One Reason for Reduced Sanctions Effectiveness

Lax Enforcement Allows Russians Access

Photo by Pavel Neznanov on Unsplash

In the debate about the effectiveness of sanctions against Russia, one issue is often overlooked: enforcement.

I have often argued that sanctions against Russia are effective, but they cannot be the only tool used to pressure Moscow to stop its invasion of Ukraine. I will now argue that sanctions against Russia—the world’s most sanctioned nation since Vladimir Putin began his invasion of Ukraine nearly two years ago—can be even more effective with proper enforcement.

To that end, US and allied regulators have stepped up their enforcement efforts against facilitators, third-countries that act as transshipment points, and financial institutions that help Russia’s military sector conduct its war in Ukraine. Multiple guidance has been issued by US and allies, including alerts on Russia’s use of gold to evade sanctions, warnings about sanctioned Russian actors’ use of art storage facilities to hide assets, guidance flagging Russia’s evasion of the $60 per-barrel price cap on oil shipments, global advisories, compliance notes, you name it!

But guidance and warnings are one thing; action against these actors is something else.

Yes, we’ve seen high-profile takedowns of illicit shipping networks and facilitators who allow Russia’s access to restricted goods and technologies sanctioned and prosecuted. The Commerce Department’s Bureau of Industry and Security (BIS) a few days ago added 94 Harmonized Tariff Schedule (HTS) codes to the list of items requiring a license for export, reexport, or transfer (in-country) to Russia or Belarus, further limiting Russia’s access to certain chemicals, lubricants and metals needed for its defense industrial base and better aligning US controls with those implemented by our partners and allies.

The Commerce Department in its 2023 Year-in-Review highlighted the creation of the Disruptive Technology Strike Force with the Justice Department to protect US advanced technologies from illegal acquisition and use by adversaries such as Russia, China, and Iran and resulting in numerous indictments, temporary denial orders (TDOs), and additional Entity Listings.

The Justice Department this year worked with Belgian allies to indict Hans de Geetere for illegally export sensitive, military-grade technology from the United States to end users in China and Russia, including electronic components that can be used in missiles, drones, and military radar.

And yet… Russia continues to get its hands on at least some technologies and equipment it needs.

Why?

Because sometimes nothing is done.

Investigative reporting outlet, the Insider, recently detailed the activities of a Russian GRU officer who turned his business helping Russia evade sanctions and strategic trade controls into a family business.

Russian military intelligence (GRU) officer Viktor Labin has set up shop in Brussels, home to the European Commission and NATO headquarters. From his office in a nondescript seven-story building on the outskirts of the Belgian capital, Labin supplies Russian arms manufacturers with European-made coordinate-measuring machines, a high-tech machine tool critical in the production of the Kremlin’s hypersonic Kinzhal missile. The sanctions-busting operation has become a family business. Labin’s younger son runs the Moscow-based middleman that delivers his father’s shipments to end users in Russia, while his elder son pitches in by organizing pro-Kremlin protests across Europe. Despite the Labin family’s unabashed efforts to aid the Russian military-industrial complex, none of them has been placed on the European Union’s sanctions list.

The Insider in October reported that Moscow-based Sonatek LLC (ООО «Сонатек»), which imports high precision machine tools from western companies, such as Italy’s Tomelleri Engineering, German MESSTECHNIK GMBH, and the UK’s Aberlink. Russia, according to the investigation, imported products sourced through Sonatek that it could not produce domestically, such as coordinate-measuring machines.

Although Russian government defense contracts have been classified in recent years, The Insider has obtained information indicating that Sonatek provided supply and maintenance services to a minimum of 18 Russian defense companies in 2022.

Sonatek is not included on the BIS Entity List, nor it it sanctioned by the United States, EU, or UK. And although the Insider’s report in October prompted several European shipping companies to back away from Sonatek, among them Poland-based Baltic Shipping Agency LTD that used loopholes in sanctions legislation to deliver coordinate-measuring machines to Russia’s defense sector.

And although naming and shaming companies that are using gaps in sanctions regimes to continue profiting from Putin’s bloodshed seems to have worked, they are not the only ones facilitating Russia’s access to restricted goods.

Enter GRU officer Viktor Labin, who does not deny routing European technology to Sonatek, and ultimately to the Russian military sector. Labin’s sons, Roman Labin and Sonatek CEO Ruslan Labin, are listed as directors on Groupe d'Investissement Financier official documents founded by Viktor last June and located in Brussels.

Viktor claimed that after sanctions were imposed on Russian companies after the invasion began, he stopped stopped making deliveries to his son's firm in Moscow. However, records tell a different story.

Screen caption by The Insider

What seems to be a lot of Russian gobbledygook is actually a contradiction of Labin’s lies, and Taiwanese machine tools have also wound up in Russian hands.

…records show that Groupe d'Investissement Financier has done extensive business with Sonatek, delivering machines and equipment to the Russian firm’s Moscow address. It was only in April 2023 that Viktor Labin’s Belgian entity began processing its deliveries to Sonatek through a Turkish shell company with a similar name: GROUPE D’INVESTISSEMENT FINANCIER OSBORNE.

Roman Labin lives in Brussels, away from Russia, where the cost of eggs and lack of toilets and heat are unappealing to young “entrepreneurs.” Viktor Labin has another company in Belgium, Projet Plus, which shares the address with Viktor’s private residence—an apartment in Brussels that has his last name on both the doorbell and mailbox.

Both Roman and Viktor’s wife Vera, publicly proclaim their love for Russia and their support for Russian savages committing atrocities in Ukraine.

And yet, they’re living in Europe, publicly and proudly facilitating Russia’s access to critical technologies and equipment, and acting with apparent impunity.

These are the individuals and companies the West needs to research and designate. These are the entities the United States and others must flag for countries like Turkey, where Labin’s shell company that facilitates Russia’s military and technological acquisitions, is located.

Although, enforcement is on the rise, and there have been several high-profile multinational operations shutting down networks that help Russia evade sanctions, individuals like Labin and his gang and their entities need to be blocked and booted out of Europe.

Let’s hope more enforcement actions are on the way this year. Labin and those like him need to be stopped.