Without ‘Black Knights’: Do Third Countries Remain a Problem for the Initiators of Sanctions Against Russia?

One of the key challenges facing the initiators of economic sanctions is in creating a coalition of countries willing to implement the restrictive measures. A common thesis in the research literature is that the presence of such a coalition enhances the effectiveness of sanctions pressure — the more countries support sanctions, the more difficult it is to circumvent them. The emergence of “black knights”, that is, states that deliberately torpedo sanctions regimes, however, can significantly devalue the imposed sanctions.

The position and role of third countries in the Western policy of sanctions against Russia has several features. First of all, what is striking is the almost complete absence of “black knights,” at least in the form in which they existed during the Cold War. The countries of the world majority have distanced themselves from Western sanctions and have not implemented them. They trade with Russia when it is profitable for them. But there is no need to talk about targeted and large-scale support for Russia yet.

However, the absence of “black knights” has not prevented Russia from building multifaceted relations with third countries, and the level and nature of their relations with the United States may be fundamentally different. The circumvention of sanctions is quite possible within the jurisdictions of US allies or partners. This situation is explained by the fact that businesses, including specially created small companies, often participate in such operations. The authorities of individual countries either cannot or do not want to fully control these transactions. Ultimately, the risk of secondary sanctions falls on the company, not the country, although such actions may also have consequences for states in the form of tightened export controls.

Numerous tactics to circumvent sanctions in the form of supplies through third countries are still hardly the most serious problem for the West. Secondary sanctions, criminal cases against those involved in circumvention, and administrative investigations into unintentional violations increase the cost of risk, and with it the cost of goods entering Russia. It will not be possible to stop their supplies, but costs for Russian consumers may rise.

A much more serious challenge is Moscow’s consistent policy of building transaction mechanisms independent of the Western financial infrastructure. This is a long, multi-level process which is not always optimal.

In the foreseeable future, the new mechanisms are unlikely to be a problem for the continued dominance of US dollar settlements. However, the very fact of their germination with the participation of a large economy like the Russian one will create more and more zones beyond the control of the financial authorities of Western countries.

One of the key challenges facing the initiators of economic sanctions is in creating a coalition of countries willing to implement the restrictive measures. A common thesis in the research literature is that the presence of such a coalition enhances the effectiveness of sanctions pressure [1] — the more countries support sanctions, the more difficult it is to circumvent them. The emergence of “black knights”, that is, states that deliberately torpedo sanctions regimes, however, can significantly devalue the imposed sanctions. Thus, during the Cold War, the trade isolation of Cuba from the United States was largely devalued by the large-scale cooperation of Havana with the USSR. [2] Even when imposing sanctions on regional powers, the United States, despite being a superpower, was forced to build coalitions in support of its regimes. When attempting to implement the US policy of sanctions against Iran, American diplomacy carried out active work through the UN Security Council, trying, not without success, to synchronize its unilateral sanctions with multilateral restrictive measures. [3] Similar steps were taken regarding North Korea. [4] In both cases, sanctions achieved their goals only partially or not at all. The Iran nuclear deal fell apart as a result of the unilateral actions of the Trump administration, and the DPRK ultimately implemented both missile and nuclear programmes.

Ivan Timofeev:
New Sanctions Against Russia: Taking a Swing at the Ruble

After the start of Russia’s special military operation in Ukraine and the subsequent “tsunami of sanctions” launched against Russia by the collective West, the issue of a coalition was again on the agenda. A big problem for the initiators of sanctions has been third countries that maintain distance from the confrontation with Russia. Thus, while British experts state that sanctions complicate the functioning of the Russian military-industrial complex and the economy as a whole, they maintain that they do not interfere with the resolution of political problems, including the conflict in Ukraine; the circumvention of sanctions through third countries is one of the reasons. Although third countries do not openly support the circumvention of sanctions, their jurisdictions allow for the construction of transactions necessary for Russia. Moscow is using Iran’s experience in circumventing sanctions, and is also building cooperation with it (as well as with other sanctioned jurisdictions) in various areas.

The position and role of third countries in the Western policy of sanctions against Russia has several features. First of all, what is striking is the almost complete absence of “black knights,” at least in the form in which they existed during the Cold War. The countries of the world majority have distanced themselves from Western sanctions and have not implemented them. They trade with Russia when it is profitable for them. But there is no need to talk about targeted and large-scale support for Russia yet. Many of these countries have their own relations with the West and a multi-vector foreign policy. This state of affairs is partly natural, given that Russia itself is a major power, while the concept of a “black knight” arose in the context of the relations of small or less developed countries under sanctions with major powers like the USA or the USSR during the Cold War.

