The U.S. Should Take a Page From Europe’s New Russia Sanctions Playbook

The European Union is stepping up enforcement against Russian sanctions evasion.

Brussels has now implemented its largest set of designations against Moscow in two years, targeting the Kremlin’s enablers in banks and transshipment hubs around the world. The European Union originally planned to approve the package in February to coincide with the fourth anniversary of Russia’s 2022 war in Ukraine; however, Hungary and Slovakia vetoed the move until Ukraine restored deliveries of Russian oil to Central Europe by bringing the damaged Druzhba pipeline back online.

The European Union’s latest package implements several significant measures: broader bans on high-risk exports, due diligence requirements for tanker sales, and transaction bans for 20 Russian banks.

New EU ‘Anti-Circumvention’ Tool Highlights Kyrgyz Support for Russia

For the first time, the European Union is applying its so-called “anti-circumvention tool” to an enabler country: Kyrgyzstan. These restrictions bar Kyrgyzstan from importing certain dual-use EU goods, specifically radios and computer numerical control machines, which are vital to Russia’s defense industrial base. Kyrgyzstan, which is actively seeking to attract Western minerals investment, has emerged as a transshipment hub for dual-use goods that support Russia’s war effort.

Kyrgyzstan is also a known Russian sanctions evasion hub. Multiple Kyrgyz companies and banks, some of which are implicated in billion-dollar money laundering scandal, are already subject to U.S., UK, and EU sanctions. More than 20 members of the British parliament are also pushing for individual sanctions designations targeting the head of Kyrgyzstan’s central bank, Kyrgyzstan’s general prosecutor, and the head of Kyrgyzstan’s financial regulatory authority.

According to the British MPs, these officials have helped make Kyrgyzstan an enabling jurisdiction for Russian sanctions evasion, specifically by enabling the operation of A7A5, a cryptocurrency exchange based in Kyrgyzstan that has been sanctioned by western authorities.

EU Targets Payment Mechanisms and Financial Enablers

The EU’s new restrictions also work to break several individual links in Russia’s third-party support network. European regulators extended sanctions to cover specific sanctions-evaders and enablers operating in China, Belarus, the United Arab Emirates, Laos, Azerbaijan, Armenia, Indonesia, and Central Asia.

Certain of these entities, such as Azerbaijan’s Yelo Bank, appear to have participated in transactions with Russia’s System for Transfer of Financial Messages (SPFS), an alternative to the global financial messaging system, SWIFT. In November 2024, the Treasury Department’s Office of Foreign Assets Control (OFAC) issued an advisory warning that “any foreign financial institution that joins or has already joined SPFS” may be sanctioned by the United States.

In addition to targeting nodes in Russia’s traditional sanctions evasion network, the European Union also imposed a total sectoral ban on Russian and Belarusian cryptocurrency exchanges and service providers; prohibited transactions involving the ruble-backed stablecoin RUBx, and barred dealings involving Russia’s digital ruble, the country’s central bank digital currency which is not set to roll out for public use until September 2026. This move treats the entirety of Russia’s crypto ecosystem as a transaction class of concern, thereby increasing the risk profile for any firms that engage with it moving forward.

Continued Pressure Critical To Preventing Russian Windfall

The United States should consider aligning its export controls with EU prohibitions on jurisdictions of transshipment concern. The U.S. could do so by establishing a new mechanism for identifying countries like Kyrgyzstan as “Jurisdictions of Primary Diversion Concern” and, like the special measures applied to financial institutions pursuant to Section 311 of the USA PATRIOT Act, apply enhanced due diligence, end-use verification, or even blanket prohibition on dealings with jurisdictions that present elevated risk of illicit trade diversion.

The United States could also expand its designations of individual Russia-linked entities to include new actors identified by the European Union. Over the long term, this could help facilitate a more institutionalized approach to harmonizing transatlantic sanctions and export control enforcement. Beyond sanctions and export controls, the United States can also leverage Kyrgyzstan’s desire for western investment in strategic sectors of its economy as leverage to help usher in reforms.

Max Meizlish is a research fellow at the Center on Economic and Financial Power (CEFP) at the Foundation for Defense of Democracies (FDD). Angela Howard is a research analyst at CEFP. For more analysis from Max, Angela, and FDD, please subscribe HERE. Follow FDD on X @FDD and @FDD_CEFP. Follow Max on X @maxmeizlish. Follow Angela on X at @angela__howard. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.