SANCTIONS

POLICY AGAINST
RUSSIA IN 2014-2022:
Gaps and Evasion Schemes

Authors:
Anastasia Khymychuk
Roman Steblivskyi
Anna Pashkina

Кyiv 2022
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CONTENT

1. Introduction ................................................................................................. 3
2. Gaps in Sanctions Policy .............................................................................. 7
3. Selectivity of Sanctions ............................................................................... 10
4. Schemes to Circumvent Sanctions .............................................................. 14
5. Ignoring Sanctions ...................................................................................... 19
6. Conclusions and recommendations ............................................................ 21
7. List of sources ............................................................................................. 23

Supplement 1. Methodology ............................................................................ 29

Supplement 2. Base of sources of research in the form of an analytical chart
 3

1. Introduction

On February 24, 2022, the world yet again saw a real barbaric face of the Krem-
lin. The unannounced full-fledged invasion into a sovereign and democratic
Ukraine and violation of all international rules have demonstrated that Russia
cannot be an equitable member of the world community because in the civilized
democratic world of the 21st-century influence of this or that country is meas-
ured with economic, cultural, scientific and other achievements rather than an-
nexed territories.

Following the Russian occupation of the Crimean Peninsula and parts of the
Donetsk and Luhansk regions of Ukraine in 2014, the United States of Ameri-
ca, countries of the European Union and other democratic states responded to
such acts of the Russian Federation with personal and economic sanctions. Lat-
er, however, it became clear that these measures did not harm Russia enough
to prevent a full-scale war in Europe.

Open sources contain different information on how the introduced sanctions

were circumvented and violated even by American, European and Ukrainian
businesses, with nobody held liable to such acts. However, after the unprovoked
offense against Ukraine, no democratic country of the world cannot ignore the
fact that the Russian Federation is a deadly aggressor that has to be restrained
with all possible measures. This is effectiveness of sanctions that success of
the containment policy towards the aggressor depends on.

The aim of this research is to single out and analyze gaps

in the sanctions policy in regard to the Russian Federation,
schemes to evade sanctions, as well as systematize the ob-
tained results with the view to elaborating some recommen-
dations on how to make the sanctions against Russian more
effective.

A group of Trap Aggressor analysts has done monitoring of the journalistic in-
vestigations, analytical materials and news published in Ukrainian and foreign
media in 2014-2022 which related to results of the sanctions imposed on Rus-
sia. The collected materials are divided into four blocks. Each of these blocks
includes categories and subcategories which illustrate gaps in the sanctions
policy, schemes to evade sanctions and avoid responsibility for violation of the
introduced restrictions.
 4

It is worth noting that the number of instruments used to mitigate the impact of
the Westerns sanctions imposed on Russian since 2014 can exceed those de-
scribed in this research as not all of them drew attentions of mass media, analyt-
ical centers and investigators. It should also be noted that since the time the first
sanctions were introduced the Kremlin has been actively seeking counter meas-
ures which helped the Russians and foreign businesses to avoid the imposed re-
strictions.

Based on the analyzed materials, we have singled out four blocks, namely (1)
gaps in the sanctions policy; (2) selectivity of sanctions; (3) schemes to cir-
cumvent sanctions; as well as (4) ignoring the sanctions.

The block “Gaps in Sanctions Policy” includes the following categories:

• continuation of business projects launched before the sanctions were in-
troduced;
• selling and buying dual-use goods;
• operation despite being on the sanctions lists;
• absence of a full list of sanctioned activities;
• discretion to interpret sanctions restrictions;
• unawareness of sanctions as a public position.

The block “Selectivity of Sanctions” is divided into the following categories.

We have divided those which relate to non-imposed sanctions into:
• subsidiary companies of sanctioned companies;
• some key Russian companies in some economic sectors;
• Russian banks with average capital;
• leasing operations.

As well as no ban on:

• the entering of ships with Russian cargoes into ports;
• the trading of debt or share capitals in secondary markets;
• the conducting of financial operations in certain spheres;
• the supplying of Russian energy resources to EU ports;
• the launching of cultural projects.