However, the absence of “black knights” has not prevented Russia from building multifaceted relations with third countries, and the level and nature of their relations with the United States may be fundamentally different. Thus, China is in a state of growing competition with the United States. Today, Beijing has become a key trading partner of Russia, and the volume of mutual trade is breaking records. The large number of Chinese companies that fall under secondary US sanctions (for example, in the recent package of sanctions on June 12) also seems natural. However, dozens of companies from Turkey (a US NATO ally), the UAE (a US security partner) and Cyprus (EU member) are now under secondary sanctions. In other words, the circumvention of sanctions is quite possible within the jurisdictions of US allies or partners. This situation is explained by the fact that businesses, including specially created small companies, often participate in such operations. The authorities of individual countries either cannot or do not want to fully control these transactions. Ultimately, the risk of secondary sanctions falls on the company, not the country, although such actions may also have consequences for states in the form of tightened export controls. For example, the European Union has introduced a legal mechanism that makes it possible to tighten export controls on those countries that turn a blind eye to EU export restrictions targeting Russia.

Ivan Timofeev:
Eurasia’s Security System: The Economic Aspect

On the other hand, the continued leadership of the United States in the global financial system still allows it to influence businesses from countries that have not joined the sanctions against Russia. At the end of 2023, the US authorities created a legal mechanism that allows for the introduction of secondary sanctions against foreign banks carrying out transactions in favour of the Russian military-industrial complex or for certain dual-use goods. In June 2024, the interpretation of the concept of the Russian military-industrial complex was expanded to banks that were previously subject to sanctions. That is, a foreign bank risks facing secondary sanctions if its counterparty is any sanctioned Russian bank. Similar restrictions appeared in the fourteenth package of EU sanctions.

Difficulties in completing transactions, for example, through Chinese banks, or an increase in the cost of such transactions were reported in 2024, but Russian authorities do not consider the problems to be fatal.

Numerous tactics to circumvent sanctions in the form of supplies through third countries are still hardly the most serious problem for the West. Secondary sanctions, criminal cases against those involved in circumvention, and administrative investigations into unintentional violations increase the cost of risk, and with it the cost of goods entering Russia. It will not be possible to stop their supplies, but costs for Russian consumers may rise.

A much more serious challenge is Moscow’s consistent policy of building transaction mechanisms independent of the Western financial infrastructure. This is a long, multi-level process which is not always optimal.

Ivan Timofeev:
The New Balance of Power, Adequacy of Elites and Western Sanctions and Goals

Thus, settlements in national currencies are beneficial in relations with large economies, but give rise to problems of excessive accumulation of individual currencies in relations with smaller countries. However, the Russian authorities will persistently promote such mechanisms both on a bilateral and multilateral basis. In the foreseeable future, the new mechanisms are unlikely to be a problem for the continued dominance of US dollar settlements. However, the very fact of their germination with the participation of a large economy like the Russian one will create more and more zones beyond the control of the financial authorities of Western countries. Moreover, the new payment systems will not necessarily be unified and vertically integrated. They can solve different problems and differ in their parameters and operating principles. For example, connecting payment mechanisms between Russia and Iran for the mutual use of payment cards can go in parallel with the development of financial infrastructure with China and simultaneously with the promotion of the settlement system within the BRICS framework. All three problems are fundamentally different and can be solved at different speeds. However, progress in solving them will reduce the ability of Western countries to use their financial capabilities for political purposes. The absence of “black knights” as such does not reduce the risks for Western initiators of unilateral sanctions, despite all the diversity and specificity of third countries.

First published in the Valdai Discussion Club.

1. (2013) ’Determinants of Sanctions Effectiveness: Sensitivity Analysis Using New Data’, International Interactions 39: 79-98.

2. Hufbauer, G., Shott, J., Elliott, K., Oegg, B. (2009) Economic Sanctions Reconsidered. Third Edition, Washington DC: Peterson Institute for International Economics

3. Nephew, R. (2018) The Art of Sanctions. A View from the Field, New York: Columbia University Press.

4. Kim, H. (2014) ‘Stifled Growth and Added Suffering. Tensions Inherent in Sanctions Policies against North Korea’, Critical Asian Studies 46 (1): 91-112