Newsletter of the main news 17.03/23.03

1️⃣ Frozen Russian assets

Ukraine has received the second tranche of financial assistance from the EU, secured by the proceeds of frozen Russian assets. According to Prime Minister Denys Shmyhal, these funds will be used for the priority needs of the state budget. In total, at the initiative of the G7, European partners have already provided €4 billion to Ukraine.

EU has stopped discussing the confiscation of more than €200 billion of frozen Russian assets, leaving them unmoved until Russia ends its war against Ukraine and compensates for the damage it has caused. Several EU countries opposed the confiscation, citing European law, risks to financial stability, the need to support Ukraine with interest on these funds, and the importance of keeping this amount as leverage in potential peace talks. At the same time, EU confirmed its readiness to increase sanctions pressure on Russia.

Belgian Prime Minister Alexander de Wever said that the confiscation of nearly 200 billion euros of frozen Russian assets could pose systemic risks to the global financial system and become an “act of war” that would provoke retaliation from Moscow. He urged EU leaders to refrain from simplistic notions of these funds as “Putin's piggy bank” that can be simply broken up and spent. Belgium holds the largest share of these assets, and dozens of MPs have previously asked the King to support their seizure in favor of Ukraine.

The United Kingdom has frozen more than £25 billion (over $30 billion) in Russian assets and, together with its allies, has denied Russia access to more than $400 billion, the equivalent of four years of its military spending. According to the Economic Secretary to the Treasury, Emma Reynolds, London will continue to apply sanctions firmly in response to the invasion of Ukraine.

2️⃣ International sanctions policy

The United States convinced Hungary not to block the extension of EU sanctions against Russia, although Budapest initially threatened to veto them, particularly in view of Donald Trump's possible return to the White House. After Trump threatened Russia with new restrictions if it refused to abandon the ceasefire, Senator Marco Rubio called Hungarian Foreign Minister Péter Szijjártó, urging him not to undermine the unity of the EU's sanctions policy. This helped change Hungary's position. At the same time, if Trump's position changes, the EU may lose leverage, but there is currently no consensus on easing sanctions.

The United States has reduced its participation in international efforts to ensure the effectiveness of sanctions against Russia, remaining almost absent from several allied working groups, including those dealing with restricting Russia's access to military technologies and enforcing oil price caps. According to officials, Washington lacks authorized representatives, and junior officials are increasingly taking part in meetings. Although the Trump administration has recently tightened some restrictions, European partners have expressed concern about the US's real willingness to fight sanctions circumvention, which is creating tensions with Kyiv's allies.

In particular, the US has lifted sanctions on the crypto mixer Tornado Cash, founded by Russian Roman Semenov, who is wanted by the FBI for money laundering. According to the Office of Foreign Assets Control (OFAC), the service has been removed from the Specially Designated Nationals (SDN) list, which covers individuals and companies blocked under sanctions programs. According to the FBI, Tornado Cash was involved in transactions worth hundreds of millions of dollars, including helping the Lazarus Group hacker group circumvent sanctions by transferring funds from crypto wallets recognized as blocked property.

The President of Ukraine emphasized that sanctions against Russia should remain in force until the complete withdrawal of its troops from Ukrainian territory and compensation for all damages caused. He emphasized that diplomatic efforts for peace should not weaken sanctions pressure and called for the fight against the circumvention schemes that allow Russia to finance the war. Zelenskyy warned against trusting Moscow's promises, which have repeatedly been broken, and emphasized the importance of unity with partners, including the United States, to achieve peace.

Germany has confiscated the old Panamanian-flagged tanker Eventin, which drifted off its northern coast in January and is suspected of being part of Russia's shadow fleet used to circumvent oil sanctions. The vessel, carrying about 100,000 tons of oil worth €40 million, was detained near the island of Rügen, after which Berlin officially transferred it to state ownership. The tanker was heading from Russia to Egypt and has raised environmental concerns about the risk of an oil spill, but German customs and the Foreign Ministry have so far refrained from commenting.

The United States filed a lawsuit in the Southern District of Florida for civil forfeiture of a Dassault Falcon 900 EX aircraft, which was illegally used in the interests of Nicolas Maduro and his representatives in Venezuela in violation of US sanctions and export control laws. The aircraft, which was arrested in the Dominican Republic at the request of the United States, was allegedly imported from the United States under false pretenses. The lawsuit alleges violations of the International Emergency Economic Powers Act (IEEPA) and money laundering laws that led to the seizure. The case is being prosecuted by prosecutors from Florida and a lawyer from the National Security Administration.

3️⃣ Violation and circumvention of sanctions

The European Commission has warned of a high risk of sanctions circumvention when importing plywood, especially birch plywood, which is an important source of revenue for Russia and Belarus. To avoid restrictions, producers from these countries use third-country companies to relabel products and provide false documents. Among the alarming signals are birch plywood, supplies from countries such as China, Kazakhstan or Turkey, illogical delivery routes and economically unjustified processing. The European Commission reminded that operators in the EU are legally liable even in case of negligent violation of sanctions and may face administrative or criminal penalties.

EU Chief Prosecutor Laura Kevesi called on member states to more actively investigate cases of circumvention of EU sanctions, emphasizing the importance of proper application of restrictive measures. According to her, if the EU wants sanctions to have a real effect, expanding the powers of the prosecutor's office in this area should be a priority and obvious step.

The British law firm HSF Moscow, a subsidiary of Herbert Smith Freehills, was fined for violating sanctions against Russia after making six payments of almost £4 million to sanctioned persons. The Office of Financial Sanctions Implementation (OFSI) called it a “scheme of errors” and noted that the payments were made in the process of winding down the firm's activities in Russia. Due to the self-reported violation, the company received a 50% discount on the fine. This is one of the largest penalties imposed by the OFSI and, according to the Economic Secretary to the Treasury, Emma Reynolds, demonstrates the UK's unwavering commitment to sanctions policy and support for Ukraine.