Despite its significantly lower weight in the global economy compared to the United States, London is trying to secure its role as one of the leaders in the application of sanctions. This is facilitated by the continued position of the UK as one of the world’s financial hubs, a major source of FDI, a leader in the insurance market, consulting and legal services, as well as a supplier of industrial goods and technology, writes Valdai Club Programme Director Ivan Timofeev.
The British Government has published a new UK Sanctions Strategy. The document summarises innovations in the field of modernising government institutions and the practice of using restrictive measures. The main impetus for the changes is to contain Russia against the backdrop of the Ukrainian crisis, that is, the new sanctions policy is predominantly anti-Russian in nature.
The United Kingdom has pursued its own policy of sanctions since it left the EU. In 2018, a basic law was adopted (Sanctions and Anti-Money Laundering Act – SAMLA), which regulates the application of sanctions when observing UN Security Council resolutions, as well as unilateral restrictive measures. At the same time, a system of institutions and a set of instruments for applying sanctions were developed. The sanctions are divided into financial, trade, transport and visa sanctions. Among the financial restrictions, blocking sanctions have become a key tool, implying the freezing of the assets of both individuals and legal entities, as well as a ban on transactions involving them in British jurisdiction. They came under the jurisdiction of the Treasury and its Office of Financial Sanctions Implementation (OFSI). Trade sanctions are bans on the export and import of certain goods and services. The key here is the Department for Business and Trade, and two structures within it – the Export Control Joint Unit (ECJU) and a new structure – the Office of Trade Sanctions Implementation (OTSI). They interact with HM Revenue & Customs (HMRC). Transport sanctions, that is, a ban on access to the UK, its maritime and airspace by foreign ships and aircraft, as well as other restrictions, are naturally supervised by the Department for Transport. The National Crime Agency (NCA) prosecutes violators of sanctions regimes. Visa sanctions are handled by the Home Office.
British institutions tasked with implementing sanctions policy resemble their foreign analogues, including US institutions, where the application of sanctions is also divided between the US Treasury, the Commerce Department, the State Department, the Justice Department and other departments. However, British legal mechanisms are less cumbersome and simpler than those used in the United States, where sanctions are regulated by both federal laws and the executive orders of the US President. Despite its significantly lower weight in the global economy compared to the United States, London is trying to secure its role as one of the leaders in the application of sanctions. This is facilitated by the continued position of the UK as one of the world’s financial hubs, a major source of FDI, a leader in the insurance market, consulting and legal services, as well as a supplier of industrial goods and technology.
The application of sanctions against Russia today can be considered a key incentive for the development of the institution of unilateral restrictive measures. The entire range of existing sanctions is used against Russia. The Russian theme runs like a red thread through the Strategy. According to the figures cited in the document, the result of the application of sanctions has been a 94% drop in Russian imports and a 74% drop in exports. In other words, sanctions have practically paralysed bilateral trade, covering goods and services worth about 20 billion GBP in 2021 figures. Russian assets worth 22 billion pounds are blocked in British jurisdiction. This is significantly less than in the EU, where both private and sovereign Russian assets are blocked, but the value also seems significant.
The goals of the sanctions policy set out in the Strategy correspond to the “canonical” set that has been established in research literature. These include deterrence through sanctions against hostile actions (Deter), disrupting hostile actions (Disrupt) and demonstrating capabilities (Demonstrate). In this trio, however, one of the basic goals of the sanctions policy is lost – forcing the target country to change its political course (Coerce). It partly overlaps with deterrence, but the point of deterrence is to prevent certain policies, and not to change them. The decline of this goal may be due to the fact that historically, sanctions have not usually led to a change in the political course of the target countries.
Modern Russian experience also speaks to this. But the same Russian experience also speaks of the failure of containment and demonstrations. Amendments to the 2019 Russia Sanctions Regulations began to be introduced on the eve of the Special Military Operation. However, they did not lead to the containment of the conflict; nor did demonstrations in the form of blocking and other sanctions at the beginning of the conflict and as it developed. Strictly speaking, the Strategy does not contain clear criteria for the effectiveness of sanctions. This, apparently, can be considered the amount of damage caused, but not a political result in the form of victory or defeat. In other words, sanctions are presented more as an instrument of causing damage, that is, an instrument of war, rather than an instrument for achieving political goals, or what could be called an instrument of diplomacy.
The emphasis on coalition cooperation with other initiators of sanctions can be considered a logical aspect of the Strategy. They include the USA, EU countries, and other G7 countries (Japan, the UK and Canada). Research shows that coalition activity increases the effectiveness of sanctions. [Bapat, N.A., Heinrich, T., Kobayashi, Y., Morgan, C. (2013) ‘Determinants of Sanctions Effectiveness: Sensitivity Analysis Using New Data’, International Interactions 39: 79-98.] The coalition of initiators of unilateral sanctions against Russia is truly unprecedented since the end of the Cold War. The coordination of sanctions policy is carried out both at the level of harmonisation of prohibitions and restrictions, and cooperation in stopping the circumvention of sanctions. An equally familiar aspect of the Strategy is the emphasis on the careful study of sanctions, taking into account possible damage to businesses, their combination with other foreign policy instruments, the interaction of various government bodies with each other and with business, and efforts to prosecute violators of sanctions regimes.
It is interesting that the Strategy says practically nothing about the instrument of secondary sanctions. This is partly natural, since in British law, as well as in EU law, the concept of secondary sanctions is absent. However, de facto they are applied in the form of blocking financial sanctions against persons from third countries cooperating with Russian partners in the field of military and dual-use goods, as well as in strategically important sectors. The 2019 amendment to the Russia Sanctions Regulations provides such opportunities. For example, blocking sanctions may include persons who “destabilize Ukraine, threaten its territorial integrity, independence or sovereignty,” or “benefit from the Russian government.” Both formulations and their interpretation in the Amendment
are extremely broad. Both Russian and foreign individuals and legal entities may fall under them. The expansion of blocking financial sanctions in February 2024 suggests that such sanctions are being increasingly used against companies from third countries that cooperate with Russian partners. In particular, we are talking about companies from Turkey, China, the UAE and the Marshall Islands. (Office of Financial Sanctions Implementation HM Treasury. Financial Sanctions Notice. )
Other UK sanctions policies are also mentioned in the Strategy. In total, the country is currently conducting 36 programmes in the field of restrictive measures. However, information about them is still of a background nature. The New Strategy can be considered primarily focused on Russia. Most likely, the further evolution of the UK sanctions policy will be determined precisely by Russia. Active Russian policy to adapt to foreign restrictions and counteract sanctions may well give rise to conceptual changes in the sanctions policies of Western countries in the near future.
The Valdai Discussion Club was established in 2004. It is named after Lake Valdai, which is located close to Veliky Novgorod, where the Club’s first meeting took place.
