In response to Russian intervention in Ukraine, the Obama administration and the European Union have imposed sanctions on Russia’s weapons and defense sector. In an announcement on July 29, the EU banned new EU-Russian military equipment transactions for one year while the Obama administration blacklisted eight Russian defense firms, two separatist groups, and a Ukrainian oil facility.
The European Commission, the executive body of the EU, called the measures “a strong warning [that] illegal annexation of territory and deliberate destabilisation of a neighbouring sovereign country cannot be accepted in 21st century Europe.” The U.S. Commerce Department cited “Russia’s continued policy of destabilization in eastern Ukraine and ongoing occupation of Crimea and Sevastopol” as reasons to block transactions with the 11 entities “engaged in activities that are contrary to the national security or foreign policy interests of the United States.”
Any U.S. firm seeking a license to do business with these organizations will face a presumption of denial, according to the Commerce Department. The U.S. sanctions, first authorized by an executive order issued in March by President Barack Obama, also block these entities from transferring any assets, receiving payments, or processing withdrawals in the United States.
What Sanctioned Russian Firms Make
Source: Defense News, U.S. Commerce Department, Wisconsin Project on Nuclear Arms Control.
The sanctioned Russian firms include Concern Almaz-Antey, Russia’s leading defense contractor; KBPO, which manufacturers the anti-aircraft system believed to have destroyed a Malaysia Airlines plane in July; and Kalashnikov Concern, which manufactures the assault rifle of the same name. Kalashnikov exported at least 10,000 rifles to the United States in 2013, according to the Wisconsin Project on Nuclear Arms Control, which monitors the global arms trade.
It is not clear what the impact of the sanctions will be. European arms exports to Russia are relatively small, totaling around $400 million in 2013, according to the EU. But exports of dual-use goods to Russia last year were worth an estimated $26 billion. European firms supplied lasers and advanced electronics and materials, which Russia may find difficult to replace, according to sources quoted by The Wall Street Journal.
On Aug. 6, Izvestia cited sources in Russia’s Federal Space Agency as saying its aerospace and military-industrial enterprises will purchase electronic components totaling several billion dollars from China. The sources said China Aerospace Science and Industry Corp. had offered “a direct alternative to, or slight modifications of the elements [Russia] will no longer be able to acquire because of the sanctions introduced by the United States,” according to Izvestia.
In addition to the EU sanctions, the German government canceled an ongoing deal involving Rheinmetall, a German defense firm supplying parts for a Russian military training facility. The deal has been suspended, and no more deliveries will occur, according to the German embassy in Washington. “We wanted to go beyond the EU sanctions,” a spokesman said in Aug. 11 phone interview.
Despite criticism from other European countries, France is going ahead with a $1.6 billion deal to sell two Mistral amphibious warships to the Russian defense firm Rosoboronexport. DCNS, a French naval defense company, signed the deal in June 2011. The company says it will deliver the first carrier to Russia in October. According to news reports, 400 Russian sailors trained this summer at the port of Saint-Nazaire, in northwestern France, learning how to operate the vessel.
The U.S. House of Representatives approved a defense appropriations bill in May with an amendment by Rep. Rosa DeLauro (D-Conn.) barring the Defense Department from contracting or subcontracting for helicopters or other weapons with Rosoboronexport. The Senate is expected to take up similar legislation in September. Republican Sens. John Cornyn (Texas) and Dan Coats (Ind.) have called for the cancellation of all Pentagon contracts with Rosoboronexport. The Pentagon has paid the company more than $1 billion for a fleet of Russian-made Mi-17 helicopters, which the United States is providing to Afghan security forces.