We have divided the block “Schemes to Circumvent Sanctions” into the fol-
lowing categories and subcategories:
• hiding origin of goods (changing flag or ship destination, switching off iden-
tification system, changing producer’s marking, packaging, smuggling and
customs violations);
 5

• hiding a sanctioned company, its beneficiaries or links with its beneficiaries

(transferring assets to the CEOs who are not under sanctions, in particular
business partners, family members or friends, using intermediary companies
which are not under sanctions, using offshores as well as sham companies);
• hiding final destination of goods;
• conducting business activities in non-sanctioned jurisdictions;
• conducting business activities by foreign companies in the occupied Crimea
through local retailers;
• conducting business activities by foreign companies in Russia and the occu-
pied Crimea through their subsidiaries;
• circumventing sanctions through third countries or their resident companies;
• circumventing sanctions through adoption of legislative changes.

The block “Ignoring Sanctions” does not include any categories or subcatego-
ries. It is about non-responsible conduct of businesses in terms of the introduced
sanctions.

The group of the Trap Aggressor also draws attention to the fact that the sanc-
tions are violated not only by foreign companies, but Ukrainian companies too,
even when it implies violation of the sanctions legislation of Ukraine. We be-
lieve that such activities on the side of Ukrainian companies are inadmissible,
considering that the sanctions have been introduced by the West in order to
protect, first and foremost, Ukraine from the Russian aggression. Such viola-
tions by Ukrainian residents undermine the spirit of the sanctions and ethics of
cooperation with our Western partners.

It is also worth mentioning that, while conducting this research, we have dis-
covered a positive tendency too. A number of the gaps in our sanctions legisla-
tion has been eliminated. To tell the truth, it happened after the full-fledges in-
vasion of the Russian Federation. For example, contracts on supplies of military
equipment which were made before August of 2014 did not fall under embargo.
Today, this problem has been resolved1.

Based on the obtained results, Trap Aggressor has elaborated such recommen-
dations for the Ukrainian authorities:

Internationally:
1. To promote full embargo on economic and financial business relations with
Russia, primarily on crude oil, petroleum products, gas and coal;
 6

2. To promote prohibition for Russian businesses, Russian cargoes to use the

transportation and sea ports of the European Union, USA, Great Britain and
other countries which introduced sanctions against the Russian Federation;
3. To promote sanctions against supplies of dual-use goods;
4. To uphold propositions of the European Commission in regard to recogni-
tion of breaching the sanctions regime a crime at the level of the European
Union;
5. To promote the format of international cooperation in terms of the moni-
toring and coordinating sanctions against aggressors.

In Ukraine:
1. To consider a possibility of comprehensive improvement of sanctions legis-
lation and creation of a body at the Council of National Security and Defense
for coordination of the sanctions policy, non-stop monitoring and assess-
ment of economic, political, legal and other circumstances of using, chang-
ing or lifting sanctions.
 7

2. Gaps in Sanctions Policy

Gaps or, in other words, lack or obscurity of legislative norms is a

widely-spread phenomenon both for the national and international
law. The measures taken by our Western partners against Ukraine
are not the exception. The group of Trap Aggressor has found the
following gaps in the sanctions policy of the United States and
countries of the European Union during 2014-2022 which enables Russian busi-
nesses or their foreign partners annihilate sanctions restrictions.

Continuation of business projects launched before the sanctions were

imposed. The sanctions restrictions of the European Union in the defense
sphere after the annexation of Crimea and aggression in the Donbas in 2014 in-
troduced embargo on selling military goods to the Russian Federation. However,
this embargo had nothing to do with all contracts signed before August 1, 2014.

This loophole enabled French companies to sell to Russia military equip-

ment in the amount of 152 million euros under contracts concluded prior
to the introduction of the embargo, which constituted 44% of the export
of the European weaponry to Russia. For example, thermal imagers, nav-
igation systems and infra-red detectors for jet fighters and combat heli-
copters, which could be found onboard of land vehicles, jet fighters and
helicopters used in the military aggression against Ukraine were bought
from Safran and Thales2.

152 44% of the export of the European

weaponry to Russia
mln €

Selling and buying dual-use goods. Authors of the research “Leaky em-
bargo. How Russian circumvents sanctions against import of weapons” of
April 22, 2022, noted that, for example,

“German Bosch was convincing that it was selling automotive equipment

solely for peaceful purposes, but its devices were found in the Russian in-
fantry armored vehicles captured by the Ukrainian Army”3.
 8

One of the ways to trade dual-use goods is their selling on online marketplaces,
since the latterdoes not have a possibility to effectively control sellers that
conduct their business on some platforms4.

