SIFMANet Brussels Report 2

Introduction

In late November 2024, the Centre for Finance and Security (CFS) at RUSI hosted two roundtable workshops in Brussels to bring together sanctions experts to discuss issues of implementation. The workshops involved representatives from national authorities in the UK and several EU member states – including from financial intelligence units, ministries of foreign affairs, and other national competent authorities with responsibility for sanctions policy and/or enforcement. Also in attendance were private sector representatives from a range of companies in the insurance, maritime, industrial, legal and consultancy sectors. Research institutes also participated, as did civil society groups with a focus on anti-corruption and financial integrity.

The events form part of the programme of activities conducted by the CFS-led European Sanctions and Illicit Finance Monitoring and Analysis Network (SIFMANet), supported by the National Endowment for Democracy. None of the discussions from either workshop are attributable.

This report relates to the second workshop, which focused on the diplomatic and coercive measures available to secure greater cooperation to counter sanctions circumvention through third countries that have chosen not to adopt sanctions against Russia. These states were referred to as “sceptics” and “agnostics”, each of which has their various economic and historical reasons to oppose sanctions and/or to pursue a neutral foreign policy. Some participants also referred to these states as “middle-ground countries”, reflecting their preference for non-alignment in international affairs.

Successes and Limitations of Multilateral Diplomacy

A participant from the British government began the discussion by presenting takeaways from diplomatic efforts the UK has undertaken with the US and the EU in third countries. These diplomats have jointly visited countries through which Russia has imported large volumes of key military items on the Common High Priority Items List (commonly referred to as the Common High Priority List (CHPL)), a list of 50 critical goods. On these multilateral visits, the UK participant said, they had faced “difficult meetings”, in which representatives of “sceptical” countries expressed four sets of concerns about the sanctions on Russia.

First, intermediary countries asked why they should stop this trade when, in many cases, items had originated from EU countries, the UK or the US. In relation to this point, the UK official said that it was important to show improvements in their own domestic implementation and enforcement, which, they noted, has increased drastically since 2022.

Second, sceptical states also criticised complicated sanctions, and discrepancies between the different sanctions regimes. This issue had been the motivation for establishing the CHPL: “we asked exactly the same thing of each country”, the participant noted.

Third, sceptical states questioned why they should support UK, US and EU sanctions efforts. The sanctioning countries’ response had been to point out that the volume of these goods was small, and represented a fraction of a percentage of the total trade or GDP for these states.

Finally, sceptical states said that taking measures to prevent the transshipment of goods was technical or complicated. This was met with offers of targeted technical assistance.

These engagements were viewed by government participants as having been successful. For example, as a result of these visits, a fall has been observed in trade flows through the countries involved, at least for a limited time. There were also reports that some countries had increased their monitoring of their exports to Russia. Having convinced initial countries to do this, government participants said, had eased similar conversations in subsequent countries. As a result, they said, engagement with third countries had improved. In these discussions, government representatives told sceptical states that preventing transshipment of these critical goods has little impact on intermediary countries’ economies. “This is not an unrealistic ask”, one British government participant noted.

These solutions were not permanent, government participants admitted: in some cases, sanctions evasion and critical items transshipment began “spiking” in other countries, including Thailand and Malaysia, as a result of displacement. In other cases, officials saw a return of transshipment to the countries with which they had spoken earlier. These changes were not, one Czech government representative said, necessarily a sign of failure, but rather a feature of the continually changing nature of sanctions policy implementation. “We have seen sanctions bite and then the effect is diminished. The target of sanctions adapts, and that calls for our further adaptation”, they said. Other government participants agreed, saying: “The game of ‘Whac-a-Mole^TM’ is also a success because it imposes additional costs on Russia to move somewhere else.”

However, China continues to supply most of Russia’s CHPL imports, which requires a more complicated engagement. Government representatives said that, initially, this had “felt like a problem that was too big to solve”, but they also stressed that multilateral diplomatic pressure, as well as public investigations and pressure on the financial sector, had had some impact.

Finding the Right Narrative for Government Engagement

Beyond these targeted approaches to individual countries and regions, workshop participants believed that the G7 countries’ overall narrative on Russia sanctions could be stronger. One issue, a participant from a research institute said, was that the sanctions regime was seen as “an instrument of Western coercion” and, in particular, as driven by the US. As a result, sanctions were seen as a tool of a unipolar order that many middle-ground countries opposed.

Discussion turned to suggestions for how to address both the narrative and the perception of unipolarity. One clear difficulty was that many sceptical countries are willing to enforce only truly international sanctions imposed by the UN, preferring to refer to the regimes from the UK, the US and the EU as “unilateral coercive measures” that they do not recognise. The counter to this is that the UN’s sanctioning capability is now absent, due to Russia’s veto power as a permanent member of the Security Council, which has gone as far as terminating the operation of the expert panel on North Korea sanctions. Despite this, a British policymaker said that the UK had not given up on the UN, and that it continued to see important areas of cooperation on issues such as counterterrorism through international institutions.

A participant from an Eastern European research institute said there was more for their region to do to support the narrative on Russia sanctions, saying: “It is much easier for diplomats from our part of the world to present those arguments while avoiding the long shadow of colonial history.”

