Sanctions aren’t working: How the West enables Russia’s war on Ukraine

BERLIN — At its summit this week, the European Union is threatening to name and shame more than a dozen Chinese companies that, it claims, are supplying critical technology to equip Russia’s war machine.

But what about the Western companies that make dual-use and other advanced gear that is subject to sanctions and yet, according to an analysis of wreckage found on the Ukrainian battlefield, is used in Russian Kalibr missiles, Orlan drones and Ka-52 “Alligator” helicopters?

Radio silence.

So here’s a trivia question for you: Which company is the leading maker of the so-called “high-priority battlefield items” trafficked to Russia that the Western coalition wants to interdict?

If you said Intel, then go to the top of the class: According to the sanctions team at the Kyiv School of Economics, the U.S. semiconductor giant again leads the pack this year. It’s followed by Huawei of China. Then come Analog Devices, AMD, Texas Instruments and IBM — all of which are American.

Russian imports of microelectronics, wireless and satellite navigation systems and other critical parts subject to sanctions have recovered to near pre-war levels with a monthly run rate of $900 million in the first nine months of this year, according to a forthcoming report from the Kyiv School’s analytical center, the KSE Institute.

All of this indicates that, while Western sanctions imposed over Russia’s full-scale invasion on February 24, 2022, had a temporary impact, Moscow and its helpers have largely succeeded in reconfiguring supply chains — with the help of China, Hong Kong and countries in Russia’s backyard like Kazakhstan and NATO member Turkey.

That in turn begs the question as to whether, as the EU strives to deliver a 12th package of sanctions against Russia in time for a leaders’ summit on Thursday, the bloc is serving up yet another case study for the definition of insanity often attributed to Albert Einstein: doing the same thing over and over again and expecting a different result.

For Elina Ribakova, director of the international program at the KSE Institute, the Western private sector must also be held to account. It should, she argues, be required to track its products along the entire value chain to their final destination — just as banks were forced to tighten anti-money laundering controls and customer checks after the 2008 crash.

“We have a policy in a void. We have put it on paper but we don’t have any infrastructure for the private sector to comply — or for us to check,” Ribakova told POLITICO. “We need to have the private sector enforce and implement this.”

Intel, responding to a request for comment, said it had suspended all shipments to Russia and Belarus, its ally, and that it was compliant with sanctions and export controls against both countries issued by the U.S. and its allies.

“While we do not always know nor can we control what products our customers create or the applications end-users may develop, Intel does not support or tolerate our products being used to violate human rights,” the company said in a statement. “Where we become aware of a concern that Intel products are being used by a business partner in connection with abuses of human rights, we will restrict or cease business with the third party until and unless we have high confidence that Intel’s products are not being used to violate human rights.”

Anecdotal evidence

The KSE Institute’s findings bear out, in a systematic way, the anecdotal findings of POLITICO’s own reporting this year: In our investigations, we showed how U.S.-made sniper ammunition finds its way into Russian rifles, and how China has positioned itself as Russia’s go-to supplier of nonlethal, but militarily useful, equipment. 

As for Europe, while its companies may not feature among the top makers of critical technology sold to Russia, its industrial businesses are facing growing scrutiny over the supply of machinery and spare parts — often via third countries like Kazakhstan that have seen suspicious surges in imports.

It’s here, also, that Europe has fallen down.

In imposing sanctions, it’s a case of “all for one” — the bloc has jointly agreed on and implemented measures affecting everything from energy to banking.

But enforcement is a matter for individual member countries. Some are on board with the program. Others, like Hungarian Prime Minister Viktor Orbán, overtly sympathize with Russia. And others, still, are conflicted — as when it emerged that the husband of hawkish Estonian premier Kaja Kallas owned a stake in a freight firm that still did business in Russia.

Then there are countries like neutral Austria, with historical ties to the Soviet military-industrial complex that have left politicians and law enforcement with a huge blind spot.

That’s important because, as independent researcher Kamil Galeev put it to POLITICO, Russia today still upholds an organizing principle dating back to the early Soviet era that civilian industry should “be able to switch 100 percent to military production should the need arise.”

Justice delayed

Despite evidence of widespread breaches, only a handful of sanctions cases are being pursued by European law enforcement. Among them, German prosecutors have secured the arrest of a businessman suspected of supplying precision lathes to two Russian companies that make sniper rifles.

But the wheels of justice turn slowly: The arrest in August of Ulli S. — prosecutors, following German tradition, have not published his full name — relates to the initial imposition of Western sanctions over Russia’s occupation of Crimea and eastern Ukraine in 2014.

The press had already cracked the case by the time the suspect appeared in court, naming DMG Mori — a Japanese-German joint venture — as the supplier. One customer was Kalashnikov, maker of the famed AK-47 rifle. The other was Promtekhnologia, which has been sanctioned by the U.S. and featured in POLITICO’s sniper bullets investigation. Promtekhnologia makes the Orsis sniper rifle promoted by action movie actor Steven Seagal — now a Russian citizen — and used by President Vladimir Putin’s men in Ukraine.  

DMG Mori, formerly called Gildemeister, suspended sales to Russia after the full-scale invasion. But, because it has closed down its operations in the country, it says it is no longer able to keep control over its machines made there (although an internal probe did find that they were being used for civilian purposes). The German Federal Prosecutor did not respond to a request for comment.

The real bad actors 

It’s not just in stopping imports to Russia that sanctions are falling short of their stated intention.

Russians with close ties to Putin — and their money — continue to be more than welcome in Europe despite the death and destruction his regime has unleashed. His former wife, Lyudmila, and her new partner have splashed the cash on luxury property investments in Spain, Switzerland and France, as a POLITICO investigation found at the start of the year.

And when the European Council — the intergovernmental branch of the EU — does sanction Russian business leaders suspected of aiding and abetting the Putin regime, it has often relied on slipshod evidence that makes the decisions easy to challenge in court, POLITICO has also found.

Nearly 1,600 Western multinationals continue, meanwhile, to do business in Russia. Many that announced they would pull out have struggled to do so, as POLITICO discovered when it investigated Western liquor companies that said they had quit Russia — only to find that their booze was still freely available. And some companies that did stay, like Danone and Carlsberg, have been shaken down by Putin and his cronies — a case of Russian roulette, if ever there was one.

With the EU apparently lacking the means, or the political will, to do more to economically isolate Russia, the bloc is sending its sanctions envoy, David O’Sullivan, on a mission to apply moral suasion to countries that are, as he diplomatically puts it, “not aligned” on sanctions.

On the high-priority battlefield technology, Sullivan told POLITICO’s EU Confidential podcast last month that the EU has had “a limited success — but in an area which is absolutely critical to the defense of Ukraine.”

More broadly, he said: “The sanctions are a sort of slow puncture of the Russian economy. Perhaps not the blowout that some people initially predicted, but … the air is escaping from the tire and sooner or later the vehicle is going to become impossible to drive.”

To be fair, O’Sullivan isn’t overselling the efficacy of sanctions. And he may ultimately be proven right. 

But he only will be vindicated if Western governments do a better job of holding their own businesses to account in stemming the flows of technology, equipment and spare parts that sustain Putin and his war of aggression.

That will come down to whether they have the will to enforce their decisions. And the evidence so far is that they don’t.