Just under 130 British companies admitted to having violated the sanctions imposed on Russia, according to data from the UK Treasury cited by the Financial Times. This demonstrates that London’s sanctions on Russia have not worked, and rather, the sanctions are only restricting opportunities for British companies.
In May 2023, a total of 127 companies in the United Kingdom admitted to having violated the sanctions imposed on Russia by the Western bloc, according to the British outlet. By admitting it, companies hope to reduce the fines their government has introduced against those who continue cooperation in the economic field with the Eurasian country.
Following the start of the military operation in February 2022, seeking means to crush the Russian economy, London imposed numerous sanctions against the state banking sector, as well as other individuals and legal entities. However, breaking beneficial ties with such a global power is not an easy matter.
In this sense, the sanctions against Russia have been a great test for British companies, said Stacy Keen, partner of the multinational law firm Pinsent Masons, who specialises in financial crimes. In her view, unlike the situation with North Korea and Iran, also under sanctions, the Russian economy is more deeply intertwined with the world economy.
“The Russian sanction packages have been felt more keenly outside of Russia in a heightened way,” she said, adding that “Russian individuals and entities had a footprint outside of Russia that perhaps if you look at the Iranian regime or the Syrian regime – there just wasn’t those interlinks between the economies.”
The severity of the penalties that the British Government can apply in cases against domestic companies ranges from complete inaction or a warning letter to an administrative fine or criminal prosecution. The publication adds that the financial sanctions “have no ceiling.”
The companies admitted to the violations to the Office of Financial Sanctions Implementation (OFSI), responsible for monitoring compliance with sanctions and suspected breaches. According to the Financial Times, British companies can reduce government penalties by voluntarily admitting violations and cooperating with investigations.
“We of course consider any relevant efforts and checks undertaken as a mitigating factor when assessing any possible enforcement action,” an OFSI spokesperson said, adding that the agency was “not trying to unduly penalize honest mistakes.”
Nonetheless, despite British companies being forced to stop cooperating with Russia, the imposed sanctions had their impact only at the beginning, as Moscow has fully adapted to such conditions. In fact, Russia has barely been harmed by the introduction of a $60 per barrel price ceiling for Russian oil.
“Proponents of the cap argue that it represents a critical tool to curb the Kremlin’s ability to finance the war in Ukraine. Critics believe that Russia easily dodges the cap, rendering it ineffective,” argued Foreign Policy columnist Agathe Demarals.
Although the sanctions impacted Russia at the beginning, as would be expected, Moscow completely adapted to the situation by carrying out more trade exchanges with countries that did not support the price ceiling, such as China and India.
“Policymakers never like to admit it, but there is no such a thing as a perfect sanction. The oil price cap has done its job over the past year, but it was never meant to be a long-term fix. Sanctions targets always adapt, and Russia will be no exception to the rule,” wrote Demarals.
It is recalled that in 2022, G7 countries (United States, Germany, Canada, France, the United Kingdom, Italy, and Japan) and Australia reached a consensus to limit the maximum price of a barrel of oil from Russia to limit Moscow’s income. The idea of imposing a price limit on Russian oil purchases was proposed by the US, with Treasury Secretary Janet Yellen suggesting that a $60 per barrel range would probably be enough to reduce Moscow’s energy revenues while allowing profitable production – but she failed in her quest.
According to the International Energy Agency, in September, Russian oil exports increased by 460,000 barrels per day compared to August – reaching up to 7.6 million barrels. In this way, Russia obtained the highest revenue since July 2022, worth $18.8 billion. Revenues from oil and gas to the Russian budget more than doubled in October compared to September, indicating once again how Russia adapted to the situation when considering at the beginning of 2023, Russian revenues from the sale of energy sources fell.
Although the 127 British companies will now suffer since they will no longer be able to do business with Russia, it does demonstrate that there is a huge divide between the political and economic interests of the UK. What makes the restricting of British companies even more ludicrous is the fact that Moscow has comfortably adapted to its new economic reality, even rendering a G7 price cap useless.
