Why has the EU sanctioned Indian, Chinese companies for Russia links?

The latest sanctions, coinciding with the anniversary of the Ukraine war, touch New Delhi, Beijing for the first time.

A day before the two-year anniversary of Russia’s invasion of Ukraine, the European Union released an exhaustive new list of companies, entities or people in countries including Russia, India, Iran, China and Syria, that it said it was sanctioning over allegations that they were connected to Russia’s defence and security sector.

The new sanctions added 27 new entities to a list of more than 600 that were already facing EU bans and restrictions.

But the additions included companies in mainland China and India for the first time, targeting entities in the countries that have been the biggest buyers of Russian fossil fuels since the Kremlin launched its full-fledged war on Ukraine in February 2022.

Here’s more about the new sanctions, who they target, why these companies have been sanctioned, how China, India and Russia have responded – and why all of this matters.

What other countries’ companies have faced sanctions?

While 619 of the 641 entities on the 27-nation bloc’s sanction list are in Russia, a handful of entities from other countries are also on the sanctions register. These include:

  • Eight companies from Iran, including aircraft and aviation companies
  • Four companies from Hong Kong. The United States government said in December 2023 that these companies sent high-priority items to Russia, “critical to Russia’s war in Ukraine”
  • Three companies from mainland China
  • Three from Uzbekistan, including Mvizion which was sanctioned by the US earlier for allegedly manufacturing drones used by the Russian army
  • Two aviation companies from the United Arab Emirates (UAE)
  • One company each on the list from India, Singapore, Sri Lanka, Syria, Armenia, Serbia, Turkey, Thailand and Kazakhstan
  • Zaliv Shipbuilding yard, which is based in Crimea, was annexed by Russia in 2014, but is still recognised by most nations as legally part of Ukraine.

Besides Russian companies, the sanctions are also against Russian officials, including judiciary members, local politicians and people the EU said were “responsible for the illegal deportation and military re-education of Ukrainian children”.

Most international companies were sanctioned by the EU in June 2023. Only 27 of the entities on the list were first announced to be sanctioned on Friday.

Why are companies from foreign countries sanctioned?

The foreign companies have been sanctioned over allegations that they have exported dual-use goods to Russia that could be used in its war against Ukraine. A dual-use item is something that can be used for both civilian and military applications such as technology, satellites or drones. The EU regulation describes the foreign countries as “third countries”.

Ali Ahmadi, a scholar of sanctions and economic statecraft, explained that these countries are often “points of transshipment” – places through which sensitive technology is routed to Russia.

If European countries refuse to export an item to Russia because it might have military applications, the item might still be sent to a country like Uzbekistan or the UAE. From there, it could in turn be sold to Russia – at times without the branding and labelling of its country of origin.

“So it essentially ends up in Russia indirectly,” added Ahmadi, an executive fellow at the Geneva Centre for Security Policy and an analyst at Gulf State Analytics.

The US also imposed roughly 600 new sanctions against entities in Russia and other countries on Friday in the largest single round of penalties since Russia’s invasion of Ukraine on February 24, 2022.

US President Joe Biden said the sanctions were a response to the war in Ukraine and Russian opposition leader Alexey Navalny’s death. There is overlap between the entities the US and EU have sanctioned. Ahmadi said that the US and the EU “certainly cooperate with each other a lot, but there are entities that are on one sanctions list, not on the other”.

How will the sanctions affect the entities?

The EU sanctions mean that EU member states can not sell battlefield or dual-use goods to the entities on the sanctions list.

The US and EU sanctions on the companies in countries besides Russia are “going to make it substantially harder for them to interact with the outside world,” said Ahmadi.

Ahmadi compared the sanctions with former US President Donald Trump’s maximum pressure campaigns against Iran or Syria, adding that it is a much more aggressive stance reflecting that “the Europeans have acknowledged their sanctions are very leaky“.

However, Ahmadi added that the third countries themselves will not necessarily take a significant hit – yet – since only a handful of companies from these nations have been targeted so far.

