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91. Toward a New Transatlantic Approach to Russia Sanctions

Author:
Edward Fishman, Andrea Kendall-Taylor, and Angela Stent
Publication Date:
02-2022
Content Type:
Special Report
Institution:
Center for a New American Security (CNAS)
Abstract:
This policy brief is a product of the Center for a New American Security Transatlantic Forum on Russia, an initiative designed to spur coordination between the United States and Europe on Russia-related policy across multiple issue areas. The policy briefs are informed by a series of dialogues with leading experts from both sides of the Atlantic. The analysis and recommendations in the memo reflect areas of agreement between U.S. and European experts. Where there are notable differences in perspective, we highlight those to better enable policymakers to navigate fissures that can hinder coordination. We thank all the experts who contributed to such fruitful dialogue, especially Nigel Gould-Davies, Brian O’Toole, and Maria Shagina. Introduction As Russia continues to build its forces on Ukraine’s border, the United States and its allies have laid out the economic costs that Russian President Vladimir Putin would face for any further aggression against Ukraine. The Biden administration has stated it is willing to pursue “economic measures that we've refrained from using in the past.”1 In addition, the United States has indicated it is prepared to use export controls on U.S.-origin technologies that are key to Russia’s industrial sectors and potentially enact a Russia-focused Foreign Direct Product Rule—a tool that, to date, has only been used against Huawei. It is unclear if such a package is enough to deter Putin, especially if he is intent on pursuing his maximalist objectives—autonomy for parts of eastern Ukraine that would give Russia a veto over Ukrainian foreign policy and closing NATO’s door to Ukraine. Nonetheless, implementing such sanctions if Putin further escalates in Ukraine is critical for raising the costs to Putin and for restricting Russia’s ability to sustain its aggressive foreign policy over the long term. Regardless of what happens in Ukraine, however, U.S.-Russia relations are on a new course. The era of working toward a stable and predictable relationship with Russia is over for now. The United States will need a new, more proactive approach—one in which sanctions will be a tool (among many) that Washington should use to deter future Russian attacks on liberal democracies and disrupt Russia’s destabilizing actions, especially the corrupt networks that Moscow uses to spread its influence and sustain its hold on power. This policy brief outlines the current state of play of U.S. and European sanctions policies on Russia and how the United States and Europe can update its sanctions approach in this new era of relations with Russia.
Topic:
Foreign Policy, Sanctions, Crisis Management, Deterrence, and Transatlantic Relations
Political Geography:
Russia, Europe, and United States of America

92. Following the Crypto: Using Blockchain Analysis to Assess the Strengths and Vulnerabilities of North Korean Hackers

Author:
Jason Bartlett
Publication Date:
02-2022
Content Type:
Special Report
Institution:
Center for a New American Security (CNAS)
Abstract:
Under heavy and sustained pressure from decades of economic sanctions, North Korea has rapidly expanded its illicit activity within the cyber domain. In particular, Pyongyang has demonstrated an increasing interest in using evolving financial platforms, such as cryptocurrency and blockchain technology, to compensate for the fiscal losses related to economic sanctions on more traditional forms of commercial activity. Since 2014, the Pyongyang-led cybercrime organization known as the Lazarus Group has transformed from a rogue team of hackers to a masterful army of cybercriminals and foreign affiliates, capable of compromising major national financial networks and stealing hundreds of millions of dollars’ worth of virtual assets. The international community and national governments often incorrectly correlate North Korea’s lack of access to modern computer hardware within its borders to its ability to successfully execute software-reliant cyberattacks. While Beijing and Moscow captivate the attention of most democratic governments concerned about pending cyber intrusions, Pyongyang continues to defy miscalculated expectations by successfully employing myriad sophisticated cyberattacks that target new and developing financial technology. North Korea will likely continue to adapt its cybercrime tactics targeting cryptocurrency to circumvent obstacles presented by economic sanctions on more traditional forms of financial activity and commerce. This report provides in-depth analysis of North Korea’s demonstrated ability to exploit financial technologies, in particular cryptocurrencies and blockchain technology, to procure funds for its illicit nuclear and ballistic weapons development programs. This research was supported through blockchain analysis conducted in partnership with TRM Labs, a leading blockchain intelligence firm that seeks to monitor, investigate, and mitigate crypto fraud and financial crime. Through analyzing three case studies of major North Korean hacks, this report outlines key strengths and vulnerabilities in the Lazarus Group’s campaigns to infiltrate cryptocurrency exchanges and steal, launder, and liquidate funds. The report also provides a snapshot of key policy oversights within the regulatory environment in the crypto space of central stakeholders and countries, such as China, the United States, and South Korea. Lastly, this study offers a prospective look into the future of North Korea–led crypto hacks and provides a series of policy recommendations to strengthen cyber resilience against these efforts.
Topic:
Science and Technology, Sanctions, Cybersecurity, and Blockchain
Political Geography:
Asia and North Korea

