Vladyslav Vlasyuk, Presidential Commissioner for Sanctions Policy

Despite two years of unprecedented sanctions pressure, Russia is still trying to keep its economy afloat – thanks to oil revenues, sanctions circumvention schemes and support from third countries. But, according to Vladyslav Vlasyuk, the President’s commissioner for sanctions policy, the Kremlin’s resources are rapidly melting away. Western sanctions against Rosneft and Lukoil only open up a new phase of economic pressure, which may now spread out to include the financial sector, crypto-payment arrangements, and exports of critical components to Russian Defense Industrial Base (DIB) companies.

Vladyslav Vlasyuk serves as an envoy and adviser to the President on sanctions policy and as the Secretary of the International Working Group on Sanctions against Russia (also known as the Yermak-McFaul expert group). He is a key figure in the Ukrainian government's efforts to develop and implement sanctions against Russia due to its invasion of Ukraine. Russia has lost an estimated $700 billion from sanctions initiated by Ukraine since the inception of all-out invasion, and it was Vlasyuk who developed a significant part of them.

Acting in coordination with government agencies, public organizations and experts, Vladyslav Vlasyuk develops suggestions regarding Russia sanctions, which, after consideration by the Interagency Working Group, are submitted to the National Security and Defense Council for consideration and possible endorsement. And international sanctions initiatives are pushed forward by Ukraine through the sanctions commissioners of partner countries - also under his coordination.

In a conversation with Ukrinform, Vlasyuk explains why the Western sanctions coalition is acting increasingly coherently, how strikes against Russia’s energy and banking sectors can undermine its military capabilities, and why the only way for Moscow to alleviate the sanctions pressure is to embark on the path to peace.

RUSSIA MAY LOSE $5.5 BILLION EVERY MONTH

- How can we ultimately benefit from the US sanctions against Rosneft and Lukoil? How do they impact the Russian economy?

- Sanctions against Rosneft and Lukoil were first introduced by Great Britain, a week before the US sanctions. Then the Americans imposed restrictions on both companies and 32 of their subsidiaries. This is very good, because what are targeted in this case are vertically integrated entities.

Then the European Union joined in by sanctioning Rosneft. Lukoil is expected to be included in the next package, and this is for definite.

How can we benefit from this? The benefit is that the sanctions are targeting 60-70% of Russian oil exports to India and China.

Here I have to note that oil transportation is a complicated story. There is the concept of "clean" oil, of Rosneft’s and Lukoil’s net exports. And there is the concept of "mixed" oil. In fact, a significant part of Russian oil is exported as a mix with Rosneft’s oil, amounting to 60-70% of overall exports. That is, if the sanctions are enforced at least at 80 percent, this would amount to approximately $5.5 billion in monthly losses for the Russian budget.

- But the American sanctions come into effect from November 20, don ‘t they?

- Yes, the American sanctions will formally become effective beginning on November 20. But oil purchase contracts are signed for future periods.

Since last week, we have seen an almost 20 percent decline in the number of contracts signed for crude oil futures. And reports are already coming that Chinese buyers have become far less interested in buying oil from Russia.

So, the effect is already there, complementing the fresh British and European Union sanctions that have already come into effect. Therefore, I am expecting that we will see a significant decline in both demand for Russian oil and Moscow's oil profits after November 20. At the same time, it is crucial not to let the Russians implement new supply schemes.

-Basically, they now have time to organize all these schemes for themselves.

- Theoretically, yes. But in practice, this is a very strong signal to the entire market.

Redirecting exports through another legal entity means with a high degree of probability that this other company will as well run into sanctions. After all, given that the Americans, Europeans, and British have already wielded sanctions against Rosneft and Lukoil, the issue of blacklisting any other exporter will, in principle, be easily resolvable.

- The US sanctions were long awaited. Despite this, the American media has drawn attention to the fact that they are not as tough as Trump promised. A lighter option was purportedly chosen. Do you agree with this? Could the Americans have hit the Russian economy harder?

- You can always hit harder.

Rosneft and Lukoil are Russia’s top two largest oil companies, and they are under serious sanctions. Was there really a choice between several options - stronger, weaker, medium? I think so. At least, we have been told many times that a bunch of options of varying degrees of severity had been prepared.

Therefore, I am sure that there really was a choice. But the decision made is definitely not the weakest. This is an obvious result of our diplomatic efforts. An understanding on that issue has developed between US and Ukrainian presidents, as shown by Zelensky’s most recent visit to the United States. And, of course, our meetings in Washington during the visit of the delegation led by Prime Minister Yulia Sviridenko also had an effect: the Yermak-McFaul sanctions group continues to work.

- You mentioned China and the Chinese gradually abandoning Russian oil. Will that really happen? After all, China responds to any American sanctions as if it means nothing to it.

- I would not mix these issues. Why? Because the issues of oil supply, oil export, production, transportation insurance in modern conditions cannot be reduced exclusively to relations between Russia and China.

Unlike supplies of critical components, for example. In this matter, it is quite easy for many Chinese companies to make a choice: don't give a damn about sanctions, voluntarily cut themselves off from the world market, work with Russia; it suits them all right.

