Editor’s note: This is the latest in Kyiv Post’s Sanctions Busting series, a look into how Russia evades sanctions to wage its war against Ukraine.
European and American allies have imposed tens of thousands of economic sanctions against Russia since the Kremlin launched the full-scale invasion of Ukraine in 2022, aiming to slowly strangle the Kremlin into retreating. Yet leaders in key business sectors across the EU and the US have continued to find ways to bypass restrictions aimed at curbing Russia’s ability to fund the war through international trade and national growth, allowing the invasion to drag on as casualties mount.
JOIN US ON TELEGRAM
Follow our coverage of the war on the @Kyivpost_official.
While some countries have successfully adapted their trade networks to replace Russian vendors with sellers from non-sanctioned states – others have simply rerouted their trade with Russia through third parties. Although Poland has been one of Ukraine’s staunchest allies since Russia launched its full-scale invasion in 2022, critics have recently called out some Polish firms for increasingly circumventing international sanctions aimed at crippling Russia’s economy.
Ukrainian HIMARS Attack Blasts Russian Mobile HQ
Polish officials have struggled to rein in companies that are suspected of sanctions-busting, according to economic watchdog reports, highlighting the enforcement challenges faced by Poland’s National Revenue Administration. The trend raises questions about Poland’s commitment to the sanctions regime and its implications for European security.
Sanctions and their shortcomings in Europe
Russia’s full-scale invasion of Ukraine has been heavily financed through revenues generated from exports in three key sectors: oil, gas, and iron ore and steel. In 2023, these industries alone contributed billions to Russia’s federal budget and accounted for over 40% of total revenue, according to Reuters. The profits enable Russia to sustain its defense spending, which came to about €110 billion last year.
Russian steel exports to EU countries amounted to €2.4 billion in 2023 alone, for example, with companies owned by Russian oligarchs – like NLMK Group and Evraz Group – earning the most profit. Semi-finished metal products, like slabs and pig iron, are subject to less stringent sanctions than finished goods, so these Russian companies can bypass sanctions and continue profiting from their operations in the EU by changing the form of their steel output, according to the Ukrainian think tank GMK Center.
Former Polish Prime Minister Mateusz Morawiecki acknowledged that the international sanctions imposed on Russia are not having the desired effect in an interview last year with the Polish news site Interia. “What catches the eye: Russia this year and next will develop faster than Germany. And this is despite the sanctions,” he said.
Morawiecki explained that the ineffectiveness of these sanctions could be blamed on the global economy and trade partners continuing to work with Russia behind the scenes. “Firstly, unfortunately, Russia has learned to bypass them,” he said. “Secondly, the prices of raw materials have skyrocketed. The Russian budget makes more money even on fewer sales.”
Problems with compliance in Poland
Although Poland stopped importing oil and oil products from Russia in 2022, it remains a significant player in the regional market due to its geographic location, according to Port Monitor. Polish ports are being used to facilitate the transit of Russian steel and other metallurgical products to countries like the Czech Republic, where they can be processed and sold without direct sanctions implications.
There has been a staggering 1,900% increase in Polish exports to Kyrgyzstan since before the invasion, where analysts believe that these goods are likely being rerouted to Russia, according to the Institute of Legislative Ideas, a Ukrainian sanctions-busting think tank. And Poland remains one of the largest buyers of liquefied petroleum gas (LPG) from Russia, spending €710 million in 2023 alone – almost two-thirds of all EU imports, according to Notes from Poland.
One of the most significant challenges in Poland to enforcing sanctions against Russia has been the emergence of a “shadow fleet” of interlocutors – a network of tankers operating under opaque ownership structures that evade Western maritime regulations. Estimates suggest that this fleet has grown to include at least 399 vessels, according to Oxford Analytica, allowing Russia to export oil through complex routes that circumvent established sanctions.
“To evade sanctions, the Russian ‘shadow fleet’ makes use of flags of convenience and intricate ownership and management structures while employing a variety of tactics to conceal the origins of its cargo, including: ship-to-ship transfers; automatic identification system blackouts; falsified positions; transmission of false data; and other deceptive or even illegal techniques,” Wrote Anna Caprile and Gabija Leclerc of the Members’ Research Service (MRS), a think tank providing analysis on EU policy.
The shadow fleet not only undermines the effectiveness of price caps set by the G7 and EU but also poses environmental risks to the entire region due to the age and condition of many vessels involved. “In addition to bolstering its war chest, Russia’s ‘shadow fleet,’ which consists of a growing number of aging and poorly maintained vessels that operate with minimal regard to the regulations, poses significant environmental, maritime safety, and security risks,” MRS experts wrote.
Recent incidents have further complicated Poland’s position regarding sanctions compliance. In November 2024, Polish authorities arrested a German national for allegedly exporting dual-use technology to Russia that could be utilized in arms production, according to Reuters. The case underscored the challenges faced by law enforcement in preventing sanctioned goods from reaching Russian military facilities.
Poland’s continued reliance on Russian technology and energy contradicts Warsaw’s vocal stance against Moscow’s aggression and highlights the complexities of balancing economic interests with political commitments.
The need for accountability from Warsaw
Experts at the Kyiv School of Economics (KSE) have argued that without stringent measures and accountability for companies engaging in sanctions evasion, countries like Poland risk undermining not only their own credibility but also the broader unity among Western allies in their response to Russian aggression. “Our contention is that tougher sanctions will shorten the war by undermining Russia’s capacity to finance the military effort – and, most importantly, in a way which causes less death and destruction. If you want peace, sanction Russia harder,” KSE economists wrote in a March 2023 report.
Strengthening enforcement mechanisms and increasing transparency in trade relationships is crucial to ensuring that Polish industries do not become conduits for Russian financial flows. G7 countries (Canada, France, Germany, Italy, Japan, the UK, the US, and the EU) recommended considering several measures to prevent sanctions evasion and strengthen export controls targeting Russia in joint guidance shared in 2023, including:
- Tightening import controls: Impose stricter regulations on imports of metallurgical products from third countries that may contain Russian materials, including blocking imports through Polish ports or imposing tariffs.
- Enhancing oversight of trade practices: Implement mechanisms for tracking and controlling the shadow tanker fleet.
- Shortening transition periods: Significantly reduce the transition periods for semi-finished products to close existing loopholes that allow continued Russian exports into Europe.
- Personal sanctions: Target individuals within oligarch-controlled companies who continue trading with EU countries to disrupt their operations.
By reassessing its trade practices and committing to upholding international sanctions against Russia through these steps, EU countries like Poland can reinforce their position as key allies in the fight against Russian expansionism while safeguarding their domestic economies and European security interests.
You can also highlight the text and press Ctrl + Enter
