In January, David O’Sullivan, a former Secretary General of the European Commission and senior EU diplomat, became the first international special envoy for the implementation of EU sanctions. He talks about his job, the challenges ahead, and whether he thinks the EU’s sanctions against Russia are having the desired impact.

You have been in your new position for a few weeks now. How’s it going so far?

Well, it is of course a new role, so I am exploring what it entails. Firstly, I must say that I am extremely impressed by what the FISMA team, working of course with other parts of the Commission, has managed to achieve in the past 12 months. Now that so much is in place, the focus is turning more to the next phase – ‘is this actually having the impact that we want? And are there ways for Russia to circumvent this?’. Here my role is to start a dialogue with non-EU countries about whether there is ‘leakage’ through trading partners. This really is hugely important. These sanctions are unlike any we’ve imposed previously because this is an existential issue for this continent. So, making sure that they have the necessary impact is crucial, for this institution and for the EU as a whole. I’m just back from a visit to the United Arab Emirates, which I did jointly with my US and British counterparts. I went more with questions, rather than accusations. They have promised to come back to us, and we’ve set up an expert group to look into the matter in more detail. That’s probably the pattern that we will follow with other countries.   

You were previously EU ambassador to the US. How do you think your experience there will help you in your new position?

It certainly honed my general diplomatic skills, which were sorely tested particularly by the previous administration. While there, I also worked on sanctions, because I did a lot of work on the Iran deal and had quite a bit of contact with the US counterparts – OFAC (the Office of Foreign Assets Control), the Treasury, Commerce… So, I think I have a fairly good understanding of how the US system works. And of course, I have a good range of contacts in Washington. So, that’s all extremely helpful. I would also add that we are extremely lucky to have President Biden and his team in place in Washington in this crisis. They could not have been more cooperative and helpful, and we are really on the same page in terms of what we’re trying to do and how we’re going to do it.

You mentioned OFAC. What is its added value? And should we consider something like that in the EU?

There are probably between 600-700 people dealing with sanctions in Washington, which is much more than in the EU, even taking into account the people working on sanctions in the Member States. So, we clearly have a problem of resources at European level. But these sanctions are going to be with us for a long time. Therefore, we have to give this a much firmer foundation for the future. We’ll have to think about the best way of doing that in a European context – we’re not the United States, we’re not a federal state, there are responsibilities for the Member States in all this. But, particularly when it comes to the monitoring of the implementation of sanctions, it’s clear that we don’t currently have the level of resources needed to do the job effectively.  

The EU has adopted ten packages of sanctions in response to Russia’s invasion of Ukraine. Do you think these sanctions are having the desired impact?

The short answer is yes, with a slight ‘health warning’. We have to start with what we are trying to do, and here we have three objectives. The first is to degrade the capacity of the Russian military by depriving them of cutting-edge technology. In this I think we’re succeeding and there’s a lot of evidence that the Russian military are struggling to renew their equipment. The second is to deprive the Russian state of the revenue needed to fund the war machine. Here again, the measures in place – the freezing of assets, the reduction of revenue from fossil fuels – is undoubtedly hitting the liquidity of the Russian state. Being a dictatorship, they are able to shift money from other areas into defence. But this is not sustainable over time and increasingly will present a real dilemma for the Russian economy. The third objective is to impose a serious economic cost on the Russian economy as a whole. Here we’ve seen the shrinkage of Russia’s GDP but also the fact that the country is being deprived of the instruments needed to develop a more sophisticated and modern economy and is increasingly being pushed back into a more agrarian and fossil-fuel based economy. Over time this is going to really shrink the Russian economy.

Now, the ‘health warning’ is that none of this has an instant impact. We need to be realistic that sanctions are not going to dramatically change the behaviour of Mr Putin from one day to the next. The hope has to be that over time you increase the pressure on Putin – and you also considerably reduce the possibilities for him to rebuild his military in a way that could fuel a further aggressive effort.

We also must be clear about the fact that these sanctions come at an economic cost to the EU. And they hurt us a lot more than they hurt the Americans, because we trade much more with Russia. On the other hand, if we don’t get this right, we will pay an even bigger price down the road. This is the political trade-off. And I think the extent of political consensus and also public support has been remarkable. It’s not all bad news – the decision to drop dependence on Russian fossil fuels is a major push for the green transformation, and this is a positive. But some of the measures will cost us, and we need to be honest about that.

How concerned is the EU about circumvention outside the EU?  What tools will you deploy?

It’s important to emphasise that anti-circumvention starts at home. All Member States have a big job to do domestically to make sure that all our economic operators have the information they need to respect the sanctions regime. And let’s be frank, some of it is quite complicated. If you’re a good-faith economic operator you might have some legitimate questions about what is permitted and what is not. Obviously, trade with other countries is a source of potential circumvention. If you’re suddenly selling more to other countries, is some of that finding its way to Russia? That’s the concern. The same is true about certain financial activities. We may have indices that something might be going on – reports from investigative journalists or NGOs – but no firm presumption of circumvention. And that’s why I’m here. To have that conversation with those countries, to explore the issues, to see what the situation really is and establish a common set of information. And, if there is proof of circumvention, to act – either for them to act or indeed for us to act. Our legal powers now enable us to sanction an entity in a non-EU country that is aiding a European company to evade sanctions. In the private sector, there is also the issue of personal liability of EU nationals working in non-EU countries who might be part of evasion behaviour. They are personally liable under our law. Most of these countries take the view that they don’t want to align with our sanctions – that’s their sovereign decision – but neither do they want to become an instrument of circumvention. So, they are willing to cooperate.

What do you see as the main challenges in the next few months?

Where to begin! The main challenge is to establish a clear image of what is happening, and on that basis to discuss with our trading partners any problems that we have identified. Sometimes, to do this we need more data from them. So, the challenge is to come to an agreement with non-EU countries and persuade them to provide us with the information that allows us to have a perfect picture. In a second phase we’ll have to try to close those loopholes. We’ll see how we can do that through cooperation with countries or maybe through further refinement of our own sanctions. For example, in the 10^th package, we are banning the transit through Russia of any dual-use goods, even if in principle the destination is outside Russia, because we fear the inability to control that.  So, that’s an illustration of how sometimes it comes back to us, to close off the loophole from this end.