This cannot be the case in the world of oil trade. There is no place for isolationism there. I suppose the impact will be sufficient.

AFTER OIL SANCTIONS, FINANCIAL SANCTIONS ARE TO FOLLOW

- What new sanctions can the US administration apply on Russia, in your opinion?

- There is a broad choice of options. With a high probability, these could be sanctions against the financial sector, and this is what we are talking about at numerous working meetings. These are restrictions on Russian banks and banks in third countries that help Russians receive money for oil and pay for some expenses. This is about blocking alternative payments, which we have talked about a lot with members of the US administration. We share the opinion that the infrastructure of alternative payments (crypto and others) is at a high risk.

So, there are different options, but it is financial sanctions that come second after oil sanctions in terms of achieving an impact.

- Despite this, let's not forget that after the US had imposed its sanctions, Putin's special representative Kirill Dmitriev visited Washington. Many began to piece together the puzzle, as if he had come either to ask for the sanctions to be lifted, or to negotiate against new sanctions. What do you know about this?

- I am unaware of any such political motives behind Dmitriev’s visit. Whatever his mission might be, it doesn’t look successful. He didn’t seem to have made much of an impression. After that, we saw Donald Trump and the US administration being firm in not allowing any exceptions to the sanctions against Rosneft and Lukoil for those who requested such exceptions, among them the Hungarian leader, Viktor Orbán.

Therefore, for now we are observing an absolutely firm position: the sanctions must work. The only way to return to talking about their theoretical abolition is to take meaningful steps towards peace negotiations.

- Previously, Turkey, the UAE, and Kazakhstan were the major countries that helped Russia bypass the sanctions. What is the prospect for them to continue to help the Russian Federation, or are they already bringing this activity to a close?

- Sanctions circumvention remains a big issue, depending on the industry. But what is extremely important for us is the importation of critical components to the Russian Federation. Central Asia is involved there, Turkey is involved to a lesser extent, China is number one supplier, Emirati companies, unfortunately, are still assisting, but the amount or frequency of that help has decreased. So, the dynamics is definitely positive.

We would like these sanctions circumvention schemes to be reduced. Therefore, we are looking forward to the next round of sanction from the EU, the USA, the UK, targeting primarily critical components.

- Has Russia engaged more countries, or devised innovative ways to circumvent the sanctions?

- There are reports about certain, perhaps less traditional routes through other countries being used. We are still working with this information, so we are not talking publicly yet.

OIL SANCTIONS WILL IMPACT RUSSIA’S WAR CHEST

- Here I would like to ask you questions about the import of components for both drones and missiles to the Russian Federation. President Zelensky, at his latest media briefing, said that around two dozen and a half manufacturing companies are involved in the production of the Oreshnik ballistic missile. Have these 25 manufacturers already been sanctioned?

- Sanctions have already been expanded to include some of the identified manufacturers of both the Oreshnik and certain other means of destruction. As for the others, the arguments and evidence for sanctioning have been handed over to the partners.

- Are these Russian companies?

- Yes, we are talking about Russian companies. Plus, we are talking about some companies from third countries. There are a small number of them, they act as suppliers.

- Is it known what foreign components are used in the Oreshnik missile?

- Some information proving this is available to us.

- How significant is the share of imported components in Russian missiles and drones now?

- The main thing we can see when analyzing relatively “fresh” missiles and drones is the replacement of Western components with Chinese ones. Therefore, from this point of view, we see positive dynamics.

- So, it turns out that the maximum number of sanctions should be imposed against Chinese companies that provide these components?

- The question is not in the number of sanctions. The question is in making these sanctions cause the impact we need. Chinese companies often ignore the sanctions’ encouraging purpose. They continue to trade not with the whole world, but only with Russia, and this is quite enough for them. And then the sanctions do not achieve the effect they were supposed to achieve.

We are talking about the need for other sanctions, in particular those targeting the financial sector and alternative payment systems, in order to make account settlements much more difficult. This multiplies the impact of sanctions on suppliers.

- Can sanctions against Russian oil, against, again, Rosneft and Lukoil, cause a reduction in weapons production?

- Excellent question. This is going to impact Russia's ability to pay for weapons purchases. We are keeping in mind the need of reducing the influx of revenues to the Russian budget, and there is also the issue of draining the bank accounts of these companies, which they often use to pay for the supplies they require.

It’s pretty often that Rosneft, Lukoil and many other major exporters used the money they accumulated outside of Russia in account settlements with suppliers to Russian manufacturers.

ALTERNATIVE PAYMENT ARRANGEMENTS - THE NEXT SANCTIONS PACKAGE

- What new sanctions should be applied on Russian oil to ensure that even China and India finally stop buying it?

- Firstly, these are sanctions against Rosneft, Lukoil, Surgutneftegaz. We want to identify everything contained in these entities and sanction everything. That is, to do the same thing the Americans did with regard to the aforementioned 32 companies. The same approach should be applied by all jurisdictions to all the five majors.

