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Russia Sanctions Will Need Constant Tuning, Experts Say

Despite reports Russia has found ways to evade sanctions and export controls, those trade restrictions are working, experts said during a Feb. 8 panel discussion hosted by the Atlantic Council. At least one official said the sanctions will need continual tuning to remain effective.

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Sanctions and export controls have had a "significant impact on the Russian economy ... despite having a lesser impact than initially hoped," Atlantic Council nonresident senior fellow Brian O’Toole said. Russia sacrificed economic growth to build up a defensive buffer against sanctions, which has meant their effects are not as drastic as many initially predicted, he said. "Russian spending on the war is way up and revenues are way down," said O'Toole, a former Office of Foreign Assets Control official.

But despite the "unprecedented" nature of the sanctions, Russia was able to mitigate their effects in a number of ways, said Timothy Ash, strategist at BlueBay Asset Management. Russian actions were clearly planned many years ahead and the country was able to "build up its defenses," Ash said. The buffer of currency reserves was built at the expense of growth, which means that long term, the sanctions still will have impacts.

Rather than new sanctions, the focus should be on "constant tuning and reinforcement" of existing ones, O'Toole said, likening the process of shutting down new evasion schemes to a game of "whack-a-mole." The panel largely agreed sanctions were meant to "complement" arms shipments and export controls rather than being "front and center," O'Toole said.

Olena Halushka, co-founder of the International Center for Ukrainian Victory, called on the U.S. to do more, advocating adding Russia as a state sponsor of terror (see 2209070083) and closing avenues for export control evasion. Halushka also called for removing Russia from the Financial Action Task Force, an intergovernmental policymaking body that combats money laundering and terrorism financing. "Blacklisting Russia from FATF would close loopholes for sanctions evasion."