Duplicity: Romania is in no hurry to apply EU sanctions against Russia

More than 30 months after the aggression illegally launched by the Russian Federation in Ukraine, the Government and the Parliament in Bucharest still do not have the necessary legislation - with a small exception regarding the powers of the Ministry of Finance and ANAF - to implement the 14 sanctions packages adopted by The European Union to the Kremlin. In other words, the representatives of our country voted with both hands in Brussels for the 14 packages of economic and financial sanctions, but when it came to implementation it was found that we are dealing with Ion Creangă's saying from the Harap-Alb fairy tale: " to pies forward, to war back".

Specifically, GEO 202/2008 on the implementation of international sanctions does not contain provisions regarding the central authorities and public institutions intended to oversee the implementation of these sanctions. What is worse is that, since March 2022 when the first package of European sanctions against the Russian Federation was approved and until now, GEO 202/2008 has not yet been amended so that our country, an EU member state, can effectively implement the sanctions adopted at Brussels and with which he agreed.

Only on August 27, 2024, on the website of the Ministry of Foreign Affairs, a project to amend GEO 202/2008 appeared for public consultation, but it has remained in consultation for almost two months, although the explanatory note says that there is a need for an urgent decision of the Bucharest government.

• Note to substantiate the draft GEO: "Romania risks not being able to apply the entire set of restrictive measures imposed at the European level, which could lead to accusations of non-compliance with the obligations assumed by the European Union treaties"

The preamble of the project to amend Emergency Ordinance no. 202/2008 on the implementation of international sanctions reflects an extremely tense geopolitical framework, directly influenced by Russia's war of aggression against Ukraine. According to the quoted text, this conflict had profound effects not only on international security, but also on the global economy, forcing the European Union to adopt the most extensive package of sanctions against the Russian Federation in history. The European Union has imposed sanctions targeting essential sectors such as financial-banking, transport, energy, trade in technologies and sensitive products, but also direct sanctions on individuals and entities responsible for supporting aggression. These sanctions include measures to freeze funds and economic resources, as well as travel restrictions. Romania, as a member state of the European Union, has the obligation to effectively implement these sanctions, but the current legislative framework does not provide all the necessary tools for their implementation at the national level.

The draft ordinance emphasizes that the war in Ukraine affects not only global security, but also the national economy, having a significant impact on the labor market and other economic sectors. In this context, it is necessary to grant exemptions from the sanctioning regime, where permitted by European Union law, in order to reduce the negative social effects of sanctions.

These exemptions are considered essential to mitigate the impact of restrictive measures on the domestic economy, particularly in sectors affected by sanctions. It is a delicate balance between the need to comply with international obligations and the need to protect certain key economic sectors that may suffer knock-on effects.

The preamble of the draft amendment to GEO 202/2008 draws attention to the fact that without amending the current legal framework, Romania would risk not being able to apply the entire set of restrictive measures imposed at the European level, which could lead to accusations of non-compliance with the obligations assumed by the Union treaties European. This compliance is essential not only for Romania's credibility on the international stage, but also for avoiding possible sanctions on the Romanian state in case it does not respect its obligations under European law.

Given the urgent nature of the situation, the draft ordinance is formulated in terms that emphasize the need for rapid intervention. The elements set out in the preamble indicate that this regulation is considered a matter of major public interest, which constitutes an extraordinary situation. In the absence of immediate legislative intervention, there is a risk that Romania will not be able to properly manage the implementation of international sanctions, thus affecting the economic and political security of the country.

• Ministry of Economy, Ministry of Energy, ASF and BNR - among the main institutions with powers in the field of compliance with sanctions

The draft ordinance proposes a series of changes and additions to the existing legislative framework to ensure the implementation of international sanctions. Here are the main changes:

1. Changing the name and powers of the Ministry of Economy

One of the first notable changes is the replacement of the name "Ministry of Economy" with "Ministry of Economy, Entrepreneurship and Tourism" in all relevant articles. This change reflects the expansion of the ministry's powers and aligns the legislation with the current structure of the government.

2. Clarification and update of key terms (Article 2)

The text of the ordinance clarifies essential terms such as:

- International sanctions - include the restrictions imposed by the United Nations Organization, the European Union, or unilateral decisions of other states that Romania decides to implement.

- Designated persons and entities - governments, non-state entities or natural and legal persons that are subject to international sanctions.

- Funds and economic resources - include financial and economic assets that can be frozen to prevent their use for illegal purposes.

3. Freezing of funds and economic resources (Articles 7 and 21)

The amendments provide additional clarification on the freezing of funds and economic resources of designated persons and entities, establishing clear mechanisms for notifying competent authorities when a person or entity has data on such funds. The new articles also include measures forcing authorities to freeze assets and prevent their use for financial or commercial transactions.

In addition, the amendments provide that any request to register goods subject to international sanctions in the commercial register will be rejected until the freezing measure is lifted or modified.