93. Designing Sanctions: Lessons from EU Restrictive Measures against Belarus

Author:
Yuliya Miadzvetskaya
Publication Date:
06-2022
Content Type:
Working Paper
Institution:
German Marshall Fund of the United States (GMFUS)
Abstract:
The effectiveness and impact of sanctions are predetermined by how they are designed. This paper looks at the different elements in the design of European Union sanctions on Belarus in its different stages, their main pitfalls, and their potential effects on the country and its citizens. Several key elements are important for the design of sanctions: the triggering situation, the type of sanctions, the clarity of objectives and targets, the evidence for listings, and the conditions for review. They are crucial for explaining the mismatch between the objectives of EU sanctions and their limited impact. The gravity of the situation that triggers the introduction of sanctions is closely linked to the type of restrictive measures that will be chosen by the EU. Threats to EU and regional security as well as to the territorial integrity and sovereignty of its neighbors result in more complex measures, including sectoral economic sanctions, export restrictions, and flight bans. In the case of Belarus, broader economic measures were enacted in response to growing security threats to the EU and its partners. An analysis of EU sanctions on Belarus, including their cyclical nature, suggests that they have been most effective when their objective is limited and achievable. The release of political prisoners, cosmetic reforms to the Electoral Code, and the partial solution of the migration crisis are the most obvious examples of concessions that were made by the Belarusian authorities following the imposition of sanctions. Overly ambitious sanctions objectives limit the EU’s room for maneuver and bargaining. Bringing to justice those responsible for forced disappearances and human-rights violations or holding new free and fair elections are inacceptable demands for the Belarusian regime because they endanger its survival as it relies on the law-enforcement institutions. The effects of sanctions also depend on whom can be added on sanctions lists. Listing or designation criteria define conditions under which someone can be targeted. Those for Belarus were significantly updated in 2021 and now target those responsible for violations of human rights and election falsification, entities and persons benefitting from the regime, and those responsible for the forced landing of a Ryanair plane, the instrumentalization of the migration crisis, and Belarus’s involvement in Russia’s aggression against Ukraine. The broadening of the listing criteria increases the sanctioning power of the EU and paves the way for the extension of sanctions listings. The EU enacts sanctions by providing a statement of reasons that must come under the listing criteria and be substantiated with sufficient evidence for each listing. Based on EU sanctions-related case law, sanctions are designed in a way that takes into consideration the due-process rights of targeted individuals and entities. The EU Council has deployed a degree of legal gymnastics in crafting its sanctions on Belarus to increase their traction, notably by using the broad concepts of “support” for and “benefit” from the regime’s actions. Conditions for the review of sanctions are construed as requirements addressed to the targeted state. The fulfillment of these or some variation in the behavior of the target could trigger the partial suspension or the lifting of restrictive measures. Those conditions in EU sanctions against Belarus are sometimes included in EU legal acts and sometimes in other political statements. Clear-cut conditions for reviewing sanctions would help in improving their effects. The paper concludes with suggestions regarding the EU sanctions policy toward Belarus, notably with respect to national bias and to the need for a proper prior impact assessment, realistic objectives, clear communication, and more leverage for the EU.
Topic:
Sanctions, European Union, Domestic Politics, and Society
Political Geography:
Europe, Eastern Europe, and Belarus

94. What Putin’s War in Ukraine Means for the Future of China-Russia Relations

Author:
Björn Alexander Düben
Publication Date:
05-2022
Content Type:
Working Paper
Institution:
LSE IDEAS
Abstract:
Björn Alexander Düben analyses China’s reaction to, and motivation in implicitly supporting, Russia’s invasion of Ukraine, even as Putin’s strategic blunder becomes increasingly difficult to deal with. The author finds that, as long as Putin remains in power, long-term alignment since 2014 and a shared authoritarian world-view will cement closer ties between the PRC and Russian Federation; this at the cost of the latter devolving to a client-state dependent on China to keep its economy afloat, whilst the PRC’s cautious state banks further diminish Russian hopes of financial cooperation in order to avoid secondary sanctions from the West.
Topic:
Bilateral Relations, Sanctions, Authoritarianism, Economy, Vladimir Putin, and Russia-Ukraine War
Political Geography:
Russia, China, Ukraine, and Asia

