EU countries mull curbing Russia sanctions dodging via trade tools, access to EU market

By Gabriela Baczynska

BRUSSELS (Reuters) -Twelve EU countries are calling on the European Union to stop companies and third countries from circumventing EU sanctions on Russia by using trade and access to the European single market as leverage, a document showed on Tuesday.

The document was prepared by Belgium, Czech Republic, Estonia, Finland, France, Germany, Italy, Latvia, Lithuania, Romania, Spain and The Netherlands for talks of representatives of EU governments who are discussing their 10th sanctions package against Russia over its invasion of Ukraine.

“Circumvention tactics and procurement efforts by the Russians are getting more numerous and more creative,” the paper, seen by Reuters, said.

“With these efforts Russia is trying to keep supplying its military industry and its strategic industries that finance the war with the necessary components despite our sanctions,” it said.

The 12 countries said it was therefore urgent that the EU as a whole acted to stop sanctions circumvention by expanding the cooperation of customs, tax authorities and prosecutors, the intelligence community, as well as research institutes and statistics agencies at EU level and in the EU’s 27 members.

“Use of the EU’s trade toolbox and possibly other instruments of external action can be considered in cases of widespread circumvention within the territory of a specific state that refuses to act upon these issues,” they said.

“We should give a strong signal to persons and entities in third states. The provision of material support to Russia’s military and defense industrial base will have severe consequences regarding their access to the EU market,” they added.

The EU should issue official warnings to persons or entities inside and outside the EU that they could be violating sanctions, create watch-lists of companies and industries of special concern and encourage firms to put in contracts obligations on the end-use of their products, the paper said.

It also said the EU should be able to broaden its view of what products and components can be linked to sanctions circumventions based on what can be found on the battlefield in Ukraine.

“Special focus should be put on Western components that are crucial to the Russian military industry,” the paper said.

“These components are not easily replaced: changing an element in weapons production takes months, due to certification and design processes. A small disruption of these production chains therefore quickly has a significant impact in the Russian ability to produce weapons and military equipment,” it said.

(Reporting by Jan Strupczewski; editing by Kate Abnett and Ed Osmond)