4. Exemptions from the application of sanctions (Articles 8 and 81)

An important aspect is the mechanism for granting exemptions for certain transactions or sectors affected by sanctions. These exemptions are necessary in particular for the operation of diplomatic missions or for humanitarian purposes, such as the provision of medical aid or food. Derogation requests will be analyzed by the competent authorities within 15 working days, and in urgent humanitarian cases, within 10 days.

Also, exemptions from the freezing of funds can be issued by the National Agency for Fiscal Administration (ANAF), with the approval of the competent authority. If exemptions are required for financial activities, the relevant financial authority will issue substantiated views within 5 working days.

5. Special surveillance system (Article 81)

Legal entities under the control of designated persons or entities, whose funds have been frozen, may request the establishment of a special surveillance system. This measure allows funds and economic resources to be unfrozen under the supervision of national authorities, ensuring that they will not be used illegally.

This mechanism is essential to ensure the continuity of economic activities without compromising national security or international obligations.

6. Obligations of competent national authorities (Article 12)

The new amendments clearly establish the responsibilities of competent national authorities for overseeing the application of international sanctions. The Ministry of Foreign Affairs, ANAF, the Ministry of Economy, the Ministry of Transport and other institutions have well-defined roles in the implementation and monitoring of sanctions. These authorities are obliged to collaborate and ensure the publicity of the adopted measures by publishing them on official websites or in the Official Gazette.

7. Sanctions and contraventions (Articles 26 and 261)

The amendments introduce a new set of sanctions for breaching the restrictive measures. Contraventions are sanctioned with fines from 10,000 lei to 100,000 lei and, as the case may be, the confiscation of the goods used in committing the contravention. Also, financial supervisory authorities, such as the National Bank of Romania and the Financial Supervisory Authority, can apply administrative sanctions to supervised entities that do not comply with the international sanctions regime.

8. Record-keeping and reporting systems (Article 15 and Article 18)

The amendments propose the creation and administration by the competent authorities of record systems with data on the implementation of international sanctions. Individuals and legal entities are required to report on sanctions enforcement measures and adopt internal procedures to ensure compliance. Reporting includes detailed information about the transactions, people and assets involved.

• 14 packages of sanctions decided by the EU against the Russian Federation

As of February 2022, the European Union has adopted 14 sanctions packages against Russia in response to its military invasion of Ukraine, according to the European Commission website. These sanctions are designed to weaken Russia's economy and military capability, targeting sectors such as energy, finance, trade and defense. The latest measures include restrictions on liquefied natural gas (LNG), bans on the export of advanced technologies, sanctions on individuals and entities involved in supporting the war, and measures against sanctions evasion through third countries.

The sanctions approved by the European Union are:

1. Energy restrictions: Starting with the initial packages, the EU imposed restrictions on energy imports from Russia, including an embargo on oil and coal. Later packages also included restrictions on liquefied natural gas (LNG) and the natural gas infrastructure that supports Russian energy exports.

2. Financial sanctions: Russia was excluded from the SWIFT system, which blocked the access of Russian banks to international financial markets. In addition, EU banks and financial institutions were banned from doing business with certain Russian financial entities. Restrictions have also been placed on the use of cryptocurrencies to avoid sanctions.

3. Trade and technology restrictions: The EU has introduced strict bans on exports of critical technologies, including advanced drone equipment, electronic components and software, that could be used by the Russian military-industrial complex. In addition, restrictions were imposed on imports of steel, aluminum and other metals from Russia.

4. Sanctions lists: More than 1,400 people and 171 entities were included on the sanctions list. These include high-ranking Russian officials, oligarchs, companies in the military sector, and individuals involved in disseminating pro-Kremlin disinformation and propaganda.

5. Measures against sanctions evasion: The EU introduced mechanisms to combat sanctions evasion by third countries, adding entities and individuals from China, Turkey and other countries to the list of those who directly support Russia's war.

6. Defense Industry Sanctions: Each sanctions package included additional measures to prevent Russia from accessing sensitive military technologies and materials. In particular, the sanctions targeted companies that supply components for drones and other military equipment used in the conflict.

7. Bans on disinformation and propaganda: Several Russian media outlets, such as RT and Sputnik, have been banned in the EU due to their role in spreading disinformation and justifying the war against Ukraine.

In addition to the above, 7 other types of sanctions imposed by the EU against Russia include:

- Sanctions on transport: Ban on access to ports and restrictions on Russian transport vehicles.

- Bans on financial and banking services: Freezing assets and restricting financial transactions.

- Investment Sanctions: Bans on direct investment in various sectors.

- Sanctions on cultural and sports industries.

- Bans on cultural products stolen from Ukraine.

- Safeguards for EU operators affected by sanctions.

- Restrictions on intellectual property rights.

These measures aim at the economic and technological isolation of Russia. Unfortunately, too few of these sanctions are actually applied in our country. Should we be surprised under these conditions that Russia still has the financial resources to continue the illegally started war in Ukraine?