95. North Korea Continues to Develop Its Nuclear Forces

Author:
Oskar Pietrewicz
Publication Date:
11-2022
Content Type:
Working Paper
Institution:
The Polish Institute of International Affairs
Abstract:
North Korea is conducting further missile tests to check new types of weapons and increase the credibility of its nuclear deterrence. The adoption of a new nuclear doctrine that allows pre-emptive nuclear strikes also serves this purpose. North Korea is taking advantage of the period of tension between the U.S., Russia, and China, which prevent the UN Security Council from adopting further sanctions. In this situation, the U.S. and its allies should strengthen defence and deterrence capabilities against North Korea and set achievable goals to reduce the risk of escalation of tensions before possible negotiations.
Topic:
Defense Policy, Nuclear Weapons, Sanctions, and Deterrence
Political Geography:
Asia and North Korea

96. The impact of the Ukraine crisis on international trade

Author:
Zsolt Darvas and Catarina Martins
Publication Date:
12-2022
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
We study the economic implications of Russia’s invasion of Ukraine, by scrutinising global trade volumes and commodity prices, trade balances and bilateral trade flows between major economic powers and Russia. We find that energy prices increased more in 2021 than in 2022, suggesting that the war and the sanctions were not the most important drivers. Nevertheless, International Monetary Fund forecast revisions from October 2021 to October 2022 suggest that the volume of global trade in goods and services declined by 3.4 percent, energy prices increased by about 100 percent, and the prices of non-energy commodities by 8 percent. The war could be an important driver of these forecast revisions, though other factors were also at play. While forecasts for important industrial production input costs were not revised, soaring energy prices deteriorated the trade balance of countries importing energy. Only half of the increase in Russia’s trade surplus was related to soaring energy prices. The other half resulted from the collapse of Russian imports, which will likely undermine the Russian economy’s productive capacity over time. Falling Russian exports of goods other than mineral fuels suggest Russia’s productive capacity has already weakened. Russia’s trade has been reoriented from advanced economies to China, India and Turkey, but this has only partially compensated for the decline in trade with advanced countries. We find that sanctions had an impact on trade. There is no evidence of European and US companies circumventing sanctions by re-routing sanctioned goods to Russia via China and Turkey. The UK and the US have already stopped importing fossil fuels from Russia, and such imports by the EU have declined. With the EU’s Russian seaborne crude petroleum import ban taking effect in December 2022 and the refined petroleum ban coming to effect in February 2023, Russia’s revenues from fossil fuel exports to the EU are set to shrink significantly, with limited options for redirecting exports to other countries. The three main policy-relevant implications from our research are: The war and the sanctions are not the most important drivers of energy price; The direct aim of sanctions seems to have been achieved; The capacity of the Russian state to finance the war from fossil fuel revenues is bound to shrink. The dataset used for most charts of this working paper is regularly updated and is available in the Russian foreign trade tracker
Topic:
International Trade and Finance, Sanctions, Fossil Fuels, and Russia-Ukraine War
Political Geography:
Russia, Europe, and Ukraine

97. How have sanctions impacted Russia?

Author:
Maria Demertzis, Benjamin Hilgenstock, Ben McWilliams, Elina Ribakova, and Simone Tagliapietra
Publication Date:
10-2022
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
Russia’s invasion of Ukraine has triggered a series of sanctions imposed by the European Union, the United States and others. Sanctions included restrictions on Russia’s financial industry, its central bank and its coal and oil exporters, in addition to general export controls. Meanwhile, foreign companies have withdrawn voluntarily from the Russian market as a result of a ‘self-sanctioning’ trend. We assess the impact these sanctions have had on Russia’s economy in the immediate aftermath of the invasion and more structurally. Russian fiscal revenues have not suffered from sanctions sufficiently to reduce the length of this war. Effective management by the Bank of Russia has prevented financial instability and has therefore also protected the real economy. However, this picture of economic containment is coming to an end. Russia’s fiscal revenues are now beginning to take a hit; given the breadth of sanctions, the economy will suffer in the medium to long term. The voluntary departure of a large number of western firms, eventual energy decoupling by the EU and Russia’s inability to find equal alternatives will damage the Russian economy severely. As the Russian economy closes in on itself, it will become harder to find reliable data to evaluate the extent of the hit. Still greater sanctions coordination across the globe is needed to isolate the Russian economy, limit the flow of income into Russian coffers and therefore help stop the war.
Topic:
Governance, Sanctions, Economy, and Russia-Ukraine War
Political Geography:
Russia, Europe, and Ukraine

