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Russian economy may face more hardship as the EU looks to close sanctions loopholes

Vladimir PutinRussian President Vladimir Putin.

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  • Russia’s economy could face more pressure as the EU eyes sanctions loopholes, the Financial Times reported.
  • It could involve sanctioning countries that re-export banned products into Russia.
  • Meanwhile, the US proposed a full export ban on Russia, but found little support in the G7.

The Russian economy could come under more pressure as the European Union reportedly looks to close sanctions loopholes.

EU officials are discussing new measures that would penalize countries for re-exporting banned products to Russia, sources told the Financial Times.

The proposal would give the EU power to restrict specific products from nations participating in prohibited trade with Russia. Under the mechanism, such states would be given a warning, after which they would be targeted by export controls.

However, some EU members are concerned about the proposed sanctions, citing a risk to geopolitical relations while the mechanism’s legality would also need to be reviewed, the FT reported.

“How do you avoid the unintended side-effects of pushing certain countries in a different direction to where you want them to go? You have to be very careful on how you use carrots and sticks,” one diplomat told the FT.

If implemented, the measure would add extra pressure to Russia’s economy, which has already been squeezed by sanctions on its oil exports.

The EU has already tried to persuade countries in Central Asia as well as Turkey and the UAE to get tougher on Russian efforts to evade sanctions, the FT said.

Meanwhile, the US has urged the G7 to apply an all-encompassing export ban on Russia, given the loopholes. Other members have not joined such calls, but indicated willingness to deal with the re-exporting issue in the G7’s upcoming meeting.

Official statistics from the Kremlin have suggested that Russia’s economy has proven far more resilient in the face of Western sanctions than expected. 

But other signs point to a record worker shortage as the war in Ukraine adds pressure on the labor force. Other dim views on Russia’s economic prospects have piled up lately too. 

Russia’s economy is becoming increasingly primitive as its war in Ukraine drags on, and the repercussions could push it down the same path the Soviet Union endured three decades ago, according to Russian economist and University of Chicago professor Konstantin Sonin.

And an adviser to Finland’s central bank said Russia is experiencing “reverse industrialization” as Western sanctions and its continued war on Ukraine weigh on long-term economic growth.

Read the original article on Business Insider