Operation despite being on sanctions lists. Even being on a list of sectoral

sanctions (LSS) does not prevent Russian companies from continuing their eco-
nomic activities.

For example, the main Russian oil Rosneft company which has been on LSS
since 2014 bought a share of the Indian Essar Oil Company in 20175. The-
then chief of the Russian state-owned VTB bank, Andrey Kostin, explained
that “Rosneft has 49% of shares and, therefore, does not fall under sanc-
tions. Rosneft will not have a controlling interest”6. The same loophole has
been used by the Russia Bank, which, when the sanctions were looming,
transferred to its subsidiary company 2.5% of the controlling stake (51%) of
the Sogaz insurance company7.

49% by the Rosneft -

does not fall under sanctions 48,5% by the Russia Bank -
does not fall under sanctions

sanctions sanctions

Absence of a full list of sanctioned activities. The sanctions of the Unit-

ed States and European Union prohibited Western companies to help Russia in
drilling “shale reservoirs”.

However, the ban did not mention less popular forms of “non-traditional
deposits,” which enabled the Norwegian Statoil to help Rosneft to exploit
“non-traditional resources.” Prior to the imposed sanctions, the compa-
nies announced their plans to jointly exploit shale oil deposits, but as soon
as the sanctions were introduced they changed information on their offi-
cial web sites and informed of exploitation of limestone deposits8.

Besides, the sanctions prohibited Western companies to provide technologies

or know-how to Russia for exploration of Arctic or deep horizon oil as well as for
exploration or extraction of shale oil.
 9

However, this did not influence the current extraction of carbonites. Large
Russian state-owned companies Rosneft, Gaspromneft and Bashneft have
their own plans of investments into oil refining until 2020, with all these in-
vestment projects significantly depending on Western technologies9.

Discretion to interpret US sanctions legislation has led to the compa-

ny activities of which has been deemed as a violation of the sanctions against
Russia non-guilty in 2017.

Subsidiary companies of the American Exxon Mobil entered into contracts

with Igor Sechin, a chief of Rosneft, who was under sanctions. In a district
court of Dallas, USA, Exxon Mobil referred to the explanation of the White
House, saying that the personal sanctions were aimed at “identifying cer-
tain persons and freezing their assets rather than persecuting companies
managed by them.10”

Unawareness of sanctions as a public position. The regulation of the Eu-

ropean Council dated July 30, 201411, includes a provision under which, if a party
did not know and had no reasonable grounds to suspect that its actions would
violate the measures specified in the Regulations, such a party may invoke this
justification to prove its innocence.

The given provision was used by Enerpac Heavylifting, which is a part of

the American International Actuant Company. This is the company that in-
stalled elevators at the Crimean Bridge12.
 10

3. Selectivity of Sanctions

Another drawback of the Western sanctions legislation is that it

does not comprise all economic entities in this or that sphere under
sanctions.

Trap Aggressor has accentuated the arguments which confirm that Western
sanctions are often selective. We have discovered that no sanctions were im-
posed on:
• subsidiary companies of the enterprises under sanctions;
• some key Russian companies;
• Russian banks with average capital;
• leasing operations.

We have also discovered that there is no ban on:

• ships with Russian cargoes entering ports;
• trading debt and share capitals in secondary markets;
• conducting financial transactions in certain spheres;
• supplying Russian energy carrier to EU ports;
• creating cultural projects.

Failure to impose sanctions on subsidiary companies of sanctioned

companies. Some Russian banks have found themselves under sectoral sanc-
tions, but this did not prevent their subsidiary companies from operating.

Sberbank13 and VTB, which belong to the largest Russian banks, have been
using their subsidiaries in Europe to attract deposits. The amount of such
deposits at Sberbank has come to 1.6 billion euros. VTB managed to at-
tract 3.9 billion euros. In particular, Sberbank Europe AG has been using this
scheme since July of 201414.

