The European Union plans to add Russia to its list of countries with a high risk of money laundering and terrorist financing, Politico reported this week. Once official, the decision will exacerbate Russia’s international pariah status, jeopardizing investment and trade flows that emerged in response to Western sanctions against Moscow after the full-scale invasion of Ukraine. Meduza spoke with anti-corruption expert Ilya Shumanov to understand what Russia’s inclusion on the E.U.’s blacklist will mean for the Kremlin, Russian businesses, and ordinary citizens.

The E.U. blacklisting will further isolate Russia’s financial system, making cooperation significantly riskier for foreign banks and investors. “In practical terms, landing on this list serves as a global warning: engaging with this country entails serious risk,” Shumanov explained. He pointed out that the designation will force even “friendly countries” like China and Turkey to curb Russia-linked operations to avoid “ending up among the pariahs or rogue states that assist those on these blacklists.” Credit-rating agencies may incorporate the blacklist status into sovereign credit assessments, reducing Russia’s access to investment, technology, and partnerships. “Entire industries face long-term contraction,” Shumanov explained.

Inclusion among countries like Myanmar, Mali, Kenya, South Africa, Venezuela, and Syria has nothing to do with attracting investment or developing global commerce. Instead, Shumanov said, it signals Russia’s erasure from numerous investment programs and bars Russian businesses from prospective projects, largely because numerous governments closely track European economic policy.

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Russians are already familiar with these economic consequences, having lost a wide variety of opportunities under Western sanctions. However, Shumanov warned, access to cross-border financial transfers will dwindle even further when more foreign institutions “de-risk,” refusing to work with Russian clients just to avoid the trouble associated with “money laundering and terrorist financing.” European banks may close accounts, demand additional documents, or refuse to process transactions solely because of a client’s Russian citizenship, even when the client holds an E.U. residence permit. Services like Wise and Revolut are already tightening requirements; the blacklist will expand those restrictions.

Additionally, small and medium-sized enterprises will see immediate disruptions in importing equipment and settling international payments. Importing equipment and components will require navigating even more complex supply and payment chains. Sanctions have boosted Moscow’s cooperation with countries such as Kyrgyzstan, which acts as an intermediary, but Russia’s addition to the E.U. blacklist will likely prompt partners to pivot away. Countries closely tied to Russia will risk “status contagion” and may face their own restrictions or be placed on watchlists. Even Russian-owned companies in the E.U. could become risky counterparties, and businesses may replace Russian beneficiaries to avoid regulatory problems.

Russia’s economy is set for structural deceleration, relying increasingly on parallel financial systems, crypto channels, and informal networks. The E.U. blacklisting represents a generational setback for Russia: the country is being written out of future investment programs and global economic integration. “In effect, the Russian authorities are stealing the future from their own children and grandchildren. They will be poorer solely because of the war in Ukraine,” Shumanov told Meduza. He said he expected today’s scenario as soon as Russian troops started pouring into Ukraine in early 2022. “This is probably just a matter of European bureaucracy, where all the gears had to turn and agreements had to be reached with every partner.”