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French, Dutch seek EU sanctions on financial institutions helping Russia military

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France and the Netherlands are seeking European Union sanctions on any financial institution in the world that helps Russia’s military pay for goods or technology for making weapons, according to a proposal seen by Reuters.

The EU has been trying to prevent circumvention of 13 packages of sanctions already imposed on Russia since it invaded Ukraine in February 2022. Existing sanctions include a ban on selling to Russia certain dual-use goods and technologies that have both civilian and military application.

Ambassadors of EU governments will discuss the proposal on Wednesday as part of the 14th package of sanctions against Russia now under preparation by the EU.

Under the proposal, anyone in the EU could be banned from doing business with any financial institution in the world, identified by the EU as directly or indirectly helping Russia’s military obtain forbidden dual-use goods and technologies.

Such a ban could be a powerful incentive for financial institutions in the Middle East, Turkey or even China not to engage in deals to supply EU-sanctioned dual-use goods to Russia as they could lose access to European business and the EU’s financial markets.

EU officials said the European Commission would be likely to coordinate any such sanctions on financial institutions with the U.S., making the tool even more powerful.

“The Netherlands and France propose to introduce a legal basis … providing for a transaction ban with financial institutions in Russia or other third countries when the Council has determined that these entities to be involved in transactions that significantly support Russia’s military by facilitating exports towards Russia of essential goods for the war effort, such as dual-use goods and technologies or goods listed in annexes VII and XL of the Regulation,” the Franco-Dutch proposal, seen by Reuters, said.

Hungary, which has warm ties with Moscow despite the invasion of Ukraine, may oppose the proposal, and possibly Germany, keen not to jeopardise close business ties with China. The European Commission said last month there were signs that Beijing was supplying components to Russia that could be used to make weapons.

The EU expects to have the 14th sanctions package, which requires unanimity among all of the EU’s 27 governments, ready in June.

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