The EU deals a new blow to the Russian economy: what does the 16th package of sanctions entail
On the third anniversary of the full-scale war in Ukraine, the EU passed The 16th package of sanctions aimed at weakening the most important economic spheres of the Russian Federation.
Kaya Callas, known for her tough position on economic restrictions in relation to Russia, emphasized, that the new sanctions cover a wide range of measures: from struggle with a shadow fleet that helps the Russian Federation circumvent oil restrictions, to banning the export of game controllers that can be used to control UAVs.
The EU strengthens sanctions: a blow to finance, oil, the military industry and the “shadow fleet” of the Kremlin
The progressivity of the 16th package of EU sanctions in comparison with previous ones is as follows. Previously, the EU limited the access of Russian banks to the international SWIFT system, but now the sanctions are for the first time targeted to a domestic alternative to SWIFT – the Russian Financial Message Transmission System (SFMS). This complicates the international transactions of the Russian Federation and limits the possibilities of circumventing sanctions. In addition, the package includes the disconnection of 13 Russian banks from the SWIFT system.
Broadcasting licenses for eight Russian media channels will be suspended. If earlier the EU banned the broadcasting of Russia Today and Sputnik, now the countries of the eurozone will stop broadcast 8 Russian media resources that spread fakes and pro-Kremlin narratives. At the same time, journalists who cooperate with these media can continue their activities on the territory of the EU, with the exception of broadcasting.
European Union added 83 subjects to the list of persons and companies involved in violating the sovereignty of Ukraine. Those who manage the Kremlin’s illegal fleet and contribute to the development of the Russian military industry have come under the restrictions. It is difficult to overestimate the importance of strengthening the fight against the “shadow fleet”. Previous sanctions have already limited the maritime transportation of Russian oil, but this time the EU expanded the list of vessels subject to sanctions, including 74 new tankers.
Companies that own and operate ships that circumvent the oil embargo, supply military equipment or transport stolen Ukrainian grain are also subject to restrictions. In total, 153 vessels are already under sanctions.
Regarding foreign trade, the geography of sanctioned companies is widespread. In the “black” list of collaborators added 53 Chinese, Indian, Uzbek, Turkish and Emirati companies. For the first time, software for CNC machines, chemical compounds and components for UAVs entered the list of prohibited goods for export to Russia. The supply of dual-use technologies, polymers, synthetic materials and rubber is limited. This will hit the defense sector of the Russian Federation, which already suffers from a lack of technology.
As for the transport sector, the European Community has restricted the activities of Russian air carriers that operate domestic flights or provide the aggressor country with aircraft spare parts. For the first time, communications with ports, airports and airlocks involved in the supply of military equipment or facilitating the circumvention of fuel sanctions have been banned. It also improved the supervision of the transportation of goods through the countries of the Eurozone and introduced a ban on the import of Russian aluminum and restrictions on the export of goods that could contribute to Russia’s military efforts.
EU forbade export of technologies for exploration, production and processing of fossil fuels in Russia, as well as service for the finalization of energy projects, in particular “Vostok Oil”. The new package of sanctions for the first time introduces a ban on the temporary storage of “black resources” in European terminals, as well as the provision of engineering and construction services by European contractors to the aggressor country. In order to make it impossible to circumvent the sanctions, EU exporters will have to introduce enhanced control over supplies.
In addition, the EU forbade engineering, legal and consulting services in Crimea and other occupied Ukrainian territories.
The updated sanctions put Belarus on a par with Russia in terms of economic, banking, logistics and digital technology bans. This is of great importance, since Lukashenka’s government has previously served as a tool for the Kremlin in attempts to circumvent international restrictions.
In general, the 16th package of sanctions is focused not only on new restrictions, but also on strengthening control over compliance with existing sanctions, eliminating loopholes, which were used by Russia.
The effectiveness of the previous 15 sanctions packages
Sanctions against Russia, which were imposed during the 15 previous packages, have not just a symbolic, but a fundamental meaning. This is not only about economic pressure – it is about changing the very logic of the existence of the country, which for decades lived in the confidence that everything was allowed to it.
The previous 15 packages of sanctions introduced by the European Union and its partners significantly limited Russia’s access to international markets and technologies. This led to great financial losses for the interventionist country. According to estimates Kyiv School of Economics, from December 2022 to June 2024 due to such restrictions, Russia lost 78.5 billion US dollars in oil exports.
The biggest monthly losses were in January 2023 – 8.6 billion US dollars. Since mid-2023, losses have stabilized at an average monthly level of $2.8 billion. But all the same, the overall detrimental effect on the Russian economy remains tangible.
Restrictions on the import of high-tech equipment and components made it difficult access to microelectronics and software, which negatively affected the production of modern machinery and equipment. In addition, additional barriers to industrial production have created constraints on the supply of CNC machine tool software and chemical precursors.
Sanctions have significantly limited Russia’s capabilities in the production of modern weapons. The lack of access to Western technologies and components made it difficult to develop and produce high-precision weapons and modern weapons systems. This led to a decrease in the quality and quantity of produced military equipment, which directly affects the military potential of the country.
Due to disconnection from international payment systems and restrictions on transactions with foreign currencies experienced unrest and the financial sector of the Russian Federation, which led to the devaluation of the ruble, rising inflation and higher interest rates. In particular, the rate increase of the Central Bank of Russia to 21%.
Despite considerable pressure, Russia tried to adapt to new conditions. In particular, the Russian Federation invested about 8.5 billion US dollars in creating its own tanker fleet to circumvent oil sanctions, as well as reoriented export of energy resources to Chinese and Indian markets, trying to compensate for losses from European markets. This led to a decrease in the effectiveness of sanctions and stabilization of oil prices on world markets. For example, in October of last year, Brent oil prices constituted around $81.52 per barrel and WTI at $78.54 per barrel.
200 billion euros of frozen Russian assets: EU discusses confiscation and further support for Ukraine
In addition to sanctions pressure, the E.U considers the possibility of confiscation of frozen Russian assets, estimated at 200 billion euros, as a response to the exclusion of European governments from the US-Russia talks to end the war in Ukraine. The bulk of these funds are in the Euroclear financial institution and earn interest, while the US only has $5 billion.
The Baltic states, Poland and the Czech Republic are calling for these funds to be transferred to Kyiv to strengthen its position on the battlefield. However, France, Germany, Italy and Spain fear that such a move will undermine investor confidence and deprive the EU of leverage over Russia in future negotiations. French President Emmanuel Macron supports the use of proceeds from the assets, but considers confiscation illegal.
EU leaders agreed that the assets would remain frozen until Russia compensates Ukraine for its losses. They are seen as a potential source of financing for the reconstruction of the country, the cost of which is the World Bank evaluates in 524 billion dollars. The G7 earlier agreed to use proceeds from assets to provide Ukraine with a $50 billion loan, and G20 finance ministers will discuss next steps this week in South Africa.
Tetyana Viktorova
