Voir tous les articles

A conversation with David O’Sullivan, EU Sanctions Envoy 

The European Union has approved 17 different sanction packages against Russia and is now working on the 18th package, pending approval. The goal behind these sanctions was to cripple Russia’s ability to wage war — yet the war is still going on. Are they really working?

The sanctions are definitely working. But whether sanctions alone can lead to the end of the war is a more complicated issue.

If, like Putin, you are a dictator willing to sacrifice your civilian economy on the altar of military aspirations, you will keep going even if the cost is immense. All the critical indicators in the Russian economy are flashing red at the moment. 

The governor of the central bank and the Economy minister have all acknowledged publicly that their economy is struggling and that public finances are in disarray. Interest rates are through the roof; the inflation rate is at least 10% if not more; there is no investment happening in Russia except for the military sector — the sanctions do have an impact on the Russian economy.

Which metric should we use to measure that impact?

If we had not imposed sanctions, we estimate that Russia would have had an additional 450 billion euros at its disposal for the war.

It is three to four times the Russia defense budget. 

But sanctions are puncture — not a blowout — to the tire. 

What do you mean?

To run with the metaphor: as the air is exiting the tire, it is getting harder to drive the vehicle—at some point, inevitably, the car will stop running.

You also have to view sanctions in the context of a broader package: military assistance to Ukraine, macroeconomic support to keep the Ukrainian economy going and, lastly, sanctions.

How would you define the state of the Russian economy?

While we cannot trust the data from Russia, if you look at the official figures and take them at face value, they are showing an economy that is in dismal state, with 40% of public spending dedicated to finance the military effort — which means 6 to 7% of the Russian GDP. 

The money that is paying for the war is being subtracted from the rest of the economy. The head of the Russian central bank, Elvira Nabiullina, has said on the record that all easily available sources of public funding have been used up.They will have to start making cuts into the bone of the economy. And this is going to become ever more difficult for ordinary citizens.

With the sanctions, we have gone against the core of the Russian economy: its energy sector. Their revenue from oil and gas has decreased dramatically. Gazprom, which largely funds the Russia budget, posted a loss last year. They are having to fire employees while Gazprom was the flagship of the Russian economy.

Of course, when you are faced with someone like President Putin — someone who is determined to advance his imperialist ambitions regardless of the cost for his people or to his country, who doesn’t have to face the scrutiny of parliament, and doesn’t have to justify his budget choices — it means that we too have to persevere. Russia being an authoritarian regime, Putin has the power to hold it together for a certain amount of time. 

How much longer? 

As an economist, I am always wary of making predictions when there are all these variables.

I cannot tell you the precise day in which the Russian economy will collapse.

What I observe is that we are already seeing signs of economic stress. 

They began to show last year — and it will get worse. The Russian National Welfare Fund is almost depleted. Russians are publicly admitting that they will have to make difficult choices.

When Ernest Hemingway was asked how he went bankrupt, he used to reply, wittily: “Two ways. Gradually, then suddenly” — this is what I think will happen in Russia.

What would it look like?

Superficially fine — before something suddenly precipitates an exposure of the fundamental weaknesses that we know exist in the Russian economy. Some of these are structural — like the decline in oil and gas revenue from Europe. 

Authoritarian regimes have the tools to sustain the illusion that everything is fine, until it unravels. And once it does, the collapse is fast.

As the European Union is currently working on its 18th sanctions package, it is facing resistance from Slovakia and Hungary. How confident are you that it will be implemented? 

On the substance of the package, there is a large consensus.

For some member states, there is an issue regarding what they perceive is a link between the sanctions package and the proposals that we have introduced under REPowerEU to eliminate the residual dependencies of Russian energy in the European Union. 

You used the term “residual dependency”, why?

Because, for the most part, most member states have now unplugged from Russia. 

That is not the case for Slovakia and Hungary, which still main energy contracts with Russia. 

They do. 

But this is how the European Union works at times. We are 27. We have to ask ourselves: does it impact one member state more than another? Do we need a special arrangement?

These questions have to be addressed once a member state raises these issues. We work on the basis of unanimity.

Since we talk about unanimity, I would like to stress that the sanctions were successfully rolled over for another six months by all member states last month. This is a reason to hope that we will find a way to approve this next package — the sooner, the better. We need to send that signal to Russia that we are not going to ease the sanctions, we are going to increase the pressure for as long as they continue attacking Ukraine so brutally. 

