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Sanctions Policy: The ‘European Paradox’

Ivan Timofeev

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Since the end of the Cold War, economic sanctions have increasingly been used by big players as a tool of foreign policy. The initiators of sanctions use trade and financial restrictions to try to force the target countries to change course politically as well as to influence internal political processes. The United States has positioned itself as the largest sanctions initiator. Over the past hundred years, the US has used them more often than all other nations and the UN combined. The Americans remain second to none in terms of the number of developed state institutions involved in the policy of sanctions. The US sanctions apparatus far exceeds the capabilities of the UN and any other country in terms of financial, human and organisational resources.

The European Union is also showing increasing activity as an initiator of sanctions. There are several conditions for this. First, the EU is a powerful economy with huge human, financial and technological potential. Economic power is the most important condition, without which an effective policy of sanctions is simply impossible. After all, sanctions are effective when the initiator can inflict much greater harm on the target country than vice versa. Second, the European Union has not yet become an independent military-political force. Its foreign policy is based on soft power and economic instruments, so in conflict situations, sanctions are the best option. Third, the EU coordinates its sanctions policy with the actions of the United States, its main ally. The growing number of sanctions on the part of Washington has also led to the growth of sanctions initiated by Brussels.

At the same time, there are a number of distinguished features that define the EU approach. One of the key elements is the commitment of Brussels to multilateral diplomacy. The EU avoids being the sole initiator of sanctions. This is an important difference from the United States. The Americans often impose sanctions without any regard for others. They recognise the importance of coalition pressure on the target countries and strive to involve their allies and a wider range of countries in launching sanctions. However, their support for the United States is more instrumental – the more sizable the coalition, the greater its potential for taking a toll on the economies of sanctioned countries. However, for the EU, the multilateral use of sanctions remains an important normative issue and even means of conveying shared values. The European Union carefully implements UN Security Council resolutions, and EU countries which are members of the UN Security Council have often offered their own draft resolutions on sanctions.

The EU, however, allows sanctions which bypass the decisions of the UN Security Council. Here the policy of Brussels differs from the positions of Moscow and Beijing, which consider the UN Security Council as the only legitimate source of sanctions. These countries also use unilateral measures, but so far they’ve done it much less often in comparison with the EU and especially the USA. However, by bypassing the UN, the EU is trying to combine efforts with the United States and other Western countries, that is, to provide a multilateral format. At the same time, the EU retains its own view on many problems and calibrates a set of restrictive measures at its sole discretion.

Another important distinction of EU policy is its extremely reserved attitude towards extraterritorial sanctions. The European Union authorities may well use secondary sanctions, that is, to punish certain companies or organisations for violating existing restrictions. However, Brussels uses such measures within its jurisdiction. The United States, on the contrary, is increasingly introducing secondary sanctions against foreigners, putting foreign companies on the SDN list or fining violators.

Interestingly, over the past ten years, most of the related fines were levied against European companies. This situation may well be called the “European paradox.” EU authorities support many US sanctions initiatives, but at the same time many Europeans are negatively affected by the secondary sanctions. They pay the most fines. According to the Russian International Affairs Council (RIAC), over the past 10 years, out of 201 US Treasury fines, 40 were levied against EU companies and 133 were paid by US companies. In just 10 years, the US Treasury has collected $ 5.6 billion in fines. Of these, the Europeans paid more than $ 4.6 billion (83%), and the Americans only paid 177.2 million (3%). This distribution resembles the “Pareto law”: most of the revenue is generated by a minority of players. And this minority is concentrated in Europe, whereas the smaller proportion was paid by the US-based majority. Of course, such a distribution can hardly be the result of the deliberate activity of American authorities. But the fact remains: Europeans pay the most.

At least since the 1990s, The European Union has tried to take measures to protect itself from secondary US sanctions. A serious incentive was the US withdrawal from the Joint Comprehensive Plan of Action (JCPOA) on the Iranian nuclear programme. Washington unilaterally resumed large-scale financial and sectoral sanctions against Iran. A significant number of companies operating in the Iranian market, including European ones, turned out to be facing the threat of secondary sanctions and subsequent penalties. The EU has resumed the so-called 1996 Blocking Statute, which should shield European companies from secondary sanctions. However, a significant number of big EU companies have already left Iran. Many large European companies which do business in Iran also conduct business in the US, and preferred to maintain their loyalty to American requirements, even though Brussels was critical of the US withdrawal from the JCPOA and introduced protective measures. The threat of having problems with the US authorities in the form of fines and “weaning” from the US market and financial system outweighs possible profits in the Iranian market.