Another suggestion from participants from both the UK and EU governments was to ensure that measures to reduce harm from sanctions were better communicated. For example, there had been significant efforts to protect grain and other food supplies. Nonetheless, one researcher said, “we have failed to persuade African countries that soaring food prices are not due to the sanctions on Russia”.

Ultimately, with greater efforts to improve the narrative – and one participant pointed to a recent article by Josep Borrell aiming to do this – attendees agreed it may not be possible to convince the sceptical countries to support the sanctions.

Addressing Sceptical Countries’ Other Concerns May Improve Relationships

The discussion segued into considering middle-ground countries’ concerns that the dominant narrative on Russia sanctions often overlooked human rights and corruption issues in other regions. Participants from civil society organisations (CSOs) said that their partners in regions such as Africa and Latin America were critical of sanctions’ language on universal human rights. In addition to being generally seen as “imperialistic”, participants said sceptics from the Global South believed even global human rights sanctions were applied for primarily political reasons. They pointed out that most were applied to Russian entities, which they said many viewed as further proof that human rights sanctions regimes were a tool of geopolitical censure, rather than representing genuine concerns about universal values. Human rights abuses occurred elsewhere, and the perpetrators remained unpunished. Another participant from an international CSO agreed, saying this was a missed opportunity, as “some of our best allies will be anti-corruption groups”, and that addressing local activists’ concerns was a way to foster their support.

Another critique was the perception that the anti-Russian sanctions were led by the US, with the UK and the EU following – supporting sceptical countries’ belief that the sanctions were merely a tool in a political dispute, rather than about values. One suggestion for tackling this was that the US and the EU coordinate, so that the US would adopt sanctions imposed by the EU, as opposed to vice versa.

To truly address the sceptical countries’ concerns, a UK government official said, governments needed to not just “communicate through press releases”, but also analyse the audiences and their concerns – and then seek to address them. A researcher noted that some of these countries’ concerns relate to their dependence on Russia for support in monetary, resource and security terms. This included, for example, the food supply issues already mentioned, as well as potential energy shortages and national security issues. These security issues must be addressed through not only statements but also through working collaboratively to develop practical solutions – for example, identifying alternative energy supplies, or developing regional trade routes that bypass Russia. One participant from a private company said that sanctioning states “need to come in with the carrot of investments, not just a stick”.

A participant from a research institute said it would also be important to engage in more of a dialogue with sceptical countries that results in concrete solutions on issues that mattered to them. There were regional issues and conflicts of more concern to these states, where the EU and the UK might make concessions. “We need more give and take”, they said.

Private Sector Relationships Expand the Reach of Sanctions

One area where participants from both the private and public sectors saw opportunities was in the nervousness of businesses, and especially banks, from sceptical countries to be exposed to the circumvention of Russia sanctions. Nervousness was driven by their need to continue to trade in international markets, and in international currencies. The private sector was therefore, as one participant put it, the “Achilles heel” of non-aligned foreign policy.

One participant from a manufacturing company said they spent “most of their time talking to customer companies” in middle-ground countries. These conversations aimed to train local suppliers and customers about the risks of potential diversion of high-tech goods (notably those on the CHPL); the manufacturing company had introduced a certification system to its customers to incentivise learning.

A participant from a business group said even where countries remained unconvinced about sanctions, they just wanted to know: “What companies and entities do you not want us to trade with?” In this sense, the discussion echoed the desire from the private sector to obtain more granular information from governments about what is and isn’t allowed, which was a significant part of the discussion during the first workshop.

The private sector’s limited risk appetite was driving wider observance of the sanctions than indicated by sceptical states’ foreign policies. But some policy analyst participants said there was also a risk that over-compliance could reduce financial inclusion. For example, G7 banks apply additional scrutiny to banks in jurisdictions known to pose higher transshipment risks. If these banks are unable to document their compliance systems sufficiently, they may lose their correspondent banking relationships. This could affect national economies and citizens’ access to banking services, particularly if multiple banks in a single country faced these repercussions. The intersection of financial inclusion and compliance with not only sanctions but also anti-money laundering and counterterrorist financing regulations is a renewed concern for regulators, including the Financial Action Task Force.

Conclusion

Overall, the workshop discussion highlighted the continuing narrative challenges of gaining support from sanctions sceptics and agnostics. At the same time, the conversation revealed that perhaps the search for an ideal narrative obscures the measures that are working and could be expanded – for example, engaging with countries based on their national interests, rather than ideology. Participants believed this could be widened to consider investments and other measures to address these countries’ interests from a positive perspective (the “carrot”), rather than only engaging on potential consequences (the “stick”).

Businesses in sceptical countries may be more inclined to comply with sanctions in their trade as they recognise the repercussions of losing access to global markets. At the same time, leaving compliance to the private sector alone may lead to de-risking, which could harm financial inclusion in developing markets. Ultimately, all participants recognised that a greater focus on strategic communications is necessary if Russian disinformation about sanctions is to be confronted and the mission to restrict the resourcing and funding of the Russian military is to have maximum effect.

Olivia Allison is an Associate Fellow at RUSI and an independent consultant. She has more than 15 years’ experience carrying out complex international investigations and supporting the development of integrity and governance for state-owned companies, international companies and international financial institutions. She has a wide range of financial crime and asset-tracing experience from leadership roles held in London, Moscow, Kyiv and Kazakhstan.