Brussels is discussing restrictions on certain EU exports to countries that 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 permit it to restrict sales of a narrow range of products to certain third countries, people briefed on the discussions told the Financial Times, as it seeks to close loopholes that have permitted banned products to leak into Russia and contribute to its military effort.
The move would mark a significant escalation of the EU’s efforts to clamp down on sanctions circumvention, and follows months of diplomatic efforts by Brussels and its allies aimed at convincing countries such as Turkey and the UAE as well as 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 set for further discussion next week.
Under the mooted mechanism, the EU would first draw up a legal framework enabling products and countries of concern to be identified, but without naming them. After due warning, it could then add the names of targeted products and destinations to export controls.
The idea was floated 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 over the geopolitical implications of restricting trade with countries that are not directly involved in the Ukraine conflict — even if the curbs would be highly targeted and temporary.
It is also unclear how to ensure that the restrictions would be compatible with world trade rules, and what type of legal procedures would be needed to put them into force, said one diplomat. Member states would retain final sign-off on any specific measures.
“It will lead to quite some discussion in the EU — over whether we are comfortable doing that,” said the diplomat. “How do you avoid the unintended side-effects of pushing certain countries in a different direction to where you want them to go? You have to be very careful on how you use carrots and sticks.”
The proposed mechanism reflects a growing sense among western powers that enforcement of existing sanctions, rather than new measures, is the right approach to degrade Russia’s economy further.
Inside the G7, the US is calling for a full ban on exports to Russia after growing frustrated by the number of loopholes that Moscow has exploited to import western technology via third countries.
While the EU and Japan have resisted that proposal, they are set to agree at a G7 summit next month to “close loopholes that allow [third-country] jurisdictions to access and re-export restricted G7 goods, services or technology to Russia”, according to a draft statement seen by the FT.
“The overall mechanism seems to be broadly supported by capitals,” said a second EU diplomat. “But there is some hesitation from some quarters regarding what the implications on relations with partners would be.”
The European Commission declined to comment.
Additional reporting by Laura Dubois in Brussels
Source: Economy - ft.com
