How to Detect Countries who are Likely to Bust Sanctions against Russia
Updated: Oct 27, 2022
Sanctions busting is when a state is either driven commercially or politically to engage with an internationally sanctioned regime. If it is commercially driven, then this profit-seeking behavior is dominated by trading relationships with the sanctioned state. The other type - political sanctions busting, is usually carried out through aid-based mechanisms. This article will focus on areas in which it is possible to detect commercially-driven states and organisations that have an interest in busting Western sanctions. It is important to mention that sanctions busting is not just about maintaining a status quo relationship with the sanctioned state. Sanctions busting is about filling the gaps in the sanctioned state’s economy that were left by the sanctions. Sanctions busting corporations, as well as states that are commercially driven, seek potential profits that will be left behind by companies who are now disallowed from doing business by their home state. Therefore, this is not solely about a continuation of a trading partnership between the sanctions buster and the sanctioned but is more so about the increase in their bilateral trade, which in turn limits the effects of sanctions.
States Likely to Sanctions Bust
Number one: the United Arab Emirates will be happy to accept Russian foreign investment capital that will no longer be accepted by the United States, the United Kingdom or the European Union due to sanctions. Abu Dhabi and Dubai's laissez-faire stance on financial inflows makes them an investment hub that is willing to do business with anybody. In fact, US companies like Google and J.P. Morgan have moved many of their Russian assets to Dubai. Since the UAE is willing to do business with anybody, and the US, UK and EU have not restricted their corporations from doing business in the UAE, Dubai will be a conduit for Western companies that want to continue business with Russia. The increase in trade with and through the UAE will significantly decrease the effectiveness of Western sanctions on Russia.
Another likely sanctions busting state is China. Although China is not totally commercially driven and is partially politically motivated to sanctions bust, it is still a case to look at for profit-seeking trade-based sanctions busting mechanisms. China will be happy to buy up any left-over oil or energy the EU refuses to buy both now and in the future. In exchange, China can fill the technology import gap that was left after Western sanctions. In sum, China will happily purchase Russian energy that is being sanctioned and Russia will be happy to purchase Chinese technology as replacements for US technology.
Final state profiles that are likely to participate in sanctions busting activities are close allies of the sanctions-sending states. This is counterintuitive since allies should usually be in cooperation with each other. However, allies are the most similar to the sanctioning state, meaning that allies are the best and easiest replacements for the merchandise that is being restricted to the sanctioned state. In addition, as is the case with the UAE and China, the potential profits from filling a sanction gap are large. Therefore, governments that are less concerned with the conflict are more likely to be convinced by their commercial constituents to remain neutral in order to allow these companies to profit from the gap in the market share that was cleared out by sanctions.
With this in mind, it must be answered if more needs to be done about international sanctions busting. International commercial law can only do so much. And it would be financially infeasible for a state to sanction both sanction busters as well as the target state. It is the opinion of this article that more can be done to punish corporations that blatantly create a subsidiary company within a state that is a sanctions busting haven. However, there is only so much that can be done when other states are willing to race to the bottom, meaning there will always be a company or a state willing to sacrifice morals for profits and no commercial law would stop them. Therefore, it is extraordinarily important to apply swift sanctions with as many international partners as possible. The sanctions on Russia for the Ukraine war have done just that. However, this article has shown it is still possible to significantly limit the effects of these sanctions when there are weak international commercial laws and several states willing to continue their economic participation with Russia.