Dealing with Third-Country Involvement in Sanctions Evasion
Extraterritoriality as a Policy Frontier?
- A key challenge to sanctions effectiveness is the role of third countries in sanctions evasion, as they are neither subject to sanctions nor obliged to enforce them.
- Since 2022, the EU, U.S., and UK have intensified efforts to curb sanctions evasion and avoidance through third-country jurisdictions.
- In doing so, the EU’s sanctions framework has acquired an increasingly extraterritorial dimension, raising legal, geopolitical, and economic trade-offs.
- This paper explores these challenges and proposes eight recommendations to enhance the EU’s counter-evasion framework along a spectrum of extraterritoriality.
A key challenge to the effectiveness of sanctions lies in the role of third countries that are neither subject to sanctions nor obliged to enforce them. In today’s highly interconnected global economy, trade and financial flows can be redirected through these jurisdictions, enabling the circumvention of restrictive measures. Following the imposition of far-reaching sanctions against Russia in 2022, the EU, U.S., and UK have intensified efforts to counter such sanctions evasion and avoidance (SEA). As a result, the European sanctions framework has acquired an increasingly ‘extraterritorial’ dimension, affecting sectors and operators beyond the EU’s borders. While this approach can strengthen control over evasion, the use of extraterritorial sanctions also raises legal, geopolitical, and economic trade-offs.
This paper explores these challenges and outlines eight recommendations for improving the effectiveness of the EU’s counter-SEA framework along a spectrum of extraterritoriality: prioritising high-risk goods, ensuring policy consistency, assessing economic impacts, reviewing institutional arrangements, strengthening international partnerships, employing positive inducements, and leveraging market-based instruments.
