Debate: Effectiveness of the EU sanctions on Russia
Date: TUESDAY, 17 OCTOBER 2023
Speaker: Didier Reynders
Language: EN

Since day one, we have been clear where we stand. We stand with Ukraine for as long as it takes, and we stand united as a European Union. Together, we have adopted eleven packages of sanctions so far. Together, we have acted to end our energy reliance on Russia within a very short space of time. And together, we have successfully diversified our supplies of energy and raw materials. Let me now briefly outline the impact of all measures on Russia. First of all, I want to reassure you: sanctions are having a strong impact on the Russian economy. Note that Russia carefully cherry picks the economic data that it publishes. Sanctions have curbed the revenues that Russia can use to finance the war. For instance, budget figures reveal that Russia’s income from oil and gas has significantly declined while there are large increases in military spending. This has resulted in an estimated budget deficit of RUB 1.7 trillion – in fact, EUR 15.9 billion – for this year. We can see that the oil price cap and sanctions more generally are depriving Russia of its usual income sources to finance the war. In addition, immobilising the assets of the Central Bank of Russia of about EUR 300 billion, of which two thirds we know are in the European Union, was effective. It immediately created strong pressure on the ruble and forced the Russian authorities to turn to drastic capital control measures. And it is important to recognise that Russia is implementing a number of measures to support its economy and counter the effects of sanctions. While these Russian countermeasures may provide some stabilisation, they also tie up resources that would otherwise be available to finance the war. The Russian counter-measures also include the illegal expropriation of foreign assets and forced administration of foreign companies, which undermine prospects for a return to normality. Russia is going now through a so-called reconstruction process, allegedly rebuilding its economy and really ending its trade flows. But the outcome of this process is a less efficient economy facing higher costs. First and foremost, Russia’s war and the strong response from the European Union and all allies compromise the growth potential of the Russian economy.  Inflationary expectations are increasing again. Russia’s central bank is pursuing a more restrictive policy, and their fiscal space is not large enough to extend sufficient support to all sectors. Russia’s long-term growth is undermined by our sanctions regime too. And let us not forget the kind of growth Russia is experiencing at the moment. Russia is turning its economy into a war economy, but manufacturing weapons and ammunitions will not improve the well-being of Russian citizens. There is no room for complacency; sanctions need to be implemented in full. We are working closely with the Member States, like-minded partners and third countries to tackle gaps and to address Russia’s attempts to circumvent all restrictive measures. In fact, we are doing the same with Russia as a country that what we try to do with the oligarchs and entities on the list of sanctions, whether we are trying to freeze the assets of those oligarchs and entities – and you know that we are in discussion with you and with the Council about a proposal of directive to harmonise the different sanctions and the definition of sanctions – when there is an attempt to circumvent the sanctions regime, and certainly when there is an attempt to circumvent such a possibility to freeze assets, we want to go to a step further in justice with a possible confiscation of such kind of assets. So we are working on that. And we have had again a meeting of the task force with all the Member States yesterday in Brussels about that. And I said, so we are working very closely with the Member States, and Russia is building new physical and financial infrastructures and restructuring trade patterns, logistics and supply chains to circumvent our sanctions. These circumvention efforts show that sanctions are working as intended and cutting of access to many goods. Of course, sanctions cannot win the war alone, and there will always be profiteers looking to make a quick buck however they can, including by evading sanctions. These actions damage our collective efforts – all the actions to try to circumvent the sanctions, so to take profits in the framework of the sanctions. And we need to work closely again with our partners to prevent circumvention. We need all Member States to play their part, and the Commission will continue to support them. For example, our sanctions now allow us to list people who facilitate the evasion of sanctions. The Commission is continually revising its guidance and facts. And the Commission regularly convenes, meeting with Member States to discuss implementation and to exchange best practices. We also need to act with our international partners. This is why we have appointed an EU International Special Envoy for Sanctions Implementation. The envoys work has focused on stopping Russia’s attempts to procure key technologies for the battlefield, prohibited by our sanctions that make their way to Russia via a third country. We are also in regular contact with third countries to learn together how to best limit sanctions circumvention. Honourable Members, thank you for the opportunity to speak to you today, because it is not enough to put into place eleven packages of sanctions, the most important part is to be sure that it is possible to enforce those sanctions and again, to fight against all forms of circumvention. And I count on your support to continue to work on this, sometimes also with some legislative proposals. Of course, I know that you are sharing the Commission’s commitment towards Ukraine, and I thank you for it. So we will continue to work together, and I will be very pleased to hear your views today.