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Some people’s to-do lists never end.
The European Union’s top diplomat on Russia sanctions, veteran Eurocrat David O’Sullivan, is one. “In Moscow, there’s someone getting up every day, thinking: How can I get my hands on those chips today?” he says.
In other words: We can’t let our guard down.
Making sure sanctions hurt Russia’s war effort doesn’t only matter for Ukraine but also for the very future of the European Union. “This is an existential moment for this continent,” O’Sullivan told POLITICO in an exclusive interview in Brussels this week.
“Sanctions are not just about Ukraine, there are very good reasons why we have to do this in our own best interests. If Mr. Putin has his way in Ukraine, it will have enormous consequences,” he said.
As sanctions envoy, the former EU ambassador to Washington is racking up air miles on his mission to persuade governments to prevent weapons or their critical components from reaching Russia via secretive intermediaries. These streams almost always involve multiple contracts, shippers and countries.
Even though the EU has agreed a total of 14 sanctions packages since President Vladimir Putin launched Russia’s full-scale invasion more than two years ago, the Kremlin still finds ways to put Western tech in its missiles, drones and other weapons it uses to terrorize the Ukrainian population.
“These products are frankly contributing to the death of innocent Ukrainian civilians, as we saw with the tragic attack on the children’s hospital in Kyiv,” said O’Sullivan, referring to the strike on the Okhmatdyt hospital this week that killed two people and injured at least 30.
Examples include products like semiconductors or lasers that go into missiles like the one that hit the Kyiv children’s hospital.
China is a “growing problem” as a circumvention hub for the EU’s sanctions against Russia, the envoy said. Some 70 to 80 percent of Russia’s Western inputs of battlefield and some dual-use items travel via China or Hong Kong.
“We have raised this with the Chinese, who are not particularly responsive, it must be said,” O’Sullivan lamented in his office on the eighth floor of the European Commission’s Berlaymont headquarters.
In its 14th package of Russia sanctions, the EU listed 19 companies in China and Hong Kong. This means EU companies can no longer do business with them.
“If we identify Chinese companies facilitating this kind of trade — of EU- or G7-sanctioned products — we will act. We would prefer if there were some systemic action taken in China. But that doesn’t look to be on the cards for the moment.”
“The Chinese take a strong position that they’re an independent country and that they’re not applying our sanctions,” O’Sullivan said. However, the fact chips or cameras or lasers goes into lethal weapons “makes the conversation quite different than any other form of circumvention, like with luxury goods.”
Next up: Vietnam and Malaysia
China and Hong Kong loom large, but they aren’t the envoy’s only targets. “We’ve seen a slight eastward drift in the in the circumvention lately,” said O’Sullivan, who initially focused on countries in regions closer to Europe: Serbia, Turkey, the Caucasus, Central Asia and the United Arab Emirates.
“Vietnam and Malaysia are my next destinations in September,” said O’Sullivan, who will be joined in Malaysia by representatives from Britain and possibly the United States. Vietnam will be a challenging assignment: Putin visited in June, when he was feted by the country’s communist rulers and discussed regional security.
According to O’Sullivan, third-country governments are willing to listen to the EU’s arguments.
“Of course, people also are thinking about their relations with us, their relations with the Americans, their relations with the G7, and how they position themselves generally,” he said.
O’Sullivan’s message is not to stop all trade with Russia — a demand the EU could not legally press — but rather not to serve as a platform for European products or parts to reach the Kremlin’s military-industrial complex. “It’s only a small part of sanctions, and a small part of total trade.”
A stick that Brussels can wield is banning EU companies from doing business with entities in, for instance, China or Turkey. The list — mysteriously called Annex IV — includes hundreds of entries, mostly from Russia but increasingly other nations like the UAE, Sri Lanka and Kyrgyzstan.
It doesn’t affect the companies themselves; they can carry on trading domestically. The measure rather applies to European entrepreneurs. The naming-and-shaming exercise has value, O’Sullivan argues.
“Many of these countries seek to attract inward investment. The U.S. and the EU are by far the greatest source of that of that kind of investment — Russia is not going to invest,” he explained. “So they don’t want the reputational damage of their country and companies being identified as breaking sanctions.”
Puncture or blowout
With an English accent that floats between American, British and a hint of his native Irish, the 71-year-old diplomat isn’t quite ready to retire.
A debating champion at his alma mater, Trinity College Dublin, O’Sullivan represented the bloc as ambassador in Washington and was the top civil servant at the Commission’s trade department for five years. And he shaped the European External Action Service — the nearest thing the EU has to a foreign ministry — as its first chief operating officer.
As a trained economist, O’Sullivan is careful with forecasts — but he stands by his view that Russia’s war economy is like a car with a slow puncture. It isn’t about to crash but, over time, will become impossible to steer.
“Into next year, Russia is going to increasingly struggle economically,” he said.
“Putin has shown a willingness to sacrifice the well-being of his people to an extent which most of us thought he would not do. If you’re prepared to cannibalize the rest of the economy for maintaining your military capacity, well, you can do that. But the medium-term costs are huge.”
To-do list
Tackling circumvention is a game of cat and mouse, O’Sullivan admits. It’s easy to set up a new shell company to take over from a tainted one. The EU’s fragmented sanctions framework doesn’t help; while they are agreed jointly, sanctions are implemented by its 27 countries separately. An estimated 160 agencies across the bloc are involved.
O’Sullivan prefers to looks to what’s been achieved — including new measures against Moscow ally Belarus: “With the 14 packages and the step on Belarus this is the strongest sanctions package we’ve ever had against any country; it covers now about two-thirds of former trade,” he said.
Getting those deals over the line last month — despite German opposition to both — was important, he said, while playing down expectations of a 15th sanctions round anytime soon. “Look, the ink is barely dry on the 14th package. And people are saying, so what about the 15th? Let’s make the 14th work first,” O’Sullivan added.
Pushed on a timeline, the sanctions envoy admitted “it won’t be the last” and that “the end of the year or beginning of next year might be the logical moment.”
