Newsletter of the main news 12.01/19/01

1️⃣ Frozen Russian assets

The Biden administration is considering confiscating $300 billion of frozen Russian assets, which could be a potential lever of influence on Moscow. The bulk of these funds are held in European banks, and the US is negotiating with partners to transfer the assets to a special account that will be accessible only under a peace agreement. At the same time, EU countries have expressed concern about violations of international law in the event of a complete confiscation of these funds.

The team of President-elect Donald Trump generally supports the strategy of seizing Russian assets, viewing it as a tool to stimulate the negotiation process with the Kremlin. Trump's representatives, including future Secretary of State Marco Rubio and National Security Advisor Mike Volz, are involved in consultations on this issue. The likelihood of the initiative's implementation remains uncertain, as European partners are not ready to make a decision until Trump officially takes office.

2️⃣ Sanctions, their circumvention and violations

The European Union is preparing the 16th package of sanctions against Russia, which includes a ban on imports of Russian primary aluminium. The European Commission has already held preliminary consultations with EU member states, and the package is scheduled to be adopted in February, on the third anniversary of the full-scale war. The ban will be introduced in stages, given that the share of Russian aluminium in EU imports has already fallen from 19% in 2022 to 6% in 2024. The restrictions are expected to increase demand for alternative supplies from the Middle East, particularly from the UAE and Bahrain.

The United States imposed new sanctions against Russia aimed at eliminating schemes to evade restrictions, in particular through financial transactions with China and Kyrgyzstan. The US Treasury Department reported that the Russian Federation and China are creating regional clearing platforms for cross-border payments for sanctioned goods, involving sanctioned Russian banks, including Sberbank, Alfa-Bank and Sovcombank. Companies from the energy, defence and materials sectors, including Gazstroyprom, Polymetal and Severstal, as well as the entity that manages the occupied ZNPP, were also added to the sanctions list. In total, the restrictions affected about 100 organisations.

The Russian Ministry of Justice has initiated a draft law that provides for a significant increase in fines for 36 types of economic crimes, justifying it by the need to adapt to inflation. The document also contains provisions on the introduction of fines for disclosure of commercial banking secrets related to the circumvention of sanctions, effectively legalising such schemes. According to human rights activists, the draft law will not only help to fill the budget, but also create conditions for expanding the practice of mobilising people accused of serious economic crimes.

Donald Trump's team sees sanctions against Russia as one of the key tools for reaching a peace agreement. One possible approach is to ease some restrictions on Russian oil companies as the end of the war approaches, while another option is to increase sanctions pressure to increase leverage over Moscow. The discussions are at an early stage and depend on future decisions by the Trump administration, and the consultations involve government candidates, former officials, and think tank representatives.

No convictions have yet been handed down in the UK for violating sanctions against Russia, as financial investigations are complex and lengthy, said NCA chief executive Graham Biggar. A number of investigations are currently underway, including the case of former Sevastopol governor Dmitry Ovsyannikov, who is accused of money laundering and is scheduled to go on trial in March. The Office of Financial Sanctions Enforcement (OFSI) investigated 37 cases against British companies suspected of facilitating the circumvention of oil sanctions, but 15 of them were closed without penalties. British Foreign Secretary David Lammy said that Russia had lost more than $400 billion due to sanctions, and new measures against sanctions violators were expected in the near future.

Hungarian Prime Minister Viktor Orban said it was time to lift sanctions against Russia and restore economic relations without restrictions. He stressed that during Hungary's presidency of the EU Council, the priority was to promote peace, and, in his opinion, progress had been made in this regard. Orban also noted that Europe would eventually change its position on sanctions, but for now, he said, Brussels was ‘in a state of binge’. In addition, he expressed concern about Ukraine's economic impact on Europe and said that measures should be taken to protect the Hungarian and Polish agricultural markets.

Estonian Prime Minister Kaja Kallas said that sanctions against Russia remain a key instrument of influence, and their cancellation without peace talks would weaken Europe's position. She stressed that Moscow has not abandoned its goals, so there is no reason to lift the restrictions. Kallas also noted that the decision to extend EU sanctions should be made by 31 January, but there are risks due to Hungary's position, which calls for the resumption of economic relations with Russia without sanctions. European diplomats are concerned that the possible lifting of restrictions will allow Moscow to access more than €200 billion in frozen assets.

3️⃣ Ukraine's sanctions policy

President of Ukraine Volodymyr Zelenskyy enacted the decision of the National Security and Defence Council to impose sanctions on individuals who sided with Russia or contributed to its war. The decree, published on the President's website, provides for restrictive measures against 18 individuals, including Ukrainian citizens Nestor Shufrych, Yevhen Muraiev, Oleh Voloshyn, Petro Symonenko and Yuriy Boyko, as well as Russian figures, including oligarch Konstantin Grigorishin, composer Ilya Reznik and conductor Yuri Bashmet. The sanctions include asset freezes, a ban on capital outflows abroad, and revocation of state awards, and Zelenskyy has announced new sanctions measures in the near future.

The President of Ukraine also signed a decree imposing sanctions against Russia's financial sector covering 140 entities. The relevant document was published on the website of the President's Office. Zelenskyy stressed that Ukraine would continue to cooperate with international partners to increase sanctions pressure. He also initiated a bill on criminal liability for attempts to circumvent sanctions, which is in line with international practice. According to him, sanctions remain one of the key tools to influence Russia and bring peace.