As part of efforts to negotiate an end to the war in Ukraine, the Trump administration has offered to discuss the relief of sanctions on trade, hi-tech components, finance, and oil exports imposed by the Office of Foreign Assets Control.
The restrictions on state agencies and individuals are part of a coordinated network developed with the European Union (EU) and other allies which have helped reduce the growth of the Russian economy by 5% since the full-scale invasion. If the US breaks away it will not only risk rapidly reversing the campaign’s effects but would create a second front for enforcement for the EU.
A resumption of US trade with Russia would require Brussels to monitor re-export from the US, as well as directly sanctioned entities. And if Russia was allowed access to US financial institutions, the EU would have to create layers of monitoring for transactions with American banks and dollar-denominated trades, potentially including the SWIFT bank network.
It would also open up another market for cheap Russian gas and oil, which is already being traded by Moscow’s shadow fleet around the world, weakening the impact of sanctions.
The adjustments needed would add to the mounting pressure on Europe’s leaders over Russia, Ukraine, and the new US administration, and raise serious questions over the implementation and effectiveness of economic restrictions on Moscow.
There is no central institution in the EU for the technical implementation of sanctions, and restrictions are imposed largely at a national level, which have differing levels of capacity. The weakest link can render the whole system ineffective if goods or funds are let into the borderless EU market.
Sanctions are also decided through a unanimous vote by the bloc’s Council. Each member state will have to consider the utility of more punitive sanctions against Russia without the support of the US, given they would have only half the restrictive power in terms of market access.
EU leaders would also have the added pressure of deciding whether to add friction to their existing transatlantic trade relationships. Due diligence measures for all transactions would inevitably increase barriers with the US, which is the main trading partner for 20 out of 27 of the bloc’s members.
The political focus on austerity measures, economic growth, and the affordability of consumer goods across the continent means complicating trade is unlikely to be something EU leaders can afford. It is also likely to further sway individual member states, like Hungary, which have already opposed sanctions, fragmenting the EU stance.
If Europe wants to continue sanctions against Russia, it will need to find a way to centralize resources and share the enforcement burden among member states. The Anti-Money Laundering Authority offers a potential structure for doing so.
Any easing of US sanctions against Russia could also open the possibility of a two-speed Europe in which some member states decrease pressure on Moscow, breaking the bloc’s attempts to present a united front.
And if the US pressures Ukraine into accepting Putin’s terms, will Europe maintain sanctions against Russia, and for how long? At what point would the cost to the European economy outweigh the punishment to Russia?
These issues must be discussed now, to ensure the EU and its allies in the region are not caught off balance by unpredictable and rapid political maneuvers on the other side of the Atlantic.
Ēriks Selga is a Non-resident Fellow with the Digital Innovation Initiative and Transatlantic Leadership program at the Center for European Policy Analysis. He is a former Digital Innovation Baltic Fellow at CEPA and is currently a Council member of the Latvian Competition Council.
Europe’s Edge is CEPA’s online journal covering critical topics on the foreign policy docket across Europe and North America. All opinions expressed on Europe’s Edge are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.
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