1,6 deposits at
Sberbank
3,9 deposits at
VTB bank
billion € billion €

Failure to impose sanctions on some key Russian companies in some

economic sectors.
Thus, for example, the USA did not include Sberbank, the largest bank of
the Russian Federation, on a list of sanctioned companies in 2014. In 2014,
 11

European sanctions were not introduced against Gazprom, the key energy
company in Russian, due to which it managed to increase its capital in Eu-
rope15, and one of the largest companies in the defense and industrial com-
plex KamAZ, with its vehicles used as a chassis for almost all military equip-
ment of the Russian Federation16.

Failure to impose sanctions on Russian banks with average capital.

The Western sanctions undermined activities of the largest Russian banks in
Crimea, but fifteen small and medium Russian banks continued operating there,
with only five of were found on a USA sanctions list before 201617.

Failure to ban leasing operations. Advantages have been made out of this by
suppliers of heavy machinery, buses and trucks of European companies banned
from being sold in Crimea.

“Leasing operations were not under European sanction and, therefore,

a leasing company created for this very purpose supplies machines of
the Russian and European producers there under lease agreements, at-
tracting funds of a sanctioned Crimean bank,” Novoe Vremya explains18.

An analogous scheme has been used in the sphere of investment crediting.

For example, Russian Gen Leasing LLC was an intermediary between the
Crimean Black Sea Bank for Reconstruction and Development and Russian
Nefteprombank JSC at which the Crimean bank had its correspondent ac-
counts19.

Failure to ban the entering of ships with Russian cargos into ports. Fol-
lowing the full-scale invasion, Russian ships were prohibited to enter European
ports, though the ban did not cover cargos transported by such ships. Taken
different ship registration modes in the world, there have been situations when
it is impossible to determine a country owning this or that ship.

“If it is unclear whether a ship is Russian, it may enter a port. At the same
time, it does not matter if its cargo is Russian or not,” specifies British Uni-
son trade union material20.

Failure to ban the trading of debt and share capitals in secondary

markets. Though the USA banned Russian banking transactions after Febru-
ary 24, 2022, the door for companies that have business in secondary markets
has remained open. Trading debt capital or equity of the Central Bank of the
 12

Russian Federation, National Welfare Fund of Russia or Ministry of Finances of

Russian is not prohibited provided that none of these organizations is a counter-
part to such transaction.

It enabled the American company Golden Sachs to continue receiving

profits from debts. Goldman Sachs bought out underpriced Russian debts
and transferred them to American hedge funds21.

Failure to ban the conducting of financial operations in certain spheres.

To illustrate this, one can refer to permission in 2015 to issue loans to

Russian companies under sectoral sanctions for a period up to 30 days,
if, of course, they timely pay them off. In fact, this permission means pos-
sibility to issue to them credits in the form of 30-day tranches22.

Another illustration is a possibility to exchange rubles into dollars

through cryptocurrency transactions made advantage of by Russian
citizens after the financial sanctions imposed in 2022. There are around
150 non-regulated firms in the cryptocurrency market in Great Britain.
These companies are not obliged to adhere to sanctions or provisions of
the Financial Conduct Authority (FCA). At the same time, it is not neces-
sary to buy cryptocurrency on a stock exchange as the mining of crypto-
currencies is still underway and it is possible to buy something directly
from a crypto miner. This makes assets untraceable by a regulator23.

In other words, Russian citizens can use cryptocurrency stock exchanges to

any cryptocurrency for rubles and then sell it for dollars.

Failure to ban the supplying of Russian energy resources to EU ports.

As of May of 2022, all European ports are officially closed for Russian ships. But
there is one all-European exception as this decision does not comprise ships
which are in trouble signaling SOS. Also, member states are allowed to adopt
substantiated exceptions, for example, for ships which transport energy car-
riers, food products, medical transportation means and pharmaceutical prod-
ucts to EU states24.

Since supplying energy carriers is directly excluded from the ban of EU

ports, it has been used by Greece a share of which in transporting Russian
oil has increased threefold in comparison with 2021. At the end of April,
Nissos Rhenia, a Greek supertanker, loaded onboard Russian Urals oils in
the port of Rotterdam and left for Singapore, Lloyd’s reports25.
 13

Failure to ban the launching of cultural projects.

