Russian Elite Working Around EU Sanctions

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It seems not all sanctions are created equal. France just granted an entry visa to a sanctioned Russian Agriculture Minister, the same official denied entry by Germany in January. The European Union (EU) placed Alexander Tkachev on the sanctions list after Tkachev actively supported Russia’s annexation of Crimea. The list remains the same; the implementation apparently less so. The incident highlights the often complex connections that exist between the Russian elite and the EU. Simplification of these links should be in order.

Ties between the EU and the Russian elite run deep, especially in the finance sector. Russian money often winds up in European banks and luxury real estate. Louise Shelley remarks how money acquired through illicit means is often laundered by purchasing real estate in sought-after locations. Southern France, Switzerland, and Spain represent well-known locales for parking Russian money abroad. Aside from certain illicit elements, keeping assets abroad is an avenue for privacy and security.

In his first public address as a third-term president, Putin announced a repatriation campaign aimed at encouraging movement of assets back to Russia. What happened is quite the contrary. Since that speech, a net $330 billion left Russia in the form of capital flight. Financial institutions in the EU represent a way to hedge against risk, which includes political uncertainty, lack of transparency, and economic fragility. As an example, the newly released report on illegal asset raiding details the level of insecurity and pressure faced by companies in Russia.

It is based on these financial links that the EU implemented sanctions targeted at high-level officials. Essentially, the current power vertical in Russia is alive and well, at least trying to be. Dmitry Oreshkin, a political scientist based in Moscow, commented on the lack of incentives for the political elite to move away from the status quo and the official Kremlin rhetoric. The EU sanctions fit within this context.

The EU sanctions were meant to influence the direction of foreign policy. If Putin plays to an inner circle, then a shift in the priorities of key figures would influence policy. Counterargument here would be that a dissenting voice could simply be rotated out of the inner circle. However, replacing the whole contingent is not as easy as removing just one figure. In effect, top-level political and business leaders do wield power to influence policy, and it matters where their priorities lie.

However, certain elements within the EU political establishment seem reticent to prolong sanctions in July. In April, the French lower house of parliament passed a largely symbolic resolution calling on France to drop the sanctions. In a bid to encourage Hungary to back up anti-sanction rhetoric with concrete action, Russian Foreign Minister Sergei Lavrov recently met with his Hungarian counterpart. Foreign policy is often complex and rarely clear-cut. In this particular case, the EU should opt for simplicity.

It makes little sense to take up valuable time reevaluating sanctions when the Minsk agreements, the implementation of which is the basis for the sanctions, have clearly not been met. For all the criticism directed at the West, the Russian elite continue to vacation and travel in the EU, for business and for pleasure. It is a status symbol to spend winters in the Alps and summers at the Côte d’Azur. If the EU can affect the cost-benefit analysis of targeted top-level officials, i.e. limited access to the EU, it should.

As such, the EU should stay the course and refrain from devising new conditions for sanctions relief. To change gear now would be to delegitimize EU credibility. It would both send a signal that the EU lacks resolve and suggest that waiting out any unwelcome EU policy is a viable strategy option. Russia likely calculated that an intervention and then a withdrawal from eastern Ukraine could provide leverage to drop sanctions imposed due to the annexation of Crimea. Moscow could simply wait out the sanctions.

If anything, the EU should strengthen its position and synchronize sanctions with Washington, whether that entails additional sanctions from the EU, less sanctions from Washington, or a combination of the two. Washington and Brussels already coordinate on some level. The U.S. Treasury Department imposed added sanctions on Russian entities the day after the EU renewed sanctions this winter. Concerted transatlantic efforts would put more pressure on the Russian political elite to change their calculus.

Alexander Tkachev considered attendance at an animal health conference in Paris as a top priority. Motivations that prompted France to disregard sanctions and grant him the visa remain less clear. The EU chose to implement sanctions as the least bad option. So far, sanctions remain the most effective diplomatic tool to affect Russia’s foreign policy toward Ukraine. The Russian political elite is already predisposed to maintain the status quo. The EU should help create incentives for change.

Photo Credit: Kremlin

Pikria Saliashvili recently finished a M.A. in International Affairs at the Elliott School of International Affairs. She focuses on international security issues. Her interests include exploring the intersection between business and politics.

 

 

 

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