Newsletter of the main news 06.01/12.01

1️⃣ Frozen Russian assets

Ukraine has received the first €3bn from the EU under the ERA initiative, which provides for the use of proceeds from Russian frozen assets. Prime Minister Denys Shmyhal said that these funds will be used for priority budget expenditures, and that the G7 plans to provide Ukraine with a total of $50 billion, of which $20 billion will be allocated by the EU, implementing the ‘Russia will pay’ principle to strengthen Ukraine's financial stability in 2025.

British MPs have called on the government to transfer frozen Russian assets to Ukraine, including £25.5bn held in the UK. The letter states that the assets must be used to make Russia pay for its crimes, and notes that this will send a clear signal of strategic resolve and help prevent future conflicts. The letter was signed by more than ten British MPs and parliamentarians from allied countries.

Ukraine and Italy discussed the possibility of using frozen Russian assets to purchase air defence systems and ammunition, and got acquainted with the products of Italian defence companies. Deputy Minister Anatoliy Klochko thanked Italy for its support since the beginning of the war, and the Italian delegation expressed its readiness to cooperate in the distribution of the EU budget and the creation of joint industrial projects to strengthen Ukraine's defence capabilities.

The Netherlands confirmed that as of 1 July 2024, frozen Russian assets amounted to €97.2 million, significantly less than the previously announced €660 million. The Ministry of Foreign Affairs explained that a significant part of the funds was unfrozen due to the loss of ties between the companies and the sanctioned owners and the corresponding exemptions from the European sanctions regime. The Investment Evaluation Office also confirmed that the two companies are no longer subject to sanctions and that the freeze on their assets has been lifted following restructuring.

Prime Minister of Ukraine Denys Shmyhal and the Minister of Foreign Affairs of Iceland discussed the confiscation of frozen Russian assets, strengthening of sanctions and the fight against Russia's shadow fleet. Shmyhal stressed the importance of Iceland's support for Ukrainian arms production based on the Danish model and invited Icelandic companies to join Ukraine's reconstruction projects. He thanked them for their support of European integration, leadership in the Coalition for Demining and initiatives for a just peace.

2️⃣ International sanctions policy

The United Kingdom imposed direct sanctions against Russian oil giants Gazprom Neft and Surgutneftegaz, which produce more than a million barrels of oil daily, financing Russia's military aggression. Foreign Secretary David Lammy said that the fight against the profits of Russian oil companies weakens Putin's war economy and saves Ukrainian lives. President Volodymyr Zelenskyy thanked Britain for its decisive actions that significantly limit Russia's ability to finance aggression and stressed the importance of international unity in countering the Russian war machine.

The United States also imposed sanctions on these oil companies, as well as 183 ships transporting Russian oil. This may force China and India to look for new suppliers, as the sanctions have targeted tankers that provided a significant portion of exports to these countries, including 42% of Russia's maritime crude oil exports. Over the past year, China has imported about 300 million barrels and India 1.764 million barrels daily. The new restrictions will severely hit Russian oil exports, reducing the refining capacity of Chinese independent refiners.

Japan has imposed new sanctions on Russia, adding 33 entities and 12 individuals, including a North Korean citizen, to the asset freeze list. The export ban was also extended to 53 organisations from Russia, China and Turkey, mainly suppliers to the military-industrial complex. Starting 23 January, Japan will restrict the export of 335 goods, including motorcycles and components for special vehicles, while conducting educational work with manufacturers whose parts are found in Russian missiles.

3️⃣ Violation and circumvention of international sanctions

The US Department of Justice confiscated two luxury apartments in Miami worth $1.8 million in violation of sanctions related to Russian citizen Viktor Perevalov. The property, hidden through nominee owners, was used for rent despite sanctions imposed in 2018 over the construction of the Tavrida highway in occupied Crimea. The case was investigated by the KleptoCapture working group aimed at countering sanctions evasion, with the involvement of the FBI and local police. This case demonstrates the US determination to implement sanctions measures against Russian military aggression.

Ukrainian investigative activists exposed a scheme to supply servo motors from China to Russia through fake companies KZT and UNIHUI INTERNATIONAL LIMITED, which used the name of Taiwan's TRC as a cover. Components manufactured by KST Digital Technology Limited are exported to sanctioned Russian enterprises such as the Tactical Missile Corporation and are critical to guided munitions. These loopholes highlight the need for stronger controls on exports of dual-use technologies and coordination of sanctions.

4️⃣ Sanctions violations in Ukraine

The SSU detained two officials of a Ukrainian holding company involved in the construction of a gas processing plant in the Rostov region of Russia. The plant was used to produce liquefied natural gas, which was sold abroad through the ‘shadow fleet of the Russian Federation’ and the proceeds were used to finance the war against Ukraine. The defendants developed project documentation and transferred it through a co-owner of a holding company associated with the sanctioned Gazprom and Lukoil. The detainees were served a notice of suspicion of aiding the aggressor state and face up to 12 years in prison with confiscation of property.