Thus, the Director General of the Austrian Coop Himmerlb(l)au company

claimed that the working of his firm on a project of the Sevastopol State
Opera and Ballet Theatre planned to be opened in 2023 is it right since cul-
tural projects had been excluded from the regime of sanctions26.
 14

4. Schemes to Circumvent Sanctions

The available schemes to circumvent sanctions do not break the
norms of the sanctions legislation, though annihilate effect from
sanctions. Schemes lie in using weak points of sanctions with the
view to their circumvention and avoidance of responsibility. As usual,
this is a political issue resolution of which depends on many aspects,
in particular norms of domestic legislation of different countries.

The group of Trap Aggressor analysts has identified the following schemes
to circumvent sanctions policy of the West during 2014-2022: hiding origin of
goods, in particular change of flag or destination of a transporting ship, switch-
ing off ship identification systems, change of producer’s marking, change of
packaging, smuggling and customs violations. In order to hide beneficiaries,
companies use offshores, transfer property into ownership of non-sanctioned
chiefs, sham companies and non-sanctioned intermediaries. In order to circum-
vent sanctions, they also hide designation of goods and use non-sanctioned
jurisdiction to conduct their business. We have also singled out business con-
ducted by Western companies in Russian and occupied Crimea through local
retailers and subsidiary companies, circumvention of sanctions through third
countries, in particular in the financial sphere, and through adoption of chang-
es to the Russian legislation.

Hiding origin of goods has to do with manipulations with goods rather than a
selling firm. For example, changing flag or ship destination are often used
to hide goods.

In 2019, a Russian civil airplane transported 10 armored cars from Kalin-

ingrad to Serbia through the airspace of EU countries were banned from
transiting weaponry27. The Russians used a civil aircraft to hide the weap-
onry.

In order to hide origin of goods, ships can switch off their identification
systems.

Thus, during just one week of March of 2022, Windward Ltd, an Israeli sea
consulting company, counted 33 cases when Russian tankers switched off
their identification systems to conduct certain operations with non-Rus-
sian ships, which two times more than the number of “shadow activities”
before the sanctions were introduced28. Analysts of the sea company say
that identification systems are switched off with the view to transporting
oil to ships which are not under sanctions.
 15

Domestic companies also circumvented sanctions, in particular Ukrainian legis-

lation. This is about, for example, changing producer’s marking.

Thus, a firm from Kharkiv bought buses of the Pavlovskyi bus manufactur-
er, which is a part of the GAZ holding, reequipped them into school buses
and sold to Ukrainian educational institutions, with this firm rather than
the Russian factory is indicated as the producer29.

Changing packaging is a similar manipulation, when a Russian bar code is

changed into a Ukrainian one because goods brought from the Russian Federa-
tion are packaged in Ukraine.

“You may bring a ton of washing powder and package it in Ukraine, but you
may not bring a pack because a pack is subjected to sanctions and a ton
is not. Almost all companies have installed their packaging equipment in
Ukraine to pack fish, caviar, seafood, tea, coffee,” explained the Director
General of the Association of Suppliers of Commercial Networks30.

Origin of some goods is hidden through smuggling and customs violations.

In 2014, Ukrainian law enforcement officers detained trucks with fake cig-
arettes produced at Khamadey Tobacco Plant in the occupied Donetsk31,
and during several months of 2016 made 504 reports for the amount of 92
million hryvnias for attempts to illegally transport goods from Russia32.

Hiding a sanctioned company, its beneficiaries or links with its bene-

ficiaries relate to manipulations with companies, their founders or directors –
using offshore companies, “sale” of companies of a sanctioned person to its
business partner or family members, intermediary company or sham firm.

Persons or companies under sanctions often “sell” their business to non-sanc-

tioned business partners, family members or friends.
In 2014, a day before American sanctions were introduced against him, the
Russian oligarch Gennady Timchenko “sold” shares of the Finish Airfix Avi-
ation company and IPP Oil Products from Cyprus to his business partners.
Thus, these companies avoided restrictions in 2014, though in a year they
eventually found themselves under US sanctions33.

Non-sanctioned intermediary companies are also actively used to circum-

vent sanctions.
 16

In 2021, the Lipetsk Mechanical Plant, which was not under sanctions in
previous years, held negotiations on supply of a line to produce bullets
from Europe in the interest of the Russian Kalashnikov concern34. Rus-
sian media, in turn, described a scheme when Russian companies which are
“partners” of the Russian Ministry of Defense, Academy of the Federal Secu-
rity Service and Roskosmos bought processors and servers from the Amer-
ican network equipment Cisco company35. Such companies, as usual, have
symbolic authorized capital and supply insignificant amount of goods36.