98. Holding the Hard-line: What is behind Iran’s seizure of Greek ships in Arabian Gulf?

Author:
FARAS
Publication Date:
06-2022
Content Type:
Policy Brief
Institution:
Future for Advanced Research and Studies (FARAS)
Abstract:
On May 27, Iran seized two Greek tankers, named “Prudent Warrior” and “Delta Poseidon”, in the Arabian Gulf. Forces from the Islamic Revolutionary Guard Corps (IRGC) descended on the tankers and ordered them to sail to Bandar Abbas port. Onboard the tankers were 49 crew members. Greece described the operation as ‘piracy’. The seizure seems to be a reprisal for Greece’s role earlier in the month assisting the US impounding a Russian-flagged tanker transporting Iranian oil and carrying 19 crew.
Topic:
Security, Foreign Policy, Sanctions, Maritime, and Shipping
Political Geography:
Iran, Middle East, Israel, and Greece

99. Strict and Uniform: Improving EU Sanctions Enforcement

Author:
Kim B. Olsen and Simon Fasterkjær Kjeldsen
Publication Date:
09-2022
Content Type:
Policy Brief
Institution:
German Council on Foreign Relations (DGAP)
Abstract:
For as long as the EU has been using sanctions as a foreign policy instrument, countering violations has been a challenge. With the EU rapidly expanding the breadth and depth of its sanctions, its ­institutions and member states must find ways to ensure stricter and more uniform enforcement to deter violations, enhance efficiency, and ensure a more level playing field for economic actors. The stakes are high: the success of the EU’s response to Russia’s military aggression hinges largely on effective sanctions, and the long-term legitimacy of the tool itself depends on its enforcement.
Topic:
Foreign Policy, Governance, Sanctions, European Union, International Order, and Russia-Ukraine War
Political Geography:
Russia, Europe, and Eastern Europe

100. France at the head of the Council: positive results despite the war

Author:
Eric Maurice, Justine Ducretet-Pajot, and Monica Amaouche Recchia
Publication Date:
06-2022
Content Type:
Policy Brief
Institution:
Robert Schuman Foundation (RSF)
Abstract:
The French Presidency of the Council of the European Union began on 1 January in a context of postCovid-19 recovery and the development of the dual climate and digital transition, and ends on 30 June in an environment shaken by the war in Ukraine. In the space of a few weeks, the EU-27 have imposed unprecedented sanctions on Russia, broken the taboo regarding financing the war, they decided to change their energy supplies and opened the door to further enlargement. They also are having to accommodate several million people fleeing war, deal with the highest inflation in decades and anticipate a global food crisis. Under the motto "recovery, power, belonging", the French presidency of the Council, commonly referred to as the FPEU[1], has had to take the new situation in its diplomatic, political and economic dimensions into consideration. Whilst, according to the institutional scheme of things, the main orientations of the European Union's response have been decided by the European Council, and the measures taken have been prepared by the Commission, the role of the FPEU has been to coordinate the adoption and implementation of these measures, and to maintain the unity of the Member States. This diplomatic and technical undertaking is what typifies a rotating Council Presidency. In the longterm work of European institutions, it organises the work of the Member States and the legislative process with the Parliament. Prepared in advance, it represents continuity in the projects that will be taken up by the next presidency, by following a programme prepared in coordination with its partners. In times of crisis such as those that Europe is currently experiencing, presiding over the Council means striking a balance between priorities defined in advance and the urgencies of the moment. An assessment of the FPEU must therefore be drawn on both levels, that of the processes and that of the events. The FPEU in its strict institutional sense, i.e. the temporary chairing of meetings of ministers and their preparatory bodies, establishes goals in terms of legislative texts to be concluded or taken forward. As part of the broader ambition of building a sovereign Europe that defends its model of society, these objectives have largely been achieved.
Topic:
Diplomacy, Sanctions, European Union, Leadership, Russia-Ukraine War, and European Council
Political Geography:
Europe and France