate revenue from monetisation, avoiding restrictions. The situation demonstrates the weakness of the mechanisms for enforcing sanctions on platforms.