As an example of using offshores,

one can refer to companies of the former Minister of Defense of Ukraine,

Pavlo Lebiediev, with the help of which the fugitive minister owned a hotel
in Crimea after the occupation of Crimea by Russia in 201437. The founders
of the construction company which built the hotel included several off-
shore companies from Panama, Belize, British Virgin Islands, which helped
the company to circumvent the sanctions introduced by the European Un-
ion since the given offshore jurisdictions did not publish data of company
owners and failed to impose sanctions on Russia.

Sometimes sham companies are formed to circumvent sanctions.

Thus, media suspected that the sale of the Lukoil-Ukraine was fictitious
because the Austrian company which had bought this company was under
control of the Russian Lukoil38. The buyer as well as their mother company
were registered just a couple of months prior to the purchase, and one of
the CEOs cooperated with the Russian Lukoil company before. Moreover,
the sell was a surprise for the market, nobody expected that international
investor will enter into business in a country that is at the war.

Hiding final destination of goods has to do with documentation, in particu-

lar indication of other parts as a final destination of ships, ignoring the final
destination point in documents, etc.

For example, when a competition to lay an underwater cable between

Crimea and Russia was held, the customer did not specify in the docu-
ments that the work had to be performed in the peninsula which was under
sanctions, but mentioned only a strait without a name between a certain
Western and Eastern peninsulas”39.
 17

Conducting business activities in non-sanctioned jurisdictions. The

bulk of the schemes within this category has to do with registration of compa-
nies in the territory of Russian instead Crimea as American and European sanc-
tions ban any cooperation with Crimean businesses.

Such a scheme was used, for example, by Ukrainian oligarchs Dmytro Fir-
tash, who leased the Crimean Titan factory to a Moscow enterprise regis-
tered in the name of trusted persons, and Rinat Akhmetov, who passes the
company with the largest dry dock in Sevastopol over to his Moscow circle40.

Conducting business activities by foreign companies in the occupied

Crimea through local retailers. In this case it is mostly about Western compa-
nies which cannot sell their goods to Crimea, which is under sanctions. However,
their produce often is found there as a result of cooperation with local retailers.

Thus, medical equipment of the German brans Siemens in the amount of

2.8 million euros happened to be in Yalta in 2017 (it was bought from the
Russian firm Siemens Healthcare)41. In 2018, tomographs of the American
General Electric found their way to Balaklava and Sevastopol via the same
scheme42.

Conducting business activities by foreign companies in Russia and

the occupied Crimea through their subsidiaries. This category has to do
with creation of chains of subsidiary companies with the help of which Western
companies conduct their activities in Russia.

For example, one of “the subsidiaries” of the German air company Deutsche
Lufthansa owned 49% of the Russian company providing catering on board
of plane flying to Crimea43. European sanctions banned investments into
the tourist infrastructure of the peninsula. In turn, Metro Group from Ger-
many and Netherlands own a Moscow subsidiary which became an owned
of Metro mall in Simferopol after Crimea was occupied by Russia44. The
Czech manufacture of Primoco UAV planned to open a plant in Russia in
2016 because supplies of UAV were prohibited under the EU sanctions as
dual-use goods45. The Czech managed to have a subsidiary registered and
even received first orders before the site was officially launched46.

Circumventing sanctions through third countries or their resident

companies has to do with evasion of sanctions through countries which have
not imposed sanctions against Russia.
 18

Thus, India enabled Russia to invest into its corporate debt through an In-
dian bank after the sanctions were introduced in 202247, and in 2019 paid
the Russian Federation with rupees instead of dollars to buy air defense
C-400 systems48. In turn, China offered its alternative to SWIFT49, to Rus-
sian, with Chinese factories being capable of remark Russian gold bars
with the view to their further selling and avoidance of restrictions50.

Circumventing sanctions through adoption of legislative changes.

In 2016, Russia adopted a law under which all crediting institutions were
forced to take all their transactions to a new Mir payment system51. The pay-
ment system marked transactions from Visa/MasterCard from Crimea as
Russian and in this way circumvented the US ban on transactions in Crimea.

