How the Kremlin earns money in Europe for the war in Ukraine

Despite the imposition of 14 sanctions packages against Russia, the restrictions have not yet affected its aluminium production. As a result, the Russian aluminium giant Rusal has not only not been subject to any sanctions, but also continues to own subsidiaries in the EU.

After oil and gas, metal accounts for a significant portion of Russia's export earnings. According to the Reuters news agency, last year, exports of Russian metals and metal products brought in about $60 billion, although this year it was down 15 percent compared to 2022. However, the European Union is in no hurry to impose sanctions on Russian metals. Unlike the US and the UK, Brussels has not yet imposed effective sanctions on Russian aluminium, nickel and copper.

Sanctions against aluminium

It was reported that Europe was discussing the inclusion of possible sanctions against Russian aluminium in the 13th sanctions package, but this did not happen. But, as noted earlier, the latest EU 14 sanctions package also does not contain broad restrictions on metals from Russia. The only possible sanctions for Russian metals include a ban on imports of Russian helium and other rare earth components. However, these metals do not form the basis of Russian metal exports.

Overall, the previous rounds of sanctions did not affect about 85% of Russia's metal exports to the EU, according to the European Aluminium trade organisation. And as of 2022, the EU imported aluminium worth approximately €2.3 billion.

Sanctions against Russian companies and their owners

In addition to sanctions against Russian metals, Europe should continue to sanction and strengthen sanctions against Russian companies and their owners, i.e. Russian oligarchs. The example of the Russian aluminium giant Rusal is a good one: not only is the company not under sanctions, but it still has subsidiaries in several EU countries.

The revenues from Rusal are primarily received by Russian oligarchs Oleg Deripaska, who is under EU sanctions, and Viktor Vekselberg. The companies of these oligarchs, including Rusal, are actively working for the Russian defence industry.  They assist in producing of everything from infantry weapons, tanks and armoured vehicles to aircraft and precision missile systems. There is also information that Rusal recruits so-called volunteers to fight against Ukraine.

Despite all these facts, Rusal and one of its owners, Viktor Vekselberg, are still not under EU sanctions, which is the main argument to justify the fact that some European companies continue to buy Rusal's products, and its subsidiaries still operate in Sweden and Ireland.

Swedish aluminium with Russian origins

In particular, the Kubal metallurgical enterprise in Sundsvall, a subsidiary of the Russian Rusal, is still successfully operating in Sweden. Due to the absence of EU sanctions, the company continues to operate in Sweden and generate profits for the Russian Federation and Russian oligarchs.

The issue of nationalisation of Kubal has already been raised by the Ukrainian Security and Cooperation Centre, the Swedish-Ukrainian association Nordic Ukraine Forum, and the nationalisation of the company is also advocated by a moderate member of the Swedish Riksdag Jorgen Berglund and the parliamentary Centre Party.

The European Union has been considering restrictions on aluminium for a long time. Sanctioning Russian aluminium is an effective step that will harm the Russian economy. At the same time, the EU will also stop oligarchs such as Deripaska and Vekselberg from continuing to profit from their facilities on the European continent and channeling them into war. Therefore, for sanctions to be effective, a comprehensive approach is needed to cut off the possibility of financial flows to both the Russian state budget for the war and the pockets of the war's sponsors, which are Russian oligarchs.

Today, sanctions against Russian metals are perhaps the only way to weaken the Russian economy and achieve a turnaround in the war that threatens the security of the entire European continent in the near future.

Originally published in Dagens Nyheter.