In mid-January, Ukrainian Foreign Minister Dmytro Kuleba sounded the alarm: “95% of foreign-made critical components found in Russian weapons destroyed in Ukraine come from Western countries.” A complaint that, to be honest, is not much of a surprise: Over the months, evidence has emerged that so-called “dual-use” goods produced by European companies managed to bypass Russian sanctions and reach Moscow. These are technologies that can be used for both civilian and military purposes. And therefore it is easier to export without too many restrictions. It’s a loophole that the European Commission now wants to stop.
The countermeasures are part of a package aimed at boosting the EU’s economic security, not only in terms of exports of “dual-use” goods, but also to deal with risks associated with investments coming into Europe from abroad, particularly from China. .
‘Ghost trade’ to Russia
The main problem that the European Commission wants to solve is inadequate controls on the export of dual-use goods from the bloc to third countries: technologies, equipment and devices (e.g. advanced electronic components) that can serve both civilian and military purposes. ).
According to research by the British newspaper Finance TimesIn 2022 alone, more than a billion dollars were “lost” in the export of such goods from the EU (especially the Baltic republics) to Moscow’s main partners in the region: Kazakhstan, Kyrgyzstan and Armenia. Products at the center of an unprecedented boom in trade between the Union and Central Asian countries include aircraft spare parts, optical equipment, soldering irons, broadcasting systems and gas turbines.
Most likely, the real size of the “fictitious imports” to Russia may be much larger than that discovered by the FT and about three billion dollars. It’s a cash flow that certainly helps the Kremlin’s war in Ukraine.
Resisting triangles
The newspaper suggested that these goods probably reached Russia through trade triangulations (or “re-exports”); This constitutes the most classic method of circumventing primary sanctions, given that direct sales from European states to the Federation are prohibited, but this is not so. Countries one to three trading with Moscow. Therefore, secondary sanctions are needed, which Washington began to impose last December and which are already having repercussions on the Russian economy.
To tackle the problem, the EU is now looking for a common approach among all member states and creating common rules, especially regarding goods whose exports do not have international control standards. European legislation on this topic was last updated in 2021 and the Commission now plans to launch a consultation with stakeholders to define the next steps in more detail.
foreign investments
As for foreign direct investments, the community manager proposed strengthening screening to reduce security risks for the Union, starting with the harmonization of national rules, which, as usual, differ between the Twenty-Seven.
Italy had already taken this path last December, when Prime Minister Giorgia Meloni decided to withdraw from the New Chinese Silk Road, the massive infrastructure project through which Beijing is expanding its economic influence internationally and in which the first executive participated. It joined the league led by Giuseppe Conte in 2019, which also included the current majority shareholder Matteo Salvini’s League.
Source: Today IT
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