“Companies say that they de jure adhere to sanctions, but de facto they
do not control transactions,” research of the Media Initiative for Human
Rights says.
 19

5. Ignoring sanctions

The monitoring of mass media in the matter of breaking sanc-

tions against Russia as well as gaps in the sanctions policy have
demonstrated that these are not only the aforementioned ways
which are used to avoid liability for cooperation with Russia.
Sometimes companies do not resort to any ways to circumvent
restrictions because they merely ignore them.

Unfortunately, Ukrainian companies are not an exception. Despite the ban to

import into the customs territory of Ukraine of good of Russian origin, custom-
ers of the Furshet internet-shop can order any goods and choose any producer,
including Russia52.

As far as other countries or residents are concerned, a friend and associate of

Vladimir Putin, Vladislav Surkov, was banned from entering countries of the Europe-
an Union in March of 2014. However, this did not prevent him from visiting Greece,
which was legally obliged to control enforcement of this ban, in two years53. Be-
sides, Mr. Surkov was seen during the “Normandy Quartet” meeting in Berlin54.

Mass media also report that the main Russian manufacturer of air defense sys-
tems Ulyanovsk Mechanical Plant bought measuring equipment from German
corporations Rohde & Schwarz. Scientific and production Geofizika enterprise,
which develops optoelectronic systems for Russian space forces, air craft, navy,
ground forces bought spare parts from the German firm PFERD. The scientif-
ic and production Strela association, which develops military radars, regularly
bought Optimum machinery. The Kirov machine-building company, which pro-
duces air defense missiles, received equipment from the German Trumpf cor-
poration and German-Japanese DMG Mori company55.

Investigate Europe published information that in the period from 2016 to 2018
Bulgaria concluded two contracts on export of special military and sea equip-
ment, accessories and components in the amount of 16.5 million euros. The
Czech Republic, for example, annually exported light air craft, unmanned aerial
vehicle, air engines and equipment in the period from 2015 to 201956. The Euro-
pean investigation also exposes non-concealed sale of military goods to Russia
by Italy, Germany, France and other countries. It is only after the full-fledged in-
vasion that all loopholes which made trade of military equipment with the Rus-
sian Federation possible were shut down.

Also, the German corporations Adidas and Puma indicated Crimea as the Rus-
sian territory on their websites and conducted their activities on the peninsula
contrary to this ban57.
 20

A representative of the Italian Bertolaso, which supplied equipment to a Crime-

an wine company Zolotaya Balka for a plant in Sevastopol said that “the con-
tract was signed with Russia, in particular Zolotaya Balka agricultural firm. First,
the order was placed with Zolotaya Balka, which had its office in Crimea, then,
when the address changed, we signed the final sale contract with Russia on a
request of our client.”

A representative of Bertolaso said, “we know that our goods were intend-
ed to be installed at a Crimean enterprise… If you ask me about the sanc-
tions and ethical aspect of this, I’ll exit the conversation.58”

At the beginning of 2022, mass media published information that the Russian
military manufacturers have set a record of supplies to ammunition to the United
States. It was about the import of the Russian arms for the amount of 157.9 million
dollars. They also say that the American sanctions introduced in August of 2021
restrict further licensing of the arms and ammunition from Russia. So, American
companies were trying to buy as much ammunition for their clients before the
sanctions were fully introduced59.

The Washington Post issued in March of 2022 says that quite a few legal and
physical persons subjected to the sanction can still be found on popular social
networks of Facebook and Instagram. This became the subject matter of claims
filed in December and February alleging that, allowing such accounts, the mother
Meta company was “by negligence or deliberately” involved into violation of the
US legislation on sanctions. The claims also refer to publications which allegedly
recruit mercenaries and extort money with the view of supporting pro-Russian
separatists60.
 21

6. Conclusions and recommendations

While researching gaps in the sanctions measures and schemes to circumvent
them, the group of Trap Aggressor analysts singled out some main categories
which can be referred to weak points of the sanctions:
• gaps in the sanctions policy;
• selectivity of sanctions;
• schemes to circumvent sanctions.

In addition to the aforementioned categories, a number of violations is united

under a separate category which is ignoring sanctions.

