The US, Europe and other key allies of Ukraine are preparing fresh penalties against Russia to try and tighten the net on President Vladimir Putin’s economy more than 14 months into his war, according to people familiar with the matter.
(Bloomberg) — The US, Europe and other key allies of Ukraine are preparing fresh penalties against Russia to try and tighten the net on President Vladimir Putin’s economy more than 14 months into his war, according to people familiar with the matter.
The packages would be individually implemented but coordinated. A key goal is to close loopholes in existing penalties and tackle overall sanctions circumvention, the people said, asking not to be identified discussing sensitive matters.
The plans will be unveiled around a Group of Seven leaders meeting in Japan later this month.
Multiple rounds of sanctions and other economic penalties imposed on Moscow since its invasion of Ukraine have battered Russia’s economy but not delivered a knockout blow, while Putin shows no sign of halting his war. Russia’s energy revenues are close to exceeding their target level in the face of the oil price cap imposed by the G-7 and European Union partners, helping the government to stabilize the budget even as military spending has surged.
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The Bank of Russia forecast on Friday that the economy will grow as much as 2% this year as the impact of sanctions fades, with gross domestic product reaching pre-war levels by the end of 2024, far earlier than many economists had forecast. Russia’s GDP declined by 2.1% in 2022 compared to a year earlier, confounding predictions early in the war that the restrictions would send the economy into a deep slump.
The G-7 summit will provide a forum for a discussion on what has worked so far and what options remain in terms of pressuring the Russian economy further. But with swathes of Russia’s trade and financial sectors already sanctioned, finding new areas to significantly squeeze Putin’s ability to fund his war isn’t easy.
The EU’s package, the bloc’s 11th since February 2022, will mostly focus on the loopholes in sanctions already enacted, according to officials. Proposals on the table include banning many goods from transiting through Russia and targeting vessels that switch off navigation systems.
The measures, which would need the backing of all EU member states to be adopted, would also impose new sanctions on about three dozen people.
The US and Japan are preparing their own packages, the people said. Canada is working on measures relating to human rights, including the alleged abduction of Ukrainian children, and penalties on Russia’s defense industry.
While each package may differ in its content, due in part to the regulatory systems in each country, allies have been coordinating their respective responses ahead of the summit, the people said.
Much of the G-7’s attention is focused on cracking down on Moscow’s ability to evade or circumvent existing measures, with an emphasis on hundreds of restricted goods and technologies used for military purposes.
That effort has involved applying diplomatic pressure on other countries through which trade to Russia has spiked, enhanced monitoring of key goods and targeting companies that may be helping Moscow — intentionally or otherwise — to get around restrictions.
G-7 leaders are expected to further hone those efforts at their meeting in Hiroshima, while also expanding restrictions on technology and equipment used by Russia’s military and industry.
Ahead of the summit, G-7 states are also discussing flipping the existing sanctions regime around, with all exports banned unless exempted, Bloomberg previously reported.
That is seen as especially problematic for the EU, however, where the bloc would eventually need the backing of all member states. If the new criteria are endorsed by G-7 leaders, exemptions would likely include agricultural goods, food and medicines.
The G-7 leaders are also expected to make progress on a mechanism to track and trace Russian diamonds across borders that could eventually pave the way for restrictions on that trade.
–With assistance from Ewa Krukowska.
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