In Europe, some politicians proposed establishing their own payment system, in the interests of European sovereignty and financial independence. In January 2019, INSTEX SAS company was registered in France (with the participation of Germany and the United Kingdom). It was tasked with securing transactions between European companies and Iran, bypassing US sanctions. So far the fate of this initiative remains unclear. The big problem is its approval by other EU members. Also, the real functionality of INSTEX remains unclear. In the end, nothing is preventing the Americans from including INSTEX in their SDN list, making it “toxic”, or fining the company in proportion to the volume of its deals with Iran.

The prospects for INSTEX are becoming even more vague, against the background of diplomatic difficulties. After the US exit from the JCPOA, Washington found itself in diplomatic isolation on the Iran issue. However, this didn’t bother the Americans much. The situation began to heat up after the United States lifted the restriction exceptions on the purchase of Iranian oil, which they made for eight countries, including Italy and Greece. In May 2019, Tehran announced that it would refuse to fulfil certain obligations under the JCPOA. In response, Washington immediately introduced harsh, newer sanctions against Iran. The EU reacted coolly to the actions of Tehran. Now Iran could be considered isolated.

The diplomatic development of the situation around the JCPOA is likely to seriously undermine European ambitions to create an alternative payment system. If Iran once again becomes a pariah state (as the Americans would like to see), then the reason that gave rise to the discussion about it will disappear. As for fines against banks and companies, Brussels is likely to leave these risks to the discretion of the business community itself. Moreover, entrepreneurs haven’t demonstrated any serious, noticeable activity lobbying for alternatives. Apparently, the business sector feels comfortable in the dollar system, and the risks of secondary sanctions do not outweigh the benefits the system presents and the costs of its transformation. Moreover, outside of the Iranian problem, there is not a single issue that the sanctions policy presents that could seriously stimulate discussion about a European financial alternative. The commonality of the political positions of the United States and the EU will ensure the status quo.

First published in our partner RIAC

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Europe

Strong support of president Putin to Serbia

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Serbia was visited on June 3 by the first man of Russian Duma and one of the closest associates of the Russian President Vladimir Putin. The arrival of Vyacheslav Volodin in Belgrade just a few days after the brutal intrusion of Albanian special forces in the north of Kosovo and amid strong pressure on Serbia ahead of the announced meetings in Paris in early July, sends a clear message. That message could be heard at a special session of the Serbian National Assembly:

“Brotherly Serbian people, as always, can count on Russia’s help!”

This statement of Vyacheslav Volodin is extremely important because this was a message of Vladimir Putin to the Serbian people. As Vyacheslav Volodin pointed out, Vladimir Putin knew that he would speak in the Serbian parliament, so he personally sent greetings and words of support to Serbian people.

During the visit to Serbia, the Russian official praised Serbia`s economic improvement, adding that success is even greater since it has been achieved in dificult geopolitical circumstances. Vyacheslav Volodin, stated in Belgrade that the “intrusion“ of Kosovo`s special forces into the north of Kosovo was aimed at frightening the Serbs, establishing control there by force, adding that the Serbs could count on Russian help in future.

Also Volodin said that the UN Security Council Resolution 1244 should be respected. He stressed that Russia will not support the moves of the EU and the United States, that would lead to tensions.

“We believe that all parties must respect Resolution 1244, and those who do not, must be responsible. The interests of sovereign Serbia must be respected in accordance with international law,” Volodin said.

„The UN should express its stand. Its authority and also peace in the Balkans depend on its determination and concrete moves,“ Volodin also stated in Serbia`s Parliament. He criticised the European Union and US behaviour and added that „the absence of clear EU reaction to Pristina`s provocations raises doubt the bloc is capable to mediate in the Belgrade – Pristina dialogue on normalisation of relations. Volodin said that some states adopted a practise of double standards and openly interfere with the internal issues of other states.

“ We think that is unacceptable. It is necessary to confront that if we want to preserve our nation, country, its sovereignty and independence,“ Volodin said, mentioning Libya and Iraq as examples.

Speaking about the relation between the two nations, he said that the Russians, always felt they were obliged to help and protect the Serbs. Later, Volodin had a meeting with Serbian President Aleksandar Vucic and invited him to address Duma, next time when he visit Moscow.

Vucic accepted, saying it would be a great honor for him to talk about the relations between Serbia and Russia in front of Duma members.

Volodin  also announced that  Free Trade Agreement between the Eurasian Economic Union and Serbia can be signed by the end of the year. Currently, more than 800 companies with Russian capital operate in the territory of Serbia.