Has the EU reached the end of the road in terms of new packages and will the focus turn to maintaining these sanctions instead? 

We have managed to maintain unanimity on increasingly tough sanctions. Our actions over the past three years show that it is not the end of the road. 

With sanctions, it is a constant process of adjustment and tweaking: it is not a question of reaching our limits — it is a question of constantly refining and improving our sanctions, taking into account that Russia also adjusts.

How ?

Take the shadow fleet.

Russia reacted to our oil price cap by buying end-of-life tankers to circumvent this sanction. We identified this problem and are now sanctioning these ships in greater numbers: we recently sanctioned 342 of these vessels. With the 18th package, we will target another 100.

Overall, the number is close to 600 sanctioned shadow fleet ships

This is having a devastating effect on Russia’s ability to export oil. So it is not just a matter of doing more, but really understanding how Russia will react to try to counter these sanctions. It is a constant process. 

The energy sanctions were introduced jointly with the United States and the G7. With the uncertainty surrounding Trump policies, is this the end of the transatlantic effort?

There are conflicting signals from Washington.

We hear talk of lifting sanctions in the context of a ceasefire, but those talks have not made any progress. On Monday July 14th, the President of the United States said he would impose “very severe tariffs​” on the Russian Federation in the absence of a peace deal with Ukraine in 50 days.

Congress, in the meantime, is very active.

Senators Graham and Blumenthal are proposing what is in my view a strong package of additional sanctions on Russia. They claim to have bipartisan support for it and are currently in discussions with the White House about the way forward. 

The brutality of Russia against Ukraine, aimed mostly at civilians, is horrific, and that makes any easing of sanctions on the part of the United States more difficult. I think President Trump has acknowledged that.

Did the US pressure you at any point to soften your sanctions policy or do they have an interest in Europe maintaining its approach as means to apply pressure on Russia indirectly?

We did not receive any signals in that direction. 

The rest of the G7, the UK or the Canadians have indicated they will not move in the direction of easing any sanctions.

There is a broad consensus that we need to continue to pressure Russia — particularly as the Russian economy is showing increasing signs of vulnerability.

You were appointed European Union sanctions envoy in 2023. Since then, a significant part of your effort has been dedicated to stopping sanctions circumvention. Where are you encountering the biggest obstacles? 

I have always tried to be very honest on this matter. 

Wherever there are sanctions, there will be circumvention. We will never eliminate it fully. What we have to do is to make circumvention harder, less predictable, less reliable and more expensive.

Estimates suggest for some parts used on the battlefield, the cost has risen 600% for Russia to import. 

It shows our actions are working but it is only a small victory.

Once our price cap entered into force in 2023, Russia’s oil revenue went down by 30% — but then it only dropped 20% in 2024. A significant part of that is the shadow fleet. We are now pushing harder to sanction more vessels and we are also working with the flag states to de-register vessels under sanctions and making sure that third countries do not accept vessels into these ports. On the oil revenue side and the battlefield components, we have made important progress since 2023. 

Yet, circumvention is still a problem.

It is, but you cannot look at it as a static matter.

We have to constantly adapt and get sharper.

One of the features over the next few months will be an increased emphasis on listings, designations, financial entities and individuals who may be contributing to circumvention.

What about China? The High Representative, Kaja Kallas, has used the term “war enabler” when referring to Beijing. Are they actively circumventing sanctions? 

Much of the circumvention that is happening through China is not officially run by the government.

So it is not state policy?

China has a policy when it comes to Russia: it is called the “no-limits friendship”.

It is absolutely clear that the Chinese are supporting Russia to a certain extent. They say they do not provide military support to Russia, but the definition of military support doesn’t just mean the supply of weapons directly: it also applies to parts and components that are applicable to military use and dual use technology.

This is why I constantly remind our Chinese counterparts that, even if circumvention is not officially run by the Chinese government, companies based in China and Hong Kong are responsible for 80% of the transhipment of Western components used by Russia to make drones, missiles and shells of higher precision — and, therefore, more lethal. This is a serious problem and the reason why we will continue to list entities based in China and Hong Kong.

We have managed to find solutions from many third countries in the Caucasus, Central Asia and the Middle East.

We would infinitely prefer that China works with us to find a systemic solution rather than having to take action against individual entities.