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What do EU statistics reveal or what is the purpose of sanctions harmonization?

Pavel Latushka, deputy Head of the United Transitional Cabinet of Belarus, Head of the National Anti-Crisis Management, ambassador

Russia earns more than 1.4 billion euros by circumventing sanctions through Belarus

We have long been persuading our partners about the need to harmonize trade sanctions between the Lukashenko regime and Russia, as its absence creates loopholes for circumventing the already imposed restrictions. A number of commentators, in turn, argue that harmonization pushes the Lukashenko regime towards Russia and it is necessary to impose restrictions primarily against the latter. However, it is the harmonization of sanctions that will be the most important sanction against Russia in Belarus, and we will tell you why. 

A number of experts try to convince us that harmonization will have no effect or will even be harmful at all. In their opinion, outside the Belarusian sphere of services, represented by accounting, consulting, IT, law, engineering, which are not related to trade in goods and can potentially suffer, there will be no macroeconomic effect from the harmonization of sanctions, "because the sanctions lists with respect to Belarus and Russia are already very close". However, the facts say the opposite

Yes, we do not have access to full customs data on cargoes that move across the EU-Belarus border, and even more so across the Belarus-Russia border, which remains generally open and, accordingly, uncontrolled for any supervision of compliance with the existing restrictions.  Therefore, taking into account the fact that the Lukashenko regime and Russia have closed most of their foreign trade statistics, we will turn to the data of Eurostat. How much can one learn from the EU's open statistics?

As it turns out, there are a lot of interesting things. Let's take two simple examples. In April 2022, the European Union adopted the fifth package of sanctions against Russia for its aggression against Ukraine. And a significant part of the restrictions concerned Russia itself, but in no way affected the criminal regime in Minsk, which, let us remind you, acted as a co-aggressor and thanks to it this aggression was largely, if not in principle, able to take place.

So here is the first example. The fifth package of EU sanctions against Russia, adopted on 9 April 2022, in particular, prohibited the supply of 23 commodity items from the thirty-second group of the commodity nomenclature of foreign economic activity (CN FEA) to Russia.  

Group 32 of CN FEA includes paints and varnishes; tannin or dye extracts; tannins and their derivatives; dyes, pigments and other coloring substances; putties and other mastics; printing paint, ink, embroidery or, in general, various technical varnishes and paints, including those used in the automotive industry, light industry, printing, etc. 

Even in the pre-sanctions period, according to Eurostat data, Belarus received almost no lacquers and paints from the EU by rail, which were included in commodity group 32. In the period 2015-2020, a total of €67.2 thousand worth of varnishes and paints were supplied to Belarus by rail from the EU (i.e. an average of €11.2 thousand per year, taking into account that in some years there were no such purchases at all). In 2021, another EUR 59 thousand worth of varnishes and paints belonging to CN FEA group 32 were delivered to Belarus by rail.

But 2022 was an anomalous year in trade in this type of products — 10 thousand tonnes of paint and varnish products of CN FEA group 32 were unexpectedly delivered by rail from the EU to Belarus for €15.1 million or 260 times MORE! Moreover, significant deliveries (for 704 thousand euros) began in April, i.e. the month when sanctions against Russia were introduced (in May it was already 1.7 million euros, and in June — 2.5 million euros). In the first 11 months of 2023, European deliveries were made for another €11.36 million. 

Recall that Belarus has traditionally always been sufficiently supplied with domestic paint and varnish products. More than a dozen enterprises are engaged in its production in our country, many of them are widely known outside Belarus. Therefore, there was absolutely no need to purchase this group of goods in such impressive volumes for significant growth at that time.

Only after the imposing of sectoral sanctions on Russia, in the absence of such sanctions on Lukashenko's regime, varnishes and paints from Europe of the 32nd commodity group of the CN FEA flooded by rail to the Belarusian market, which obviously did not need so much of them. From what follows the logical conclusion is that these lacquers and paints, which are excessive for our market, are transported from Belarus to the territory of Russia in circumvention of the imposed sanctions. And for this one product group alone, we are talking about tens of millions of euros!

The second example is not related to the supply of goods from the EU to the East, but in the opposite direction. In 2022, a ban on glass imports from Russia to the EU came into force within the framework of the fifth package of sanctions against Russia, while no such bans were imposed on the Lukashenko regime. 

And if in 2016-2021 exports of glass (CN FEA group 70 — Glass and glass products) from Belarus to the EU by railway averaged €5 million per year, then in 2022, these supplies of glass from Belarus amounted to a record €21.94 million, that is, more than four times the volume of the previous pre-war years. Moreover, this growth again began in April - the month of the adoption of sanctions against Russia. Over the next 11 months of 2023, Belarus exported another €18.18 million worth of glass and glass products by railway to the European market. 

Just on these two examples alone, it is clear that the lack of harmonization of sanctions allows, first of all, the same Russia to both sell to the West and receive tens of millions of euros worth of sub-sanctioned goods through the territory of Belarus to its own market. Thus, the closure of this loophole will be a powerful sanction against both Russia itself and Lukashenko's regime, which profits from the intermediation of trade in sub-sanctioned products. 

The volume of sanctions evasion in only two, not the most important and largest sectors of the economy speaks volumes about the scale of the entire evasion, which is taking place due to the difference between trade sanctions against Russia and Lukashenko's regime. Only for these two commodity items we are talking about millions of euros, and if we take all the goods flows (and this is hundreds of commodity items for which the restrictive measures between the Putin and Lukashenko regimes differ) we can talk about billions of euros. 

Thus, according to the report "Sanctions against Russia as a tool for the protection of human rights: violations of the control regime over exports to Russia of goods critical to the war", prepared by the Norwegian Helsinki Committee in October 2023, the total size of Russia's benefit in circumventing sanctions through Belarus only through excessive exports to the EU and indirect violations can reach, according to the most humble estimates, 1.4 billion euros. But this figure is in fact much higher. 

Moreover, in addition to the industries involved in financing the Lukashenko and Putin regimes, the circumvention concerns goods critical to the military-industrial complex of both countries, working for the needs of the aggression against Ukraine. However, even the two industries mentioned earlier, seemingly not directly related to the military-industrial complex, also work for it. 

Varnishes and paints are used, for example, to paint military equipment and armaments. Recently Minsk Automobile Plant placed an order to buy materials for painting khaki-coloured cabins, which would be enough to paint more than 400 MAZ trucks. I think there is no need to explain who needs so many trucks of protective khaki color and for what purposes.

The foreign currency gained from the sale of glass to the West, in turn, can be used to purchase critical components for the production of weapons in the West through front companies. It is even more difficult to trace the flow of components and equipment for armaments than paint or glass, as this sphere is the most important for aggressors and therefore the most closed. 

Some would say that Russia will still find, and is finding other ways to circumvent sanctions. And that not only Belarus is used in these schemes. This is true. However, it is impossible to underestimate and even more to deny the role of Lukashenko's regime both in circumventing sanctions and in co-aggression against Ukraine in principle. And this is clearly seen in this material as well.

It is even more impossible — and we will not do it — to turn a blind eye to this role and allow the Lukashenko regime to continue to help Russia unhindered.

Therefore, we will continue our work to identify ways to circumvent sanctions through Belarus and pass the relevant materials to our partners in order to further harmonize trade sanctions. 

As well as work on the introduction of sanctions directly related to the situation in Belarus itself — the situation with ongoing repression and the growing number of political prisoners. In this regard, we have prepared a proposal to impose sanctions on goods produced with the use of forced labor of political prisoners. We have sent this proposal to all our international partners and it has already been reflected in the European Parliament Resolution of 8 February 2024.



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