Since Moscow’s full-scale invasion of Ukraine more than two years ago, the United States, Britain, the European Union, Australia, Canada, and Japan have imposed thousands of sanctions on Russia.
The main target of the measures has been Russian finances, especially the networks that fund Moscow’s war effort. Amid the grinding conflict that’s claimed tens of thousands of lives, the companies, entities, and individuals connected to Russia’s defense and security sector have been added to ever-growing lists compiled by Brussels, Washington, and their partners meant to curb Moscow’s capacity on the battlefield.
But as the war enters its third year, a growing body of evidence shows Moscow can circumvent many of these sanctions and get key items for its military from third countries despite Western attempts to stop those efforts.
To better understand the cracks in Western sanctions and how Russia has been able to exploit them, RFE/RL spoke with Tom Keatinge, the director of the Center for Financial Crime and Security Studies at the Royal United Services Institute (RUSI) in London. A former investment banker, Keatinge is also an adviser on illicit finance to the British Parliament’s Foreign Affairs Committee.
RFE/RL: We're now in year three of the war. Shortly after the invasion happened, there was lots of talk about how Russia would become the most sanctioned country ever. Looking at things now, how does this hold up?
Tom Keatinge: Those statements are all true. There’s never been so many sanctions on one country or so many individuals and companies and industries being sanctioned -- and never has a country so integrated into the West economically been sanctioned like this before, either.
I think it’s also important to keep in mind that the goal of this response has mainly been to restrict the funding and resourcing of the Russian military. And when we look at how that’s going, the answer is not great.
It’s wrong to say that they’re not having any impact, they clearly are having an impact because the Russians are having to find circumvention mechanisms. So some would argue that sanctions are working. Others would say [that we’re actually] pulling apart drones that are smashing into Kyiv every night and finding Western components that are relatively recent and certainly have been shipped since the start of the war. Both arguments are true, but the bottom line should be whether we are doing enough and I think, bluntly, that the answer is “no, we’re not.”
And that’s true whether [we’re talking about] the provision of ammunition and advanced weaponry or whether we look at the application and implementation of sanctions.
The United States now has the power to designate foreign financial institutions that it finds is facilitating sanction circumvention, but it hasn’t been used yet because it will be bloody when it is used and will basically put that particular bank out of business. So until the West broadly is willing to make some examples out of some big violators then I think people at these places will continue to think that sanctions are something that someone else needs to worry about and not what they as an organization need to worry about.
RFE/RL: Earlier this week [Aleksei Navalny’s wife], Yulia Navalnaya, spoke to the EU parliament and, among other things, she was saying that more needs to be done to block these channels and networks of banks and lawyers in the West that allow Russia to move money around and navigate around sanctions. You’re based in London, which has been famous as one of the main hubs for this over the decades, and despite many events over the years -- including the 2022 invasion -- it seems there hasn’t been a total shift. So, if the war isn’t a wake-up call, then what would be?
Keatinge: That’s a legitimate and valid challenge that she makes. I think the thing you have to remember is that the target of sanctions -- whether it's an individual, a company, or a country -- does not sit there and simply say, “Okay, I give up. I will do what you want me to do because of the sanctions you've leveled against me.”
There is a whole industry of people, both inside the country and outside the country, whose job it is to develop new procurement networks. [Russia's Federal Security Service, the FSB], in particular is heavily involved in developing these procurement networks. They’re taking all of this very seriously. It’s existential for them and so that means that we need to treat it in a similar fashion if we don't want to be outplayed and outmaneuvered.
The West wanted to be heavy in its response, but it didn't want to destroy its own economies in the process. So we have the whole conundrum that’s played out with energy dependence on Russia in Europe. It’s more than two years now, so we should have organized ourselves to be in a position to completely embargo Russia, if we choose to, but right now there are simply too many gaps.
[Al-Qaeda founder] Osama bin Laden once famously said that his financiers knew the cracks in the Western financial system as well as the cracks on the backs of their hands, which shows how if you leave cracks then they will get abused. So I would endorse what Yulia said, and I think that, again, if we want Ukraine to win, then we have to be willing to lean in much more than we are currently [and] we may have to be willing to potentially damage our own economies.
Ultimately, if it costs us something today, it's going to cost us an awful lot more over the next five, 10, or 15 years if we’re not forceful now. So I think it's a false economy, frankly, to be lighter today than we could be. Even for the politicians where it might be a tough explanation to their populations.
RFE/RL: You said earlier that there are still tools on the table that could potentially be very effective, but they're just not being used. So that leaves me with two questions: Why aren't they being used? And what could they accomplish if they were?
Keatinge: The tools that aren't being used are the tools that would create, to put it mildly, diplomatic difficulties.
The EU, for instance, has its anti-circumvention toolbox and it could start naming and shaming countries and companies as circumvention risks, but it's treading very, very carefully and tiptoeing around [having to use it.]
As I said before, the United States could use some of the big hammers in its toolbox on foreign financial institutions, too, but the reality is that I just don't think we are brave enough to use those tools because there would be blowback [at home]. But the calculation for whether that blowback is worth it, I suppose, looks different depending on where you are.
If you’re sitting through nightly aerial bombardments in Kyiv, Odesa, or somewhere like that, I think you'd think that the blowback faced by Europe would be worth it. But if you're facing an election this year in London, Brussels, or anywhere else -- including on the mega list of countries holding elections this year -- maybe you think it's not worth it and you'll leave it for after the election or for the person who ends up taking over after you.
So I think there's a big dose of realpolitik in all of this, which for those of us who want to see an end to this war immediately and Russia expelled from Ukraine, is disappointing.
