When Putin decided on February 24, 2022 to seize - in a few days, he thought - Kiev and the rest of Ukraine, he was far from thinking that Europeans would be united in the face of this unprecedented aggression since the invasion of Czechoslovakia in 1938 and the subsequent invasions of the last world war.
But what he has done is to provoke an awakening of NATO and of Europe. Of course, this reaction is under American leadership. Nevertheless, it is a coalition of democracies fighting together for a world order necessarily based on the respect of national sovereignties and the maintenance of global security.
The other change in Europe is that it has resolutely embarked on a policy of economic sanctions against Russia without parallel in its history. For it must be said that until now, even after the illegal annexation of Crimea, it had hidden behind the need to negotiate agreements involving Russia, Ukraine, but also the self-proclaimed regions of Luhansk and Donbass. In vain. The Minsk Protocol and the Minsk II agreements were a resounding failure.
The European sanctions policy was launched in February 2022 so to create a new paradigm.
It remains to be seen whether the European Union will be able to enforce the decisions taken with the same firmness, but also the same realism as the Americans. Will the European Union be able to practice diplomacy through law and economics with the same efficiency as in the United States, with the OFAC and the DoJ as guarantors?
The legal basis of the EU sanctions is article 29 of the treaty on the EU (TEU) which allows the Council of the European Union to adopt sanctions against governments of third countries (non-EU countries), non-state entities and individuals to bring about a change in their policy or activity. We had forgotten that the European Union owes its existence to a double will of the Western European States:
- To ban war in Europe;
- To protect Western democracy after the partition of Europe based the 1945 Yalta agreements.
The war in Ukraine and how it made Europe regain awareness of its political and not only economic raison d'être; in other words, the European Union is first and foremost a political entity, before being an internal market where economic freedoms are exercised, such as the freedom of establishment and freedom of movement of goods, services and people.
However, the fact remains that this war also shows the limits of the European construction based on an agreement between sovereign states to share their sovereignty together. The limit of this sharing is mainly the foreign and security policy. But also law enforcement, as I would like to show you.
The rebirth of the EU as a political entity
EU Foreign policy
When I was minister between 2002 and 2004, there was no real European foreign policy. The“Common Foreign and Security Policy” (“CFSP”) was born with the Maastricht Treaty, but in a very discreet way. After the entry into force of the Lisbon treaty in 2007, the CFSP was reinforced, but it is not an integrated policy. The vast majority of decisions are taken unanimously by the EU Council as is the case today, especially in the area of economic sanctions.
The External action service (EEAS) acts as the EU's diplomatic service. A network of over 140 delegations and offices around the world promotes and protects the EU’s values and interests. But it has not powers of its own;
The EU has no standing army, so relies on ad hoc forces contributed by EU countries. The EU can send missions to the world’s trouble spots; to monitor and preserve law and order, participate in peacekeeping efforts or provide humanitarian aid to affected populations.
Putin and the franco-german “motor engine”
When I was a minister, i.e. less than two years after Putin came to power, NATO was trying to get closer to Russia. A NATO/Russia council had been created, and great hopes were placed in the democratization of this great neighbour. And it is true that Putin was fighting against corruption, but in reality, we were already turning a blind eye to his exactions, because his removal of the oligarchs who had become rich under Yeltsin was mainly a declared war against his political opponents.
The rapprochement with Russia was especially striking at the Franco-German level. In July 2001, took place the first official meeting between Jacques Chirac and Vladimir Putin. For the French President, the Russian tropism was part of the Gaullist tradition of the “third way” between the United States and the USSR. President Chirac’s friendship with Boris Yeltsin was very tight and when Yeltsin had claimed responsibility for the outbreak of the Chechen war, thanks to France he was not condemned by the Europeans who did not want “to humiliate Russia".
At the same time, NATO then seemed more or less devoid of strength, becoming above all a space for cooperation between the West and the East. Despite the rupture between NATO, the EU and Russia that constituted the successive Russian invasions of 2008 (Georgia) and 2014 (Crimea), NATO seemed to be relegated to a more diplomatic than military role: President Trump and President Macron agreed on one thing: NATO was "brain dead."
Putin's revitalization of NATO and the EU
The war in Ukraine with all its brutality and cruelty has finally woken Europe from its torpor.
Firstly, in the face of the tragedy experienced by the Ukrainians, the surge of solidarity that has been shown in civil society throughout Europe. Such solidarity in the countries of the former Soviet bloc is the most obvious, and it is admirable. The Estonian Prime Minister recently said"I know a little about the generosity of strangers. (…) I am a daughter of deportees sent by Stalin to Siberia. My mother was only six months old when she was deported".
Secondly, this solidarity is expressed by the granting of more or less substantive financial and military aid to Ukraine by the Member States in close conjunction with the American ally and NATO.
Third, the resilience of the European Union is also remarkable because it is coupled with a sanctions policy against Russia of a dimension unmatched in Europe’s history. Even the Hungary of Mr. Orban, who is still a strong admirer of Valdimir Putin, does not oppose it even if he does apply the sanctions with regard commercial relationships between his country and Russia.
And package after package of sanctions, the EU is turning the pressure with sanctions. What is in a tenth package is a further export ban worth more than €11 billion, to deprive the Russian economy of critical technology and industrial goods especially dual goods and advanced tech goods (electronic components…). In addition, and for the first time ever, sanctions target third country entities to the Russia dual use : Iran's Revolutionary Guards who have been providing Russia with Shahed drones to attack civilian infrastructure in Ukraine.
The challenge facing European sanctions ‘ effectiveness
Law enforcement US/EU
Whether to know if sanctions are having an effect on Russia’s economy is another issue.
