#US Sanctions failing to target #Kremlin stooges in East #Ukraine

US sanctions on east Ukraine are not working. Controls on those involved with the self-declared Donetsk People’s Republic (DPR) and Luhansk People’s Republic (LPR) are failing to stop Russian businessmen working under the Kremlin’s protection from enriching themselves and furthering Russia’s ambitions abroad.

The Donbass has always been the heart of hard industry in the region. The business and criminal worlds have been closely intertwined since the conflict began five years ago, taking advantage of the current state of cold war between Russia and the West that makes east Ukraine an ideal area for black-market business to thrive. Coal, gold, gasoline and tobacco, amongst other contraband, continue to flow across the border with Russia, as does the stream of dirty money.

The failure of the West to control the financial flows around the breakaway states assists Putin’s campaign in east Ukraine. If the international community wishes to make a genuine attempt at stopping the war in the east, it needs to turn off the DPR-LPR’s source of funds, and the network of supporting assets that run across Europe, from London to Cyprus.

The illegal export of coal from the Donbass has been crucial in the continuation of the war and in maintaining the existence of the DPR-LPR. Locals in the Donbass have said that there hasn’t been a day since 2014 when the coal mines have stopped working – despite a supposed trade embargo of coal from the separatist region. Businessmen such as Ruslan Borisovich Rostovtsev, or the “the coal king” as he is known, have been exporting coal from the Donbass throughout Europe throughout the conflict, taking full advantage of the situation and the protection from the Kremlin that business in the east of Ukraine brings.

Rostovtsev’s involvement began in 2014, when he met Igor Martynov, the former Mayor of Donetsk and now deputy head of the administration of the DPR. Rostovtsev arranged the transportation of coal from the DPR to the nearby Russian city of Rostov. It was there that the coal was repacked, reloaded and dispersed throughout Europe, repackaged as Russian coal.

Rostovtsev’s black market coal enterprise has seen millions of dollars laundered throughout Europe. Loan agreements between foreign companies, owned by Rostovtsev to launder money, reveal that between April and July 2015 alone $16 million was transferred offshore through an account at the Latvian ABLV bank. The Campaign Against Maladministration and European Corruption has accused Rostovtsev of using a UK-registered company, Grandwood Systems Ltd, along with multiple Sottish LPs to launder millions of dollars made by the coal from the Donbass.

Not only has the illegal trade of coal and other contraband enriched those involved and the Russian government, it has also helped to legitimise the DPR-LPR. Rostovtsev has allegedly helped set up bogus embassies for the DPR in Marseille in Turin, and received a personal award from the Ministry of Foreign Affairs of the DPR proclaiming he helped “strengthen international relations and a positive image of the Republic on the international arena.”

The continued movement of supposedly banned coal from the DPR underlines the West’s extraordinary failure when it comes to clamping down on dodgy oligarchs and the dirty money that flows freely through Europe and the US.

Rostovtsev positioning as a second-tier businessman has allowed him to largely fly under the radar, but the West should wake up to the realisation that current sanctions against the elite closest to Putin – businessmen like Oleg Deripaska – must be expanded. The web of those involved in business in east Ukraine is far more complex – with the example of Rostovtsev only a small part of a much larger money laundering machine.

Without a new sanctions strategy and a clamp-down on Russian laundered money making its way through Europe’s cities, the West is implicit in the continuation of a war that has seen up to 13,000 people lose their lives. If the money being used to support the breakaway states is targeted, the pseudo-governments in east Ukraine will not be able to last for long.

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