Further Together: An Opening for NATO–EU Sanctions Cooperation

By Jack Crawford. Originally published on 16 March 2023 by the Royal United Services Institute (RUSI) on its website.

Russia is exploiting Euro-Atlantic supply chain weaknesses that could be resolved by effective sanctions cooperation between NATO and the EU.

NATO and the EU can bolster Euro-Atlantic security in an increasingly salient and critical aspect of defence – supply chain resilience – but the clock is ticking.

On 11 January, NATO Secretary-General Jens Stoltenberg announced that NATO and the EU will establish a taskforce for increasing the resilience of ‘… critical infrastructure, technology and supply chains … to mitigate potential vulnerabilities’. This announcement presents an opportunity to jointly tackle Euro-Atlantic supply chain vulnerabilities while aiding Ukraine’s defence against Russia.

RUSI Special Reports from August and December 2022 revealed that Russia is using sanctions loopholes to obtain key Western microelectronics for its military infrastructure. NATO and the EU must improve sanctions to slow the flow of Western components into Russia and critically weaken Russia’s war machine.

It Takes Two to Entangle

Comparative advantages in the defence capabilities and regulatory powers of NATO and the EU, respectively, lend considerable potential for improving sanctions against Russia’s procurement networks.

NATO’s structure as a political-military alliance is a useful diplomatic tool for incentivising allies to align sanctions and share intelligence on the components most critical to Russia’s war effort. However, despite its recent interest in expanding its capacity for economic security, it cannot implement economic policies across the Alliance. The EU, conversely, is less equipped to address defence issues but wields effective mechanisms for shaping regional trade and commercial policy as enshrined in Article 207 of the Treaty on the Functioning of the EU. It also lacks a forum for states to use when sharing sensitive information about trade and economic security, a necessary task for which NATO might serve as a stronger platform.

If NATO partners identify Russia's procurement channels for critical components, the EU is positioned to craft sweeping sanctions in collaboration with non-EU NATO allies. Stoltenberg’s taskforce announcement is well-timed, as heightened political will coincides with favourable conditions for cooperation.

Stalling Strategic Autonomy

The strategic autonomy debate that has often complicated the EU’s defence and security ambitions appears to have stalled. Previously, some EU policymakers called for a European defence infrastructure entirely decoupled from the US – and, by extension, from NATO.

However, the third Joint Declaration on EU–NATO Cooperation signed in January 2023 describes NATO as the ‘foundation of collective defence for its Allies and essential for Euro Atlantic security’ and any other European defence efforts as ‘complementary’ and ‘interoperable’. It also suggests that EU defence efforts should support NATO-led operations instead of pursuing other options. For now, EU leaders seem content to shelve discussions regarding independent European defence and security efforts.

Aligning Threat Perceptions

The EU’s threat perceptions seem more closely aligned with NATO’s than in years past. The 2023 Joint Declaration labels Russia’s invasion the ‘gravest threat to Euro-Atlantic security in decades’ and identifies China’s ‘growing assertiveness and policies’ as ‘challenges that [NATO and the EU] need to address’.

If NATO and the EU restrict Russia’s access to Western components, Russia will need to use what it cannot produce more sparingly

This language marks a shift from the EU’s 2022 Strategic Compass, which identified Russia’s invasion as ‘a tectonic shift in European history’ but stopped short of naming Russia Transatlantic Enemy Number One. The Strategic Compass was also more hopeful about China, labelling it a ‘partner for cooperation’, though not without its challenges. The invasion of Ukraine has sharpened the EU’s threat classifications, and the EU’s reassessment of threats beyond Russia may indicate a willingness for closer alignment with NATO.

The Need for Speed

As Russia’s most recent invasion of Ukraine enters its second year, Ukraine and its allies must prepare for new strategic considerations, like depleting military stockpiles.

Russian and Ukrainian munitions stockpiles are both quickly diminishing. While Russia’s economy is better prepared for wartime, Western countries supplying Ukraine with military equipment are admittedly behind in production. Although NATO and the EU intend to expedite procurement, the timeline remains uncertain.

If NATO and the EU restrict Russia’s access to Western components, Russia will need to use what it cannot produce more sparingly. Then, as Russian attacks become more selective, Ukraine and its allies will have more time to increase production and extend the longevity of existing Western support. This extension of existing support could prove consequential, given potential complications in Western aid.

Both NATO and the EU are cognisant of the time crunch; they must convert enthusiasm into action before Ukraine loses its competitive edge. Luckily for the West, when it comes to slowing Russia’s procurement, the call is coming from inside the house.

