Sanctions against Russia have a leak, and it is geographic. A machine that can no longer be sold to Moscow is sold to an importer in a neighboring country, who resells it across the border. The Union has responded in three stages. In 2014, Regulation (EU) No 833/2014 prohibited certain transactions with Russia sector by sector. Since December 2023, its Article 12g has required exporters to prohibit by contract the re-export of certain goods to Russia. And since June 2023, its Article 12f has allowed the Council to prohibit the sale of specified goods to an entire third country, where that country presents a high and continuing risk of circumvention.
The instrument was presented as a measure of last resort, and it went unused for nearly three years. On April 23, 2026, with the twentieth sanctions package, the Council activated it for the first time: Kyrgyzstan was listed, and it became prohibited to sell it computer numerically controlled machine tools for metalworking as well as telecommunications equipment, routers, modems, radio devices. The stated reason came with figures. According to Commission figures reported by the Atlantic Council and the Fergana agency, EU exports of high-risk goods to the country had grown by nearly 800 percent compared with before the war, and their re-exports to Russia by 1,200 percent. The same package listed two Kyrgyz banks, with which any transaction became prohibited for EU operators from May 14, 2026. The country is not the adversary: it is the corridor.
For a European investor established in that country, the measure changes the nature of its asset without the host country having decided anything. A distribution subsidiary that sold the group's machines can no longer receive them. A workshop servicing an installed base can no longer import the parts on the lists. A plant that bought telecommunications equipment in Europe for its own lines can no longer do so. The asset is intact, ownership is not contested, management is free. What has disappeared is the flow that gave the asset its value, and it disappeared through an act of the Union, that is, of the investor's home country.
The previous lesson extends here and hardens. The freeze targeted a person; Article 12f targets a territory, and no act of the third country is involved. Expropriation cover does not respond, for want of any deprivation by the host state. Non-transfer cover does not respond either as long as the country's central bank lets funds be converted and taken out: if part of the collections no longer goes through, it is because the Union listed two banks, not because the country closed its window, and the policy distinguishes precisely between those two causes. Some contract frustration policies, written for exporters, cover an embargo or the cancellation of an export license decided by the insured's own country; it is a rare cover, which bears on a specific contract and not on the value of a subsidiary. The investor that does not have it bears the loss.
That leaves the question that decides the year's losses: what was in progress on the day of the listing. Packages usually provide a transition period for contracts concluded before their adoption; the twenty-first, adopted on July 23, 2026, thus allows contracts concluded before July 24 on the goods it newly targets to be performed until October 25, 2026. For the listing of Kyrgyzstan in April, published summaries disagree, and one of them describes it as taking effect immediately. The practical rule follows: the transition clause is read in the text published in the Official Journal, article by article, and not in a law firm's summary. An order signed in March for delivery in June can be performed or not depending on one precise sentence, and that sentence separates a commercial loss from an offense, since Directive (EU) 2024/1226 has harmonized the criminal prosecution of circumvention since 2024.
The underwriting lesson goes beyond Kyrgyzstan. The reason for the measure was a public statistic, the growth of exports of high-risk goods to a neighbor of Russia, and such statistics exist for other countries. An investment established in a corridor country therefore carries a risk that no conventional country risk grid measures, because it comes neither from the stability of the local government nor from its finances, but from the Union's policy toward a third state. That risk is correlated: one act strikes on the same day every investment in a portfolio established in the same corridor. And the investor often receives the warning signs, through the no-re-export clause it already has its local customers sign and through the enhanced due diligence that successive packages impose. An underwriter who sees those obligations in a file is reading a country under watch.
Three steps close this lesson. For every operation in a country neighboring a sanctioned one, list the flows that depend on goods in the regulation's annexes, with their share of revenue, since that is what Article 12f can cut. Read the policy to know whether it covers an act of the home country, which is rare, and whether it separates non-transfer decided by the host country from an inability to pay caused by the listing of a bank, which is common. Finally, follow the statistic that serves as the reason, published and discussed well before the listing: a measure of last resort is prepared in public for months, and the time needed to reorganize flows is exactly the time this risk leaves.
A German telecommunications group wholly owns a subsidiary in Bishkek, set up in 2018, which installs and maintains radio networks for Central Asian operators. The subsidiary buys its routers and radio equipment in Germany, and earns 70 percent of its revenue from deployment contracts; half of its customers pay it through one of the two listed banks. On April 23, 2026, Article 12f is activated against Kyrgyzstan. An order worth 1.8 million euros, signed on March 10 for delivery in June, sits in the German warehouse. The group has a political risk policy on its stake covering expropriation, non-transfer and political violence. It asks its broker which cover applies.
None, and the file shows it in three steps. Expropriation does not apply: Kyrgyzstan took nothing, and the subsidiary remains owned and managed by the group. Non-transfer does not apply either: the Kyrgyz central bank closed no window, and if half the collections are blocked, it is because the Union listed two banks, which is an act of the insured's home country and not a currency restriction by the host country. The real loss is nonetheless heavy. The subsidiary loses its source of supply for 70 percent of its business, and its value, which rested on deployment contracts, collapses without damage, without a local decree and without anyone defaulting. Two questions remain that are not insurance questions but that decide the size of the loss. The first is the March 10 order: if the April text provides no transition period for earlier contracts, delivering it in June would be an offense, and the only routes are to reallocate it or to apply for a license from the competent German authority. The second is collection: customers who paid through a listed bank must switch banks, and every payment must be checked against the no-re-export clause and the enhanced due diligence. The only point at which the policy could reopen would be a later Kyrgyz measure, a currency restriction or a takeover of the subsidiary in response to the sanctions: that would be an act of the host state, and the file would change in nature.
- 01Article 12f targets a territory, not a person: it closes a third country to certain EU goods, without any act by that country.
- 02An intact asset whose flow is cut by the Union falls under neither expropriation nor non-transfer, which address acts of the host state.
- 03The Union's listing of a bank is not a currency restriction by the host country, and the policy separates those two causes.
- 04The transition clause is read in the text published in the Official Journal, article by article: it decides whether a delivery is a contract or an offense.
- 05A corridor country is a correlated risk: one act strikes on the same day every investment a portfolio holds there.