Second is to continue sanctions against the shadow fleet of tankers that transport Russian oil around the world, circumventing the oil price cap set by the G7 countries and their partners. This is already working. There is also work continuing with the countries that provide flags to these vessels, with the captains of the shadow fleet oil tankers, with insurance companies, oil buyers.

The third step is to reduce, so to speak, the export base. That is, reduce oil production, oil refining.

- Is that what the SBU and the GUR do by conducting their special operations?

- This is what the Security Service of Ukraine (SBU), the Defense Ministry’s Intelligence Directorate (GUR), the Navy and other services are doing. The combination of these two types of sanctions gives the greatest effect.

We have a list of foreign components used for oil and gas production and processing at Russian plants. A significant part of this list is already under sectoral sanctions. We will add some more to this list.

The connection is simple: something has burned down as a result of the fall of “drone fragments”, the Russians need to replace it. That is, buy and import. And it turns out that this is practically impossible to do due to sanctions. And we want to spread this connection.

The financial sector is also of importance. The more we explore the topic of alternative payment arrangements, the more we see. This is the next big package of sanctions. Where payments are made in crypto and other stablecoins, the amounts are huge. So, there is much to work on.

RUSSIANS ALONE CAN SAVE RUSSIA FROM SANCTIONS

- Can anyone save Russia from collapsing under the weight of sanctions?

- Russians can save Russia. For example, those Russians in the EU who, instead of suffering because of the blocked access to Revolut (Following the EU's 19th sanctions package against Russia, Revolut began blocking the accounts of Russian and Belarusian citizens without European residency or passports, - ed.) and accusing Europeans of Russophobia, can return to Russia, show some civic activism, encourage the government to change their conduct. Or even better – to change the government. Of course, for some reason it is easier for them to criticize the European Union for sanctions. But I think that if anyone can save Russia, it is the Russians themselves.

Because if the Ukrainian Armed Forces continue to “save” Russia, the Russians will not like it.

- And is China, on which most of Russian economy currently relies, going to save Russia?

- Why does China need this? We do not have an answer to that question. Therefore, I don't think anyone there will save anyone. The Chinese are only interested in saving the Russian Federation as long as they make money from it.

UKRAINE HOLDS SIGNIFICANT AUTHORITY IN SANCTIONS POLICY

- You said that the UK was the first to impose restrictions against Rosneft and Lukoil, followed by the United States. Are Ukraine’s partners – the US, UK, and the the European Union – currently coordinating the sanctions policy among themselves? And how closely is the USA engaged in this process?

- Yes, the Americans have returned into the process. There are several formats of cooperation between the partners, and we participate in most of them.

Numerous sanctions in the recent sanctions packages are based on what we suggested. For example, in the 19th EU package, more than half replicate Ukrainian initiatives, and in the Japanese package, adopted in September, more than 90% of sanctions follow our suggestions.

Ukraine holds significant authority in sanctions policy, this due to the high quality of our analytics and systematic work.

- Let's sum up the results of the sanctions policy since 2022. What are the most effective sanctions applied on Russia over that time?

- Rosneft, Lukoil, the shadow fleet of oil tankers. We are so much grateful to the European Union for its decision to completely phase out all Russian oil and gas imports (pipeline and LNG) by January 1, 2028. This is a truly huge step forward.

There are severe sanctions wielded against Russia’s financial sector, targeting the Moscow Exchange and several major banks in the Russian Federation. The impact will not come instantly, but eventually, the phased, cumulative effect is going to be very significant.

Regarding components, there is the Common High Priority List (a unified list of critical dual-use goods and advanced technology items that Russia seeks to acquire for its weapons programs and military development. It was developed jointly by the European Union, the United States, the United Kingdom, and Japan as part of coordinated sanctions efforts against Russia following its invasion of Ukraine, - ed.), which has had a significant impact on the Russian defense industrial base development.

- Work on the 20th EU sanctions package is currently in progress. This may include Russian defense-industrial base companies, individuals who kidnapped Ukrainian children, and Russian oligarchs. Are there any difficulties involved with this package?

- These will emerge a little bit later, if emerge at all. It will take two next weeks to compile the package proper. Then it will be presented to EU member states, and then it will be clear what is worrying who. By late November we will see the essence of the suggested restrictions and how the states respond.

There is an ambitious goal to make great progress on this package this year. In the best-case scenario, it will be adopted this year. If not, then it will at least be finalized.

- Could you name the Russian oligarchs you want to see on this list?

- The obvious one is Vladimir Lisin (Russian billionaire, owner of the Novolipetsk Metallurgical Plant, one of the top wealthiest oligarchs in the Russian Federation, - ed.). I cannot name all the others yet.

- How many more sanctions packages can be adopted against the Russian Federation in 2026?

- I would really like there to be none. I wish this sanctions activity to lose its meaning, wish a peace process to get started. This is the only way for Russia to avoid an increase in sanctions pressure. Otherwise, our work will continue. If the current pace is maintained, it is quite realistic to implement a dozen packages a year until the aggressor's economy is brought to a complete collapse.

Maryna Shashkova led this conversation. Kyiv

Photos via Ukrinform archive