Some corporations slow to abide by Russian sanctions

Op-ed views and opinions expressed are solely those of the author.

Corporations throughout the world have worked with Western governments to impose tough sanctions on Russia for invading Ukraine. Sanctions on Russia have already taken a heavy toll on the Russian economy and sent a message to Russian leadership that continued hostilities will not be tolerated by the West. Unfortunately, there are a handful of corporations who either are slow to cut ties with Russia or refuse to take any action to show a unified front against Russian aggression.

Some of the world’s biggest corporations, although slow to act are finally standing up to Russia. CNBC reported on June 8, 2022, “Microsoft said on Wednesday it was making substantial cuts to its business in Russia, joining a string of companies that are reducing their exposure or pulling out of the country following its invasion of Ukraine.” The report cited other companies including Apple, Nike, and Dell Technologies who have previously severed ties with Russia. Even though Microsoft was slow to start the process of reducing its economic ties to Russia, a large corporation like Microsoft partially pulling out of Russia sends a strong signal to other corporations still operating in Russia that they should do the same.

Russia has felt the pain and is reacting as expected. With more aggression. Russia recently announced a threat to stop all Ukrainian grain exports to global markets unless Western sanctions are relaxed.

The AP reports, “Ukraine is one of the world’s largest exporters of wheat, corn and sunflower oil, but the war and a Russian blockade of its ports have halted much of that flow, endangering food supplies to many developing countries. Many of those ports are now also heavily mined.” The fact that Russia is mining ports to prevent exports should horrify corporations doing business with Russia today. There are about 22 million tons of grain sitting in Ukraine waiting to be shipped to foreign markets but prevented by Russian force.

The Russians could care less if people starve because of a lack of wheat and corn. They only care about imposing their will on unwilling countries and companies to allow them to continue to savage the Ukrainian people and destroy the infrastructure of major cities. Not everybody is on board.

Some big multinational companies continue to resist sanctions. For example, Airbus, a European aerospace company, has come out against sanctions on Russian exported titanium. They want to continue to use the Russian metal in producing aircraft and increased imports after the invasion of Crimea in 2014. Business Insider reported on April 13, 2022, “A spokesperson for Airbus told Insider: ‘Sanctions on Russian titanium would hardly harm Russia, because they only account for a small part of export revenues there. But they would massively damage the entire aerospace industry across Europe.”

If every company adopted the idea that their specific product only impacts a small part of the Russian economy sanctions would never work.

Exemptions to sanctions regimes are one of the prime reasons for failure. The New Yorker analyzed why sanctions have failed in the past in a March 7, 2022, commentary and argued that “The main flaws are usually the exemptions, known as carve-outs, that provide financial lifelines. Humanitarian goods—food, medical equipment, education materials—are generally exempt. But enforcement of sanctions on everything else is up to individual nations, which can amend or bend the rules for their own economic needs.” Titanium seems like something that should be covered by sanctions – not exempted.

The article cited the 1966 Rhodesia, now Zimbabwe, example of a sanctions regime that hit a high percentage of exports yet failed because of a carve-out for the export of a certain metal. While ninety percent of the exports from Rhodesia to other nations were blocked by the U.N. Security Council, “the U.S. Congress approved an additional carve-out that allowed the import of Rhodesian chromium, a key component in American jet engines, cars, and stainless steel.”

That carve-out contributed to the failure of sanctions.  It took more than a decade to implement regime change in Rhodesia to a democratically elected government and that one carve-out was a contributing factor.

Companies like Airbus should comply with Ukrainian President Volodymyr Zelenskyy’s call for maximum sanctions to send a message to Russia that there are stark economic consequences for the invasion of Ukraine. Carve-outs by corporations will only undermine that effort.

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Dan Perkins

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