When Ukraine Sanction Measures Take A Wrong Turn

The Unintended Impact of Ukraine Sanctions: Analyzing Mistakes and Gaining Insights

Considered a crucial foreign policy tool directed at changing a country’s behavior, economic and trade sanctions have been employed against various nations since World War I. The horrific terrorist attack on September 11, 2001, however, significantly intensified the punishing power of sanctioning. The United States, along with the United Nations and the European Union, have since turned sanctions into the favorite weapon in the campaigns against international terrorism and countries violating human rights and accepted norms of behavior. The idea behind sanctions is to hamper the efforts of terrorist organizations to finance themselves or prevent countries such as Iran or North Korea from obtaining nuclear weapons.

While exerting their disapproval of different nations, the US and European countries take the precaution of making sanctions legitimate by examining every entry onto their sanctions list. A detailed legal examination of all acquired information and all pieces of evidence is conducted before sanctions are imposed. Yet even as they curb undesirable activities or alter governments’ strategic decisions, the US and the United Nations well know that sanctions can deal a deadly blow to a targeted country’s economic and political stability, as well as to the individuals under sanctions.

The latest target of American and European sanctions is Russia. After the Russian Federation annexed the Crimean Peninsula and, more recently, initiated a war against Ukraine, the West subjected it to unprecedented economic and trade sanctions. Begun in March 2014, sanction restrictions against Russia have hardened as its troops marched into Ukranian territory. Ukraine, which receives vigorous international support, has adopted the sanctions list compiled by the US and Europe. Not long ago, however, President Zelensky drew up an independent Ukranian list of restrictive measures against Russia.

On October 2022, Ukraine decided to freeze assets, restrict the exit of capital from its territory, suspend the performance of economic and financial obligations, ban trade obligations, prohibit participation in privatization and securities transactions, terminate trade agreements and joint projects with Russia, cancel visas, and impose entry bans. Over 1,300 legal entities and 2,500 individuals appeared on the Ukranian sanctions list. A heavy weapon against Russia, these sanctions also go hand in hand with the country’s attempt to fight the corruption in which it has been steeped since time immemorial. If handled smartly, the Ukrainian current policy might bring decisive results in the campaign against Russia and fortify its own political and economic stability.

What is crucial, however, for Ukraine and its international supporters is to ensure the credibility and legitimacy of the sanctioning process. Restrictive measures should neither violate human rights nor give the green light to corrupt government officials to confiscate assets illegally. Some worries have already been voiced in the West that Ukraine, backed by international communities, would misuse the power it presently wields, applying it to activities that go beyond the framework of international law. There is a danger that its sanctions will harm the rights of European citizens accused of alleged ties with the Russian government.

Such harm has already been caused to the Hungarian businessman, the resident of Monaco, Fedorichev Alexey. A criminal proceeding against Fedorichev has been conducted in Ukraine since December 2014, arising from a business dispute with his former Ukranian partner. The Ukrainian security authorities did not succeed in proving criminal allegations against Fedorichev. Determined to reach their end goal, they began to accuse him for having ties with Russia and funding Russian military activities. Ukrainian authorities even went so far in their zeal to blame Fedorichev for Russian connections, that they knowingly deceived Interpol’s Control Commission in June 2017. the Blue Notice, designed to collect information about Fedorichev, was not granted by Interpol because the conditions for its issuance were not met, given that Fedorichev was neither suspect nor fugitive but owned a property in Monaco. The case against the Hungarian businessman is highly debatable, as his link to Russia remains spurious. Considering that the Ukrainian proceeding is carried out before the Monaco judicial system, whose citizenship is held by Fedorichev, the European authorities are concerned that the information they received from Ukraine is not legally verified and damaging to Fedorichev’s human rights.

An additional example is the case of Smart Holding Group, one of the largest investment companies in Ukraine, specializing in metals, mining, oil, gas, agriculture, retail, shipbuilding, and real estate. In addition to its capital, Smart Holding also has a 24% stake in Rinat Akhmetov’s Metinvest, a large mining and iron ore producer, which owns Azovstal Iron and Steel Works in Mariupol. Smart Holding Group was founded in 2006 by Vadim Novinsky, a former lawmaker and oligarch with a present net worth of $1.4 billion, according to Forbes. As Novinsky is now a full-time priest in the Moscow-linked Ukrainian Orthodox Church and has his wife and children residing in St. Petersburg, Smart Holding Group has been sanctioned for its alleged aid to Russia.

The details emerging from the history of Smart Holding Group make clear that the accusations leveled against it are allegedly fabricated. The company’s founder, Vadim Novinsky, has publicly condemned the Russian assault on Ukraine. Smart Holdings Group has also donated over $20 million to war-related humanitarian causes. Even more telling is that Mr. Novinsky has not been associated with the company since 2013. There are documents in the Ukraine corporate registry stating that he is neither an owner nor director of the company. Nor does he receive a salary at Smart Holding Group. However, such documents have recently been forged to highlight the company’s ties to the Russian Federation.

The appearance of an online sports gambling company, Parimatch, on the Ukrainian sanctions list is an additional example. Headquartered in Cyprus, the company has never been told why it was sanctioned. An unofficial explanation given to its executives hinted that some companies providing Parimatch administrative services had formed Russian connections. Parimatch was also told that it had been put on Ukraine’s sanction list due to tax irregularities. Tax evasion is undoubtedly a criminal activity, for which people are subjected to substantial penalties. And yet, neither companies nor individuals can face sanctions for failing to pay a true tax liability.

The above examples of the dubious economic or other restrictive measures imposed by Ukraine are just the tip of the iceberg of the problematic trend that has been gathering momentum in the country since 2022. If Ukraine wants to win the fight against Russia and its corruption, it must ensure that its sanctions are not motivated by officials’ political rivalry or personal interests. Otherwise, as the US and European countries fear, Ukraine will fall short of the standards of the international legal system, which will be. at best, counterproductive to its intent to considerably weaken Russia.