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EU sanctions on Russia. Here are the effects. Study for the European Parliament

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Banks use old credit cards, cars are produced without important components and smartphones do not work properly – these are some of the conclusions of a report on the impact of EU sanctions on the Russian tech sector. The study was prepared by the think tank of the European Parliament (EP).

In the European Parliamentary Research Service’s report “Sanctions on the Russian tech sector: how effective are they?” it was assessed that “severe sanctions imposed by the West on Russia due to the invasion Ukraine had a significant impact on the Russian tech sector.

“Russia seeks to circumvent the sanctions, and countering this requires consistent implementation and enforcement of the restrictions. Further coordination in this regard would increase the impact of existing sanctions and should be a step towards ending the war,” the EP think tank said.

The report further indicated that “since the outbreak of war European Union (EU) and its Western allies have imposed nine packages of sanctions, all aimed at limiting Russia’s ability to continue the war. It added that the sanctions “include dual-use technologies that can be used for both civilian and military purposes.”

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“Export controls were imposed on semiconductors, aircraft components and military equipment. The sanctions covered goods, more than a thousand people and entities. It is worth noting that the eighth package introduced a total ban on the purchase of cryptocurrencies and the provision of information technology (IT) services and IT consulting. The ninth package adopted in December 2022, introduced additional bans on the export of drones, drone motors, laptops and generators to prevent their use by the Russian army,” the report explains.

Sanctions and their impact on the Russian economy

The report indicated that in terms of oil and gas profits, despite the sanctions, Russia “has shown a certain degree of resilience to the crisis in the short term.” However, it was noted that the economy, which in 2021 was 11th in the world, is entering a recession as a result of “devastating sanctions” and “this situation is expected to worsen in the future.”

In the case of technology, despite the government’s declared intention to gain autonomy in this area, “the impact of Western sanctions could probably set back Russia’s technological progress by decades.”

As for “digital shortages in Russian everyday life”, the EP think tank reports, “banks use old credit cards due to the lack of semiconductors, cars are produced without important components, and smartphones do not work properly due to interference due to the fact that Nokia and Ericsson withdraw from the market.

“Mobile networks are slower, and the range and quality of communication has decreased. Recently, senior managers at Yandex (Russian Google) were subject to EU sanctions. In August 2022, the company was sold to the state, which was a clear signal that the Russian president Vladimir Putin wants to gain more control over the internet,” the analysis wrote. It was also noted that Russia banned Twitter and Facebook in March last year to limit freedom of expression online.

The EP think tank pointed out that there is a “technological brain drain” in Russia. “It is estimated that in the first six months of the war, about 250,000-500,000 skilled workers left Russia to pursue their careers elsewhere. (…) According to the Russian deputy interior minister, as early as June, 170,000 IT specialists were missing in the country” – it was emphasized in the report.

Russian attempts to circumvent the sanctions

In addition, attention was drawn to the “lack of available semiconductors for the Russian army.” This is reflected in the production of drones, missiles and military communication systems. “Due to their shortage, Russia has difficulties in supplying its army and air force with this equipment and turns to third countries, such as Chinawhich often provide less advanced components.

It added that Chinese “manufacturers have concerns about deepening ties with Russia due to the risk of being driven out of Western markets and exposed to secondary US sanctions.”

Another example is Iran, which supplied Russia with Shahed-36 drones used in the war with Ukraine. “A recently formed U.S. task force is investigating the presence of U.S. technology in these drones, which are believed to have been smuggled or taken from kitchen appliances,” the report said.

How to stop sanctions circumvention?

It concluded that “Russia is still able to circumvent the sanctions, so better enforcement is needed.” It added that “Member States’ enforcement practices vary”, with “some consider violation of sanctions to be a criminal offence, others an administrative offence”.

It was pointed out that harmonizing rules on sanctions could help to combat loopholes while also serving as a deterrent.

Member States can improve the effectiveness of sanctions by being more involved in reporting and sharing information with each other.

Main photo source: EPA/YURI KOCHETKOV

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