The message of Vyacheslav Volodin about Kosovo is in line with the message that President Vladimir Putin has been repeating for years.  The views of the President of Russia on the issue of Kosovo are not changing since the beginning of the crisis:

– February 2008 – The case of Kosovo is a terrible precedent that essentially breaks out the entire system of international relations, which was created not for decades, but for centuries.

– May 2018. – Vucic asked Putin to help Serbia in the UN and other international organizations, on what was answered that Moscow will actively monitor the talks between Belgrade and Pristina and the influence of various parameters on that issue.

–  January 2019 – Moscow is in favor of a mutually acceptable solution of Belgrade and Pristina, but based on UN Resolution 1244.

–  January 2019 – Resolution 1244 does not allow the existence of any armed formations in Kosovo other than the United Nations contingent.

However, despite the clear position of Russia on Kosovo, Serbian President takes a different policy. The goal of Aleksandar Vucic is the “demarcation” between Serbs and Albanians. And for a long time he has been secretly negotiating with the President of the self-proclaimed Kosovo Hashim Thaci. And, so far Vucic’s policy towards Kosovo has been catastrophic and has caused great damage to Serbian national interests.

By signing Brussels agreements, Vucic destroyed the defense of northern Kosovo, giving police and civil protection to Pristina. This denied the right of Serbs to self-defense, and he himself is not able to protect them. Recent events in the north of Kosovo, especially in Zubin Potok, are the direct result of the capitulation of the national and state policy of Serbian President Aleksandar Vucic towards Kosovo. Vucic aim is to force the Serbian people to accept an independent Kosovo. After recognition of Kosovo, Serbia would accelerate its full membership in NATO. Already today some associates of Aleksandar Vucic say that Serbia is surrounded by NATO, and that Serbia must adjust its policy according to the situation. If that were to happen it would be another geopolitical blow to Russia, which would be completely cut off from the Baltic to the Adriatic and the Black Sea. Therefore, NATO could further increase pressure on Russia.

 From our partner International Affairs

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Candidates for European Commission President: Who is who

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Photo: European Parliament

The race for President of the European Commission has got under way. According to the rules which are questioned by many in the European Union but have so far enjoyed majority support in the European Parliament, the new head of the “executive branch” of the European Union will be elected from among the “top candidates” (Spitzenkandidat) – those nominated by European parties which have factions in the European Parliament. A candidate will finally become President of the European Commission after he receives support from EU leaders in the European Council (the Council is currently headed by former Polish Prime Minister Donald Tusk, known for his paranoic attitude towards Russia) – this procedure should be over in June. A formal approval by the European Parliament should come next.

So who has the biggest chances and what are the political platforms of potential winners?

Judging by arithmetics, the leader of the European People’s Party (former Democratic Christians) faction in the European Parliament, Manfred Weber, is in the lead. His faction remains the largest, albeit smaller in number than before,  in Parliament – 180 members. A Bavarian,  Weber is 46 years old, and is considered to have been promoted by German Chancellor Angela Merkel. He seems to be at odds with his patroness Merkel, who supports the Nord Stream – 2 project. Last year he spoke out strongly against this project, which envisages the transportation of Russian gas to Western Europe across the bottom of the Baltic Sea: “I am against this project. It does not meet the interests of the European Union,” –  he said on April 23, 2018, in an interview with the Polska Times newspaper which was quickly picked up by news agencies.

However, analysts do not rule out a certain discrepancy of conduct on the part of Merkel, who continue to support Weber’s candidacy even after the above statement. Apparently, Merkel  has no intention of becoming the one responsible for  “burying” the Nord Stream,  which is so profitable for the German business. However, if this project is ruined by the head of the European Commission nominated by her, she will be able to get out of it safe. She would explain such a result by a “clash of opinions that is natural for democracy”.  Nord Stream-2 is the only project which the United States doesn’t approve but which Merkel supports in words. (Normally, in matters of principle, Angela Merkel does not tolerate any differences of opinion within the ruling team in the Federal Republic of Germany.)

However, as remarked by the EU Observer website, close to the Brussels-based globalist elite, Merkel may refuse to back Weber at the last moment – two Germans will not be allowed to occupy the two key positions in the EU – head of the European Commission and chairman of the European Central Bank. Moreover,  Merkel wants to put Jens Weidman, the current head of the Central Bank of Germany, in charge of the European Central Bank.