We have concluded that the sanctions constitute an instrument to influence

Russia only provided that the imposing party controls adherence to bans and
restrictions, with persons who dare to breach sanctions held legally liable.
However, the results of our research have demonstrated the imperfect nature
of the sanctions due to numerous violations. If before the full-scale invasion
of Ukraine such violations were often silenced internationally, today it is obvi-
ous that the Russian Federation is a threat not only for Ukraine, but also for the
whole democratic world. That is why cooperation with the aggressor must not
be justified by economic interests. The only decision to save the world from the
conquering Russian policy still is to restrain its economic development by over-
coming the weak point of the previous restrictions.

We believe that, considering the aforementioned reasons, the anti-Russian

sanctions in the form in which they existed before February 24, 2022, failed to
fulfill their main purpose which is to contain an aggressor. Therefore, the world
democratic community needs new effective decisions which would ensure irre-
versibility of responsibility for any breach of sanctions.

Based on the conducted research, the group of Trap Aggressor analysts has
elaborated the following recommendations which will enable to make the sanc-
tions measures against Russia more effective:

Internationally:
1. To promote full embargo on economic and financial business relations with
Russia, primarily on crude oil, petroleum products, gas and coal;
2. To promote prohibition for Russian businesses, Russian cargoes to use the
transportation and sea ports of the European Union, USA, Great Britain and
other countries which introduced sanctions against the Russian Federation;
 22

3. To promote sanctions against supplies of dual-use goods;

4. To uphold propositions of the European Commission in regard to recogni-
tion of breaching the sanctions regime a crime at the level of the European
Union;
5. To promote the format of international cooperation in terms of the moni-
toring and coordinating sanctions against aggressors.

In Ukraine:
1. To consider a possibility of comprehensive improvement of sanctions legis-
lation and creation of a body at the Council of National Security and Defense
for coordination of the sanctions policy, non-stop monitoring and assess-
ment of economic, political, legal and other circumstances of using, chang-
ing or lifting sanctions.
 23

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 25

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 26

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 27

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 28

59
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Pro-Russia rebels are still using Facebook to recruit fighters, spread propaganda.
60

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nology/2022/03/10/russia-rebels-sanctions-facebook/?utm_campaign=Tech-
Stream&utm_source=hs_email&utm_medium=email.
 29

SUPPLEMENT 1

Methodology

While conducting this research, the group of Trap Aggressor analysts sought
to single out and analyze gaps in the sanctions policy of the West, schemes to
circumvent these restrictions, as well as systematize the obtained results with
the view to identifying reasons why the sanctions introduced against Russia
are so far from being perfect.

In the first phase of the research, the group of Trap Aggressor analysts monitored
reporters’ investigations, analytical materials and news related to the sanctions
against Russia which had been published in Ukrainian and foreign media in 2014-
2022. Materials about schemes to circumvent sanctions as well as their draw-
backs and gaps were searched via search engines such as Google, Yahoo and
Yandex, and also on YouTube. During the search, we collected 160 cases from
85 sources in the Ukrainian, English and Russian languages. We have systema-
tized all these materials into the analytical chart in Supplement 2 under the main
criteria such as “case”, “scheme” / “gap”, source, publication date.

In the second phase of the research, Trap Aggressor analysts conducted con-
tent-analysis of the collected materials. Citations from these materials linked
through details of one case that describes gaps in the sanctions legislation,
evasion of the sanctions through different schemes, selectivity of sanctions or
ignoring them were determined as units of the content-analysis. Thus, we have
divided all materials into four blocks, namely gaps, schemes, selectivity and ig-
noring. Each block, in its turn, has been divided into categories, with some of
them being divided into subcategories.

It is worth mentioning that the given categories and subcategories are not ex-
haustive for systematization as some materials can be referred to two-three
categories at the same time. The number of instruments which were employed
to annihilate influence of the sanctions on Russia can be higher than the number
used in this research. However, the group of Trap Aggressor analysts intended
to single out as many possible schemes and gaps as possible, and, therefore,
prioritized details and peculiarities rather than broad summaries.
SANCTIONS POLICY AGAINST
RUSSIA IN 2014-2022:
Gaps and Evasion Schemes
Authors:
Anastasia Khymychuk
Roman Steblivskyi
Anna Pashkina

The analysis was prepared with the support of the International

Renaissance Foundation. The material reflects the position of
the authors and does not necessarily coincide with the position
of the International Renaissance Foundation.