Slowing the Flow

Russia’s defence infrastructure is almost entirely dependent on Western components. During the early months of the invasion, RUSI staff analysed 450 components from 27 Russian weapons and discovered that US companies manufactured 208 components and European companies manufactured at least 55.

Although Russia may be seeking ‘opportunities to source arms and ammunition from other countries, such as Iran, Belarus and North Korea’, Western components remain critical for its complex weapons platforms, meaning that NATO and EU members must shore up supply chain and sanctions inefficiencies to impede Russia’s production capabilities.

For Western supply chain resilience, progress is the enemy of perfection. Completely preventing Russia’s procurement of components is unfeasible – the global market is highly liquid, and Western governments cannot reasonably monitor every potential shipment. Equally, it is difficult for manufacturers to track whether each sale is eventually flowing to Russia.

Nonetheless, NATO and the EU have several pragmatic options for reducing the flow of Western components into Russia.

Consolidate and Calibrate Sanctions

NATO and EU countries’ current sanctions against Russia are unprecedented, but not always consistent. For example, the EU has sanctioned over 400 entities and 1,000 individuals for involvement in the invasion of Ukraine, but has yet to sanction Special Technology Centre LLC (STC), the manufacturer of the Orlan-10 UAV – a critical part of Russia’s offensive efforts. However, STC has been sanctioned ‘by the US, the UK, Canada, Taiwan and Japan’. A NATO–EU supply chain taskforce should develop common sanctions and designation criteria to apply across NATO and EU member states.

If Western sanctions regimes remain static and inflexible, Ukraine’s allies risk allowing their existing assistance efforts to become outdated or misaligned with future goals

Additionally, some transhipment hubs for components going to Russia are outside the Euro-Atlantic. If NATO and the EU have united sanctions and export controls, they can more effectively encourage other allies to take similar steps.

Improve Sanctions Implementation

Sanctions are only as effective as their implementation permits; of the 450 components identified by RUSI, at least 80 were already under US export controls. NATO and the EU should increase investment in supply chain visibility to improve monitoring tools and cooperation with commercial and NGO partners. RUSI’s SIFMANet project, designed to help European governments and private sectors respond to illicit finance, recently released several timely suggestions on how to improve EU sanctions implementation which could also be applied more broadly across the Euro-Atlantic region.

Additionally, NATO and EU members should share information to establish where they can facilitate compliance. The Dutch government is advocating an EU body to mitigate Russia’s sanctions circumvention; NATO allies could equally benefit from institutionalised cohesion. While implementation ultimately lies with national governments, the EU can do more to facilitate capacity building, potentially developing best practices for NATO allies to use as well.

Private sector awareness is also paramount. Western manufacturers would benefit from transatlantic discussions on improving export monitoring and sanctions compliance, and they could utilise open source information to identify procurement and financing networks. NATO and the EU can initiate forward momentum on both fronts, as well as provide compliance guidance and transparency.

Finally, Western allies must ensure that sanctions implementation is dynamic. As the EU and NATO allies consider additional sanctions measures, they must also continually evaluate how they can maximise the effectiveness of existing sanctions. The EU may need to consider catch-all export controls to prevent circumvention until Western sanctions packages can accommodate for future threats; NATO could help its allies coordinate similar controls on the national level. If Western sanctions regimes against Russia remain static and inflexible, Ukraine’s allies risk allowing their existing assistance efforts to become outdated or misaligned with future goals.

Anticipate Future Trends

NATO and the EU must begin planning ahead. Which components might be most critical to Russia in the future? Russian President Vladimir Putin has tried and failed to wean Russia off Western products for years; he seems unable to do so now. Inter-institutional discussions offer a platform for streamlining component identification and designation processes now to avoid bureaucratic gridlock in the future.

These suggestions identify starting places for improving transatlantic sanctions cooperation and are not without challenges; the EU determines its sanctions unanimously, while NATO countries will need to implement sanctions individually. Private sector cooperation necessitates trust that rival manufacturers may find daunting. Similarly, convincing governments across an entire region to control components now because they might be critical to Russia in the future is likely easier said than done.

Nonetheless, if NATO and the EU can convert political will into improved sanctions cooperation in the near future, the resulting blow to Russia’s procurement capabilities could provide Ukraine with a decisive advantage in the coming year and beyond.

The views expressed in this Commentary are the author’s, and do not represent those of RUSI or any other institution.

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