The second most likely candidate is Margrethe Vestager of the Liberals and Democrats for Europe (ALDE) party. The party’s faction, which has 109 members after the elections, is the third most powerful and is known for its anti-Russian position. The leader of the ALDE faction, Belgian Guy Verhofstadt, who is officially the main “spin doctor” of Mrs. Vestager, made a statement unacceptable from the diplomatic point of view on the global Internet resource Project Syndicate before the recent elections to the European Parliament. He accused his colleagues in the European Parliament – representatives of a number of sovereign European countries (Italy, Great Britain, Hungary)  – of being the “fifth column” of Russia in the EU. He said: “Just like the illiberalism of Hungarian Prime Minister Viktor Orban, the partnership between the European right and Vladimir Putin has been going on for too long.”

Vestager is the European Commissioner for Competition, who has been dubbed “Tax Lady” by President Trump, for her relentless pursuit of alleged monopolies in Europe. Simultaneously, Vestager calls for the extension of sanctions against Russia and for measures against Russian “energy monopolies” in Europe (what is implied by these words is easy to guess – the long demonized by European mass media Gazprom). For these views, Mrs. Vestager is openly admired by the British magazine The Economist, which came out on May 28, 2019 with the headline: “The Iron Lady of Politics from Denmark should lead the European Commission.”

Nevertheless, even Mrs. Vestager’s admirers admit in this issue of the magazine, as well as in other European media that she is unpopular in her home country, in Denmark. At home, Vestager’s candidacy for the highest post in the European Commission was publicly supported only by the leader of a “related” party – the head of the Danish Liberals Lars Lokke Rasmussen. Even Liberals and Social Democrats acknowledge that the EU was unable to protect Denmark from illegal migration,  so since 2016, Copenhagen has maintained “temporary” control on the border with countries of the Schengen zone. Naturally, a lady representing  the “ineffective” EU is unlikely to be loved at home.

Nevertheless, the structure of the current European Union does not require politicians to be popular at home in order to get a high-powered and financially attractive job in the European Commission. What presents interest in this regard is the opinion of Marlene Vind, a professor at the Faculty of Political Science at the University of Copenhagen: “The head of the European Council, Donald Tusk, just recently pointed out the need for gender balance in the EU, and this is a strong support for Vestager,” – Wind says. “Besides, you can be 100% sure that not a single Danish prime minister will say no if EU leaders offer a Danish woman such an important position in the EU.”

The third likely candidate with strong chances for success is Dutch Social Democrat, France Timmermans. A representative of the Labor Party of the Netherlands,former foreign minister of the Netherlands, and at present the first vice-president of the European Commission, he is known for his initiatives on sanctions against the Polish “retrogrades” from the “Law and Justice” Party. Timmermans can count on the support of 146 MPs from the Socialists and Democrats. In the early 1990s, he worked at the Dutch Embassy in Moscow, disseminating the “light of democracy” in Russia. Afterward he represented the Netherlands during an inquiry into the crash of the MH-17 aircraft over the Donetsk region in 2014.

From a foreign policy point of view, Timmermans represents the most exotic ideological trend in the European Union – he is dreading an “union of Putin and Trump,” which, along with the “rise of nationalist forces in Europe,” could destroy the EU.

In February 2017, already holding the post of European Commissioner Timmermans declared: “We are witnessing a hybrid war, we see it in Ukraine. Will the Baltic countries be next? We bear witness to the return of the threat of a nuclear war. …. And just imagine the Cuban missile crisis played out on Twitter between Presidents Trump and Putin,” – Timmermans said, addressing the Future Force conference. It is unlikely that anyone could have imagined it, but we could attribute it to the speaker’s wild fantasy.

The reverse of Timmermans’paranoic attitude towards Russia is the praise of the European Union, which he glorifies as a kind of unique “ecosystem” of the most civilized and peaceful nations of the planet. Probably, Mr. Timmermans forgot the “civilized” destruction of Yugoslavia by the “peaceful nations” of Europe.

This blend of “green” demagogy and the new “democratic” racism of the forces that won in the last Euro elections (they say Western Europeans are above  other nations thanks to “exclusively” European democratic institutions) is an ideology that is totally hostile to Russia.

The other candidates – Frenchman Michel Barnier, Czech Jan Zahradil and  “green” German Ska Keller – have few chances due to lack of strong factions in the European Parliament.

As it happens, in its relations with the EU Russia should not expect Brussels to change its position in the near future. But, as they say, eternity in politics does not last long. 

From our partner International Affairs

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Tensions in Kosovo: Russia closely monitors the situation

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Police of self proclaimed state of Kosovo launched raids in the early hours of Tuesday morning in the Serbs-majority north of Kosovo, sparking an angry reaction from Serbs.

