When the United States announced a potential ceasefire between Russia and Ukraine in the Black Sea, Moscow responded with extra demands. The Kremlin’s wishlist was not only very odd, but it included concessions that were impossible for the US to deliver.
Moscow might have deliberately dragged out negotiations to test what exactly US President Donald Trump was prepared to concede to achieve a peace deal. However, one should not dismiss the possibility of plain and simple incompetence.
To agree to a partial ceasefire, Russia demanded sanctions be lifted from:
- State-owned Rosselkhozbank and other financial institutions involved in the food trade (including fish products). Specifically, they should be reconnected to the international payments service SWIFT and have the necessary corresponding accounts restored;
- Companies producing and exporting food and fertilizer, as well as insurance companies working with food and fertilizer cargoes;
- Russian-flagged ships engaged in food or fertilizer exports and port services for these vessels;
- Supplies of agricultural equipment to Russia, including other goods used to produce food and fertilizer.
Even if it wished, the US could not wholly fulfill these demands. And if the Kremlin understands this, then its list is simply a stalling tactic to frustrate talks while continuing the war (which it is doing with some vigor).
However, it’s not a given that those who drew up this list understand its impossibility. From a foreign policy perspective, the list makes some sense regarding efforts to stabilize food prices and score points in the eyes of the so-called Global South.
Financially, there is also some sense. Freeing Rosselkhozbank from sanctions would make it possible to trade US dollars even if all other countries maintain sanctions. This would reduce costs, uncertainty, and risks for intermediary banks.
But that’s where the logic appears to end. Firstly, neither food nor fertilizer exports have been sanctioned. The European Union (EU) has repeatedly tried to restrict fertilizer exports from Russia, but has been frustrated by concerns about food costs.
Repeated mentions of the Russian fishing industry in Moscow’s demands were also strange. The US banned fish imports from Russia in March 2022, but defined the country of origin as the place of final processing. Subsequently, Russian fish began to enter the US via factories in China. Russian frozen fish reaches Europe’s processing factories almost without restriction.
It’s true that even unsanctioned Russian fishing and fertilizer companies face higher transaction costs — not every port will accept Russian cargoes, insurers are hard to find, and companies have to use intermediaries. A formal rehabilitation of their owners would remove these obstacles. But, again, it’s hard to imagine why this would be a priority for the Kremlin. There may be another explanation, however. The Kremlin’s wishlist may reflect the personal interests of influential, private individuals.
Another oddity was the demand to reconnect Rosselkhozbank with SWIFT. Of course, Washington could easily remove sanctions from Rosselkhozbank and arrange for the necessary corresponding accounts to be opened.
But the White House cannot reconnect the bank to SWIFT: the headquarters of this financial system is in Belgium, where it is regulated by a dozen central banks, and the EU. What’s more, the bank can live without SWIFT for trade and financial operations.
It is unclear why this evidently impossible demand was raised. Either those who requested it (likely from Russia’s Agriculture Ministry) don’t understand the details of international finance, or the Kremlin may hope its demand would encourage the US to strong-arm Europe and so deepen the transatlantic rift.
Russia’s demands are a sign that it would be willing to countenance a step-by-step lifting of sanctions (rather than stubbornly demanding their immediate removal). But they are unfulfillable and difficult to understand.
They are either a tactic to frustrate negotiations or a symptom of incoherence in Russia’s negotiating strategy. In any event, they confirm that there is still a long way to go before Russia gets any major sanction relief.
Alexander Kolyandr is a Non-Resident Senior Fellow at the Center for European Policy Analysis (CEPA) specializing in the Russian economy and politics. Previously, he was a journalist for the Wall Street Journal and a banker for Credit Suisse. He was born in Kharkiv, Ukraine, and lives in London.
More on this and other aspects of the Russian economy in a weekly summary produced by an independent publication, The Bell
https://en.thebell.io/tag/economy-weekly/
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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