Swedish exports to Russia fell sharply after the country’s invasion of Ukraine in February last year. At the same time, trade flow to former Soviet countries close to Russia increased. Which many residents believe indicates that penalties are being approached.
Tom Keating is an England-based researcher and sanctions expert at the CFCS (Center for Financial Crime and Security), part of the European think tank Rossi. According to him, there could be several explanations for the change in trade routes, but most likely it is due to circumventing sanctions to some extent.
It is certain that countries that have historically close economic relations with Russia are vulnerable to serving as gateways for imports into Russia.
Do sanctions work?
But whether this indicates that sanctions are ineffective is difficult to answer.
Some might say that the fact that Russia is having to find alternative ways to bring in goods is evidence that these ways are having an impact. But I would rather argue that this indicates that the sanctions are not effective, and that the goods are taking a different route to Russia.
– At the same time, many economists point out that the Russian economy is suffering greatly, so they have an influence in general. The only question is, do they have the effect we want? Probably not, because Russia still has access to components that should have been cut off by sanctions months ago, Keating says.
Ignorance has no excuse
He believes the problem is that companies today can claim they don’t know whether their goods will end up in Russia or not.
– Private companies usually look at the law and pay lawyers to advise them on how to act so as not to violate it. I think many companies that have done business with Kazakhstan, for example, will be able to show you their legal analysis that says they did nothing wrong, even if the products ended up in Russia without their knowledge.
To achieve this, legislation must be tightened, Keating says.
Ignorance should not be a legitimate excuse. If you say “I checked everything again with my lawyers,” but your products still end up in Russia, you should be held responsible and prosecuted. I think companies within the EU can claim innocence very easily today.
“Cheaters run away”
After reviewing Sweden’s handling of sanctions as part of a research project aimed at mapping how EU sanctions work, Tom Keating sees Sweden as divided. Responsibility for enforcing sanctions falls on several different authorities without effective coordination. This means an increased risk for fraudsters to escape sanctions.
– It is clear that the capacity of law enforcement agencies to investigate sanctions violations is very low. If there is a sanctions violation, will the authorities detect it? Probably not.
– But there will always be loopholes in the system. Therefore, I do not think it is possible to completely stop imports to Russia from the EU, although it would be nice to think so. Russia will always try to find other ways.
Punishments are like circuit breakers
The question is rather how far Russian imports can be reduced, says Tom Keating.
-If we can make the Kremlin think twice before they unleash robots on Ukraine because they can’t safely replace robots, that would be a good thing.
Sanctions, as Keating believes politicians want to give the impression, are not a switch that can be turned on or off.
-At best, it’s a slow tool that tightens the screws a little more each time it discovers a new target.
Increased exports from Sweden to the immediate area of Russia in January-May 2023 compared to the same period in 2021:
Armenia: Increase from SEK 27.8 million to SEK 66.4 million
Georgia: Increase from SEK 52.0 million to SEK 133.8 million
Kazakhstan: Increase from SEK 532 million to SEK 1.3 billion
Kyrgyzstan: Increase from SEK 34.9 million to SEK 57.4 million
Uzbekistan: Increase from SEK 80.6 million to SEK 91.7 million.
Source: Statistics Sweden
In mid-August, the government commissioned the Commerskolegium to survey Sweden’s growing exports to Russia’s neighboring region.
The reason is that it can be suspected that the increase in exports is due to failure to fully comply with the sanctions. Mapping aims to analyze how and why trade patterns change.
The mapping aims to give the government in-depth knowledge about how trade patterns are changing and how the changes relate to sanctions.
The Chamber of Commerce must conduct a quick investigation so that any action can be taken quickly.