More than twenty people have been arrested so far. Among those arrested is the chief of police of the village of Zubin Potok. A Kosovo police officer was wounded by a gunshot during the operation, but is not in danger of losing life. Two other officers were also injured, according to doctors in North Mitrovica.

Kosovo Police said that in Zubin Potok(north Kosovo), barricades were set up and tyres set on fire to deter police officers. Kosovo police also stated that the operation was launched to detain suspects who have allegedly been participating in or organizing criminal groups and have been involved in the smuggling of goods, misuse of official positions, bribery and trading in contraband. According to information the operation has nothing to do with the murder of Enver Zymberi, a policeman who was killed in the north of Kosovo eight years ago, nor with the investigation into the death of Kosovo Serb politician Oliver Ivanovic, who was murdered in 2018.

The head of the Serbian government’s office for Kosovo, Marko Djuric, said on Tuesday morning that the goal was to cause fear and panic.

“This morning, around 6am, special units of the ROSU (Regional Operational Support Unit) stormed in from three directions into the north of Kosovo, into the territory of all four (Serb majority) municipalities, with the aim of intimidating and provoking panic”, Djuric told Tanjug agency. He said that “separatists from Pristina have reached for more terrifying methods to scare Serbs” and want to “create an impossible climate for Serbs in Kosovo”. Meanwhile, Serbian President Aleksandar Vucic and the Interior Ministry ordered the Serbian Army to be put on full combat readiness, Tanjug reported. Tanjug also reported that Vucic launched “intensive diplomatic activities” over the raids.

“The president asked Western political authorities to control Pristina and let them know Serbia will not allow ethnic cleansing”, Tanjug said.

A Russian diplomat was also arrested. The Ministry of Foreign Affairs of Russia has stated that is unacceptable to arrest a Russia citizen in Kosovo, asking the UN mission in Kosovo for comprehensive information on his arrest and his release.

“The arrest was carried out regardless of the fact that Russian citizen has diplomatic immunity of UN staff. We consider this to be an unacceptable act as another manifestation of the provocation of the Kosovo-Albanian authorities, stated Maria Zakharova, the official spokesman of the Russian Ministry of Foreign Affairs.The Russian diplomat was released after the protest of Russian Government. However, according to unconfirmed information, he was beaten by the Kosovo Police.

The Russian State Duma instructed its Committee on International Affairs to closely monitor the situation in Serbia because of the intensification of the situation in Kosovo . On the occasion of the incidents in Kosovo, the Russian ambassador to Serbia Alexander Chepurin spoke.

“We strongly condemn the incursion of Kosovo Special Forces in Kosovo-Serb-populated areas. This is extremely dangerous and it’s not in line with all existing agreements, “said Chepurin on Twitter.

The Serbian Armed Forces are in fully combat readiness, and according to the information, its movement under full military equipment was also observed. Serbian combat jet Mig 29 flies over an administrative line with Kosovo.

“If there is any threat to order and the life of people in northern Kosovo, our army will protect our people,” stated Serbian president Aleksandar Vucic.

Concluding Thoughts

Russia is monitoring the situation in Kosovo and is ready to provide support to Serbia. The arrest and beating of Russian citizen Mikhail Krasnoshchekov, which is a member of the United Nations Interim Administration Mission in Kosovo, is actually a message to Russia by the West. As stated by the official representative of the Russian Foreign Ministry, Maria Zakharova, the incursion of special forces is another provocation and the establishment of control over the region by force:

” It is clear that such defiant behavior of Kosovars is a direct consequence of many years indulging from EU and the Uited States”,- stated Maria Zakharova.

However, an important role also has Serbian president Aleksandar Vucic. At yesterday’s session in the Serbian Parliament, the President of Serbia, as the basic message to the Serbian people, said that Serbia should accept independent Kosovo. In other words, Vucic is still fighting for demarcation, after which a small part of Kosovo would be left to Serbia. Otherwise, in his opinion, the Albanians will attack the Serbs in Kosovo. The defeatist attitude of the President of Serbia practically encouraged the Albanian separatists to take such a move which we can see today. It is precisely on the issue of Alexander Vucic’s policy towards Kosovo that Russia should take a stronger position. The Russian Foreign Ministry regularly repeats that for Russia the solution of the Kosovo problem is UN Resolution 1244. And this is the correct policy, which is in line with the Russian and Serbian national interests. However, Aleksandar Vucic, contrary to the will of the citizens of Serbia is pursuing his policy towards Kosovo.

  First published in our partner International Affairs

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