Leaked Mairead McGuinness letter warns of Russian sanctions evasion

Russia continues to buy European Union goods for its invasion of Ukraine by getting around sanctions through indirect trade via other countries, Ireland’s Commissioner Mairead McGuinness has warned in a leaked letter.

The letter to EU member states urges them to prevent the evasion of sanctions on Russia by holding companies to account, warning that Europe’s “credibility” is at stake.

“Russia still manages to acquire western sensitive technology for its military. To put an end to this, immediate, firm and concerted action by all of us is necessary,” reads the letter, seen by The Irish Times.

It states that the Commission will soon share details on how companies are evading sanctions, and will follow up in April to see whether EU governments have taken action.

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Direct exports from the EU to Russia of goods and advanced technology that can be used on the battlefield or to develop Russian military systems plunged by 97 per cent in 2023 compared to the same period a year earlier, dropping from €2.8 billion to €69 million, according to the letter.

Some subsidiaries of EU companies located outside the bloc still sell battlefield items that can be re-exported through other countries to Russia, the letter warns

However, a €2.5 billion rise in exports of such goods from the EU to other countries where they are “often re-exported to Russia” made up the difference, it warns.

It states that EU sanctions are being circumvented by exports to Armenia, Kazahstan, Kyrgyzstan, Uzbekistan, Turkey, the United Arab Emirates and Serbia, which are then sent onwards to Russia.

Such exports grew to €5.6 billion from €3 billion, “compensating for the loss of direct ... trade with Russia”, the letter reads. “This is an extremely worrying development that we must tackle as a matter of urgency.”

In addition, some subsidiaries of EU companies located outside the bloc still sell battlefield items that can be re-exported through other countries to Russia, the letter warns.

Trade information on imports by Russia of sanctioned products that are made by the subsidiaries of EU companies based outside the bloc suggests “clear patterns ... that may suggest sanctions circumvention”.

The letter urges EU governments to warn operators 'of the risks' involved in exporting sanctioned goods to interim countries and to tell financial institutions 'that they are legally bound by EU sanctions'

The letter warns that executives and staff members who are EU citizens can be held responsible for breaching sanctions regardless of their location, and that EU parent countries that retain influence over subsidiaries outside the bloc can also be held to account.

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The EU can impose asset freezes or ban the sending of money to those found in breach of sanctions, as well as adding their names to a list of operators that cannot be sent sanctioned goods from the EU.

The letter urges EU governments to warn operators “of the risks” involved in exporting sanctioned goods to interim countries and to tell financial institutions “that they are legally bound by EU sanctions”.

The Commission has told EU countries of the names of operators and companies that exported banned products to Russia from interim countries, and has urged them to “exercise vigilance” “in view of the risk that the products may be re-exported to Russia”.

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Countries should “hold accountable EU operators that have ben actively undermining EU sanctions, wherever they are active, and publish the more illustrative cases and penalties to inform the general public and deter circumvention”.

The Commission is prepared to “target entities and individuals presenting a continuous high risk of acting to undermine the EU sanctions framework”, the letter warns.

Ireland was among 13 member states that authorised exports to Russia under exemptions or derogations allowed under the EU’s sanctions regulation, according to the letter. In total, EU countries allowed €569 million in exports under exemptions or derogations, and refused to allow exports worth €2 billion.

Ms McGuinness, whose term is due to end this year though she has expressed a wish to stay on as Commissioner, is to discuss the letter with ministers from member states in the coming week.

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