Take Iran, the country with the most companies targeted, other than Russia. The Iranian companies on the list are state-owned institutions. “Whatever business they do is with Iran’s allies,” said Ahmadi. “They don’t have any interaction with the dollar. They don’t do business with any European entities.” Their very purpose and design effectively shield them from the new sanctions.

So what’s the point of the sanctions? Simply, say experts, to send a signal of the EU’s disapproval – and a reminder to the countries hosting these companies, including China and India, of what Brussels could do more of, if it wants to.

Did China issue the EU a warning after sanctions?

After the sanctions were announced, the Chinese Ministry of Commerce released a statement on Monday condemning them.

In the statement, the ministry said that the sanctions were unilateral, with “no basis whatsoever in international law and authorisation from the United Nations Security Council”.

Beijing, New Delhi and most Global South capitals have long criticised sanctions imposed by individual countries and blocs like the EU that do not have the legitimacy of the UN’s approval, though China’s veto power on the Security Council makes it practically impossible for that body to sign off on sanctions against Beijing.

The Chinese statement also added that the sanctions go against the spirit of discussions during the China-EU leaders’ meeting, which happened between Chinese President Xi Jinping and European Commission President Ursula von der Leyen in December 2023.

China warned that these sanctions would have a detrimental impact on China-EU economic and trade relations.

Yet, Ahmadi said China’s response – much like the EU sanctions – was for the most part symbolic.

“It is something that China feels like it has to react to,” said Ahmadi. However, he added that only Chinese microtechnology companies have been affected, which does not affect China so much.

If the EU attempted to impose sanctions on major Chinese banks, that would likely have significant implications for the global economy. But, Ahmadi said, “I don’t think the Europeans or the Americans are ready to go that far, even if they may be, it may be the only way to stop transshipment through China.”

Which Indian company has been sanctioned?

Si2 Microsystems Pvt Ltd, based in India’s Bengaluru, is a new addition to the sanctions list as of Friday.

Si2 designs integrated circuits for commercial, military and space industries and has partnered up with India’s Ministry of Electronics and Information Technology (Meity) and the state-funded Indian Institute of Technology Madras, as part of an effort to research the fabrication of chips with silicon photonic processor cores.

It manufactures chips for quantum computing and avionics among other sectors and has claimed the Indian Space Research Organisation (ISRO), General Electric and IBM to be past customers, according to a government press release and global tech publisher, The Register.

The EU sanctions do not detail what specifically Si2 is believed to have helped Russia with, but experts suspect it is accused of having to facilitate semiconductor shipments to Moscow. Many modern weapons systems rely on semiconductors.

India is a close strategic partner of the EU and the US. Though it has purchased the most Russian fossil fuels since the start of the war, after China, the West has, until now, avoided targeting New Delhi or Indian entities.

What is EU Regulation 833/2014?

Adopted on July 31, 2014, the European Council’s Regulation 833/2014 states that it is “prohibited to sell, supply, transfer or export, directly or indirectly, dual-use goods and technology” to Russia or for use in Russia. It was adopted in the aftermath of the Russian annexation of Crimea and the Kremlin’s support for secessionist movements in eastern Ukraine.

The EU Regulation that came on Friday is essentially an amendment to Regulation 833/2014. The last amendment was made to the regulation on December 18, 2023, when 13 new entities were added to the sanctions list.

Initial sanctions and restrictive regulations largely targeted Russian and Belarusian entities. In February 2023, seven Iranian entities were sanctioned for allegedly manufacturing items used by Russia’s military in the war. In June 2023, entities from Hong Kong, China, Uzbekistan, the United Arab Emirates, Syria and Armenia also made the sanctions list.

How has Moscow reacted to the EU sanctions?

As a response to the latest round of EU sanctions, Russia’s foreign ministry announced that it had significantly expanded a list of EU officials and politicians banned from entering Russia. The announcement was made on Friday.

“The European Union is continuing its fruitless attempts to put pressure on Russia through unilateral restrictive measures,” the Russian foreign ministry said in a statement.

Source: Al Jazeera