What the Europeans are really trying to do is just create attrition in Russia's military industrial complex and its economy writ large. On its website, the EU Council states that “The sanctions aim at weakening Russia’s ability to finance the war and specifically target the political, military and economic elite responsible for the invasion.” But it recognises that the scope of the sanctions is limited: “the restrictive measures do not target Russian society. That is why areas such as food, agriculture, health and pharmaceuticals are excluded from the restrictive measures imposed”.
Russian oil and gas revenues have been reduced. But oil imports to China, India, Turkey, Brazil etc. help make up part of the impending loss, even though these countries are paying discounted prices for Russian oil.
Effectiveness of the sanctions against Russia does not only depend on their scope, but it also depends on law enforcement, that is to say hunt down and punish all those - individuals, companies or associations - who circumvent or help to circumvent the sanctions. This poses a diplomatic problem, certainly with regard to countries that host on their soil activities financed by Russian interests and redirected to Europe. But precisely, the will of the Europeans to assert themselves as a major player on the international scene requires that they sanction all those who violate the sanctions decided by the European Council.
Beyond the effectiveness of sanctions on the Russian economy, as a war economy, there is above all a question of credibility of Europeans.
In this respect, the European Union has a double handicap compared to the United States:
- It is not a State and - since the CJEU has mainly an interpretation role of European law - it does not have a European justice and police force;
- Europeans, on the other hand, do not collectively have the enforcement culture that exists in the United States, where I am struck by the fact that the Attorney General is often called the first Law Enforcement Officer.
DOJ prosecutions reflect aggressive stance toward Russian and export control evasion. After the creation of the Task Force KleptoCapture, just to take two recent examples:
In October 2022, the DOJ charged 11 individuals and several corporate entities who illicitly obtained military and dual-use technologies from U.S. companies and transferred them to Russia, laundered tens of millions of dollars for sanctioned Russian entities and oligarchs, and illegally used the U.S. financial system to buy Venezuelan oil for Russian and Chinese purchasers. The defendants were arrested at the request of the United States by German, Italian, Estonian, and Latvian authorities.
In January of 2003, the DOJ indicted a Russian citizen and US resident for facilitating a sanctions evasion and money laundering scheme connected to the assets of Russian oligarch Viktor Vekselberg
Europeans, and especially France, are very efficient escalating series of seizures including real estate, airplanes and other luxury assets. But there has been quite few indictments yet.
OFAC and the EU Prosecutors
In 2019, the Office of Foreign Assets Control (“OFAC”) (department of the US Treasury OFAC created in December 1950, following the entry of China into the Korean War, when President Truman declared a national emergency and blocked all Chinese and North Korean assets subject to U.S. jurisdiction ) OFAC released guidance on how to build a risk-based sanctions compliance program and it has adequate resources to ensure implementation. It may levy significant penalties.
OFAC imposed full blocking sanctions against individuals and entities across multiple countries related to a sanctions evasion network supporting Russia’s military-industrial complex. It notably targeted targets a Russian sanctions evasion network led by Russia- and Cyprus-based arms dealer Igor Vladimirovich Zimenkov.
Will the EU have interest to put in place a body similar to OFAC ? Will it extend the competences of the European Public Prosecutor's Office in matters of economic sanctions when it has just constituted as a European criminal offence the violation of "restrictive measures", i.e. economic sanctions taken against countries, their nationals and their commercial companies?
Starting operating in June 2021 in the participating 22 EU countries, the European Public Prosecutor’s Office (EPPO) is the EU’s first independent and decentralised prosecution office. It has the power to investigate, prosecute and bring to judgment crimes against the EU budget, such as fraud, corruption or serious cross-border VAT fraud.
It supervises at EU level the investigations and prosecutions in each participating EU country – to ensure independence, effective coordination and a uniform approach;
At a decentralised level – consisting of European delegated prosecutors, located in each participating EU country – it carries out investigations and prosecutions in each country, using national staff and generally applying national law.
Will it deal with EU sanctions based on the decision of the EU Council of November 28, 2022 according to which circumventing the restrictive measures taken by the 27 member states of the bloc against Moscow will now be considered an 'EU crime'?
A major step has been taken with the proposal of the EU Commission for a Directive on asset recovery and confiscation on December 2, 2022 (COM (2022) 245 final, 2022/0167 (COD). Its objectives are to harmonize the definition of the criminal offences in relation with EU sanctions, as well as to encourage Member States to prosecute those who engage in illicit activities to breach EU sanctions regulation and circumvent it.
To this aim, the proposed Directive establishes a list of criminal offences, which violate EU sanctions, such as making funds or economic resources available to, or for the benefit of, a designated person, entity or body, failing to freeze these funds, enabling the entry of designated people into the territory of a Member State or their transit through the territory of a Member State, entering into transactions with third countries, which are prohibited or restricted by EU restrictive measures, trading in goods or services whose import, export, sale, purchase, transfer, transit or transport is prohibited or restricted, providing financial activities which are prohibited or restricted; or providing other services which are prohibited or restricted, such as legal advisory services, trust services and tax consulting services.
Circumventing EU restrictive measures is also considered a criminal offence.
The proposed Directive also put forth common standards for penalties against companies and individuals.
This harmonization directive will only have a limited effect, however, if the European Union does not equip itself, beyond the EPPO with "ex post" competence, with a common management body comparable to the OFAC to manage the system of economic sanctions that has been set up. It would be appropriate to create an agency composed of delegates from the Treasury departments in the ministries of finance at the level of the Member states, who could be joined on a case-by-case basis by representatives of the customs departments, which are also at the forefront of the implementation of the "packages of sanctions" decided unanimously by the EU Council.
