Prague 19.4.2023. Czech think-tank Datlab found that the volume of EU public contracts won by Russian-linked firms did not decline in 2022. The study highlights the challenges faced by authorities and companies in implementing the sanctions. The solution lies in the use of analytical tools employed by this study, as well as a push for better-functioning beneficiary ownership registers. The EU also lags behind in expanding its sanctions list, which can be remedied by more accurate sanctions targeting.
Datlab has developed a software that maps ownership ties across more than 100 countries. This includes some hidden links to sanctioned individuals: 9,443 companies across the EU are co-owned by sanctioned persons, and another 30,092 are Russian-controlled without a tie to a sanctioned person. All these high-risk firms most likely should not have been awarded public tenders since the introduction of EU sanctions.
However, the analysis shows that at least 242 of these high-risk companies keep winning public tenders. Since the sanctions were imposed, these companies have won tenders worth €2.5 billion. The volume of their contracts has not fallen at all compared to the previous year. "We expected a drop in the tender awards to the potentially sanctioned companies. In 2022 this did not happen," states Jiří Skuhrovec, director of Datlab.
As possible explanations, the study considers an actual outflow of Russian owners (not yet recorded in the registers), but also their concealment. The result, however, illustrates a broader problem. "Authorities and companies do not have the capacity to investigate ownership links in depth. In the Czech Republic, we have launched a functional solution to assist them in this regard," concludes Skuhrovec.
The study notes that only 35% of sanctioned and Russian owners of companies are correctly listed in the Czech registry of beneficial owners. Another obstacle to uncovering ownership structures is that most owners use a chain of two or more other companies to hide their involvement in the company, making it difficult for ordinary business partners to find out who controls the entity in question.
Even more, than a year after the Russian invasion of Ukraine, the EU sanctions lists are considerably less extensive than those of other countries against Russia. The study mentions, for example, Yuri Trutnev (Russia's deputy prime minister) and Viktor Vekselberg (a Russian oligarch whose companies supply contracts in seven EU countries), who are sanctioned in the US and Ukraine but not in the EU. "The expansion of sanctions lists at the European level, together with better use of tools to uncover asset structures, could significantly increase the real impact of sanctions policy," says lawyer Lukáš Kraus of Reconstruction of the State, which is working with Datlab on the Resilient Europe project.
Sanctions against Russia must not remain on paper
Datlab, together with the anti-corruption organisation Reconstruction of the State, offers its analytical tools not only to the Czech Republic but also to other EU Member States and relevant European institutions in the Resilient Europe project. The tools were presented, for example, at a round table in the European Parliament on 1 December 2022 held under the patronage of MEP Markéta Gregorová (Greens/EFA).
On 23 March 2023, MEP Mikuláš Peksa (Greens/EFA) referred to the Datlab data at a meeting of the European Parliament's Committee on Budgetary Control on sanctions and provided his exclusive commentary to the brand new analysis from Datlab: "It is an absolute disgrace that even a year after the outbreak of war in Ukraine we in Europe are not able to effectively enforce the sanctions we imposed on Russia with great pomp. We have long-standing problems with the control of grant recipients both inside and outside the European Union. We need to put in place the necessary solutions and create a Europe-wide, transparent register of the final recipients of public funds, controlled by advanced artificial intelligence. This gives us a unique chance to kill two birds with one stone, whether it is billions of euros going to Russian oligarchs or the siphoning off of European funds by subsidy cheats."
CZECH: Press release