Brussels eyes export curbs to close Russian sanctions loophole

Brussels is discussing restrictions on certain EU exports to countries it suspects are re-exporting sanctioned products to Russia, in an effort to prevent critical components from ending up on the Ukrainian battlefield.

The European Commission has privately examined a legal mechanism that would allow it to restrict sales of a limited range of products to certain third countries, people briefed on the discussions told the Financial Times, as it seeks to close loopholes that have allowed product leakage. prohibited. in Russia and contribute to its military effort.

The move would mark a significant escalation in EU efforts to clamp down on sanctions circumvention, and follows months of diplomatic efforts by Brussels and its allies aimed at convincing countries including Turkey and the United Arab Emirates, as well as to the Central Asian states to take tougher action.

Some member states are uncomfortable with the potential ramifications of the proposal, including how it could affect relations with third countries, the people added. It is scheduled for further discussion next week.

According to the mechanism discussed, the EU would first develop a legal framework that would allow the products and countries of interest to be identified, but without naming them. After due warning, it could add the names of specific products and destinations to export controls.

The idea came up during discussions between the commission and top EU diplomats last week, according to people familiar with the process, as Brussels prepares its 11th sanctions package.

However, it raises big questions, including about the geopolitical implications of restricting trade with countries not directly involved in the Ukraine conflict, even if the restrictions would be highly targeted and temporary.

It is also unclear how to ensure the restrictions are compatible with world trade rules and what kind of legal procedures would be needed to put them into effect, a diplomat said. Member states would retain final approval of any specific measure.

“It will lead to quite a bit of discussion in the EU about whether we feel comfortable doing that,” the diplomat said. “How do you avoid the unwanted side effects of pushing certain countries in a different direction than you want them to go? You have to be very careful how you use carrots and sticks.”

The proposed mechanism reflects a growing sense among Western powers that applying existing sanctions, rather than new measures, is the right approach to further degrade Russia’s economy.

Within the G7, the US is calling for a full ban on exports to Russia after growing frustrated with the number of loopholes Moscow has exploited to import Western technology via third countries.

While the EU and Japan have resisted that proposal, they are willing to agree at a G7 summit next month to “close loopholes that allow (third-country) jurisdictions to access and re-export restricted goods, services or technology from the G7 to Russia”. according to a draft statement seen by the FT.

“The general mechanism seems to be widely supported by capitals,” said a second EU diplomat. “But there are some doubts from some sectors regarding what the implications would be in relations with partners.”

The European Commission declined to comment.

Additional reporting by Laura Dubois in Brussels

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