EU's 14th sanctions package must target circumvention, energy exports, Zelenskyy advisor says

Floating Storage Regasification Unit (FSRU) ship “Hoegh Esperanza” is guided by tug boats during its arrival at the port of Wilhelmshaven, Germany, December 15, 2022.

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The European Union’s upcoming 14th sanctions package against Russia must do more to choke off energy exports and clamp down on circumvention by third parties, an advisor to the office of Ukrainian President Volodymyr Zelenskyy told CNBC.

Vladyslav Vlasiuk said it was also vital to tighten export controls on critical technologies used within Moscow’s military equipment. He noted that EU states would need to work more cohesively for sanctions to stand a chance of crossing the line by the end of next month as planned.

“The most critical aspect of the 14th sanctions package is its adoption by the end of June, but some member states currently pose a challenge to this,” Vlasiuk said via email Thursday.

The EU’s special envoy for the implementation of sanctions, David O’Sullivan, was in Kyiv Thursday to discuss the latest sanctions package amid ongoing pushback from member states such as Hungary. Among the proposed measures is a ban on Russian liquified natural gas (LNG) exports and a crackdown on sanctions circumvention via countries including Kremlin ally Belarus.

The new energy proposals would not bar Russian LNG imports to the EU, but would prevent the bloc from re-exporting them to other markets, choking off a key trade route for Russia.

Nataliia Shapoval, a member of the Yermak-McFaul International Working Group on Russian Sanctions, a think tank which advises on EU sanctions, said the LNG proposals were an attempt to restrict both Russia’s current and future energy revenues.

“LNG is the leverage that Russia still maintains,” Shapoval, who is also head of the KSE Institute, said over the phone.

Russia said Wednesday that such a ban would hurt the EU more than it would damage Russia, and that some LNG supplies were already being redirected to China and India.

“The ban on imports and transit is currently being discussed within the framework of the EU structures, will lead to another round of rising prices for raw materials, including for European consumers, financial costs for European companies, will create new risks to international energy security, and will negatively affect the functioning of transport and logistics corridors,” Dmitry Birichevsky, director of the economic cooperation department of the Russian Foreign Ministry, said, according to a Google-translated report from Russia’s Ria Novosti news agency.

Shapoval noted, however, that gas supplies were much more difficult to direct without European infrastructure than, for example, oil. Ports in France, Belgium and Spain are critical for the gas’ trans-shipment to Asia.

She added that the EU was currently playing a “cat and mouse game” to determine which critical components were propping up Moscow’s military might and should therefore be banned.

“There is this process of searching for all components used in the military capabilities to find the chokepoint,” Shapoval said.

Previous sanctions packages from the EU and its allies have attempted to prevent the supply of critical technologies and so-called dual-use goods — which have both civilian and military uses — to Russia via third parties, most notably China. Still, Shapoval said that more needed to be done to target third countries that are found to be supporting Russia.

“There are currently multiple loopholes. It’s a widely known challenge,” she said.

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