The EU’s eighth package of sanctions against Russia

The new package includes:

• an expansion of powers to target individuals and legal entities (both inside and outside of the EU) who facilitate the circumvention of EU sanctions
• prohibitions on the provision of certain additional professional services to the government of Russia or legal persons/entities established in Russia
• additional measures in relation to maritime transport
• a prohibition on the import or purchase of certain iron and steel products
• an extension of the existing prohibitions on importing or purchasing ‘goods which provide significant revenues to Russia’
• an extension of the list of space and aviation products and industries
• an extension of the goods which could contribute to the expansion of Russian industrial capacities
• an extension of the scope of sanctions already in place relating to Donetsk and Luhansk to cover the non-Ukrainian Government controlled regions of Kherson and Zaporizhzhia
• a new prohibition on the sale, supply, transfer or export of firearms, their parts and essential components and ammunition.

We set out below some of the key points arising from this further package of EU sanctions.

Further sanctions on Russia are also expected to be issued by the UK Government in the near future. The UK’s further sanctions on Russia are expected to include further professional services prohibitions and export restrictions. Read the details of the UK’s last round of sanctions in our previous publication.

Targeting individuals or legal entities facilitating the circumvention of EU sanctions

The EU has broadened its sanctions designation criteria to enable it to target ‘natural or legal persons, entities or bodies facilitating infringements of the prohibition against circumvention’ of EU sanctions. This introduces an extra-territorial dimension to the EU sanctions regime as it seeks to prevent individuals or companies within and outside of the EU’s jurisdiction from assisting EU persons with the evasion of its prohibitions.

Professional services and directorships

Subject to the certain exemptions and derogations, it is now prohibited to provide, directly or indirectly, architectural and engineering services, legal advisory services and IT consultancy services to a) the Government of Russia; or b) legal persons, entities or bodies established in Russia.

In contrast to various other restrictions, the sanctions are not explicitly stated to target persons owned for more than 50% by, controlled by, or otherwise acting on behalf or at the direction of, such persons.

There are a number of important exemptions including where the services are intended for the exclusive use of companies established in Russia that are owned by, or solely or jointly controlled by, a company which is incorporated or constituted under the law of a Member State, a country member of the EEA, Switzerland or a partner country (which includes the UK).

Additionally, it is prohibited as from 22 October 2022 to hold any posts in the governing bodies of any companies targeted by the EU’s so-called “transaction ban”. The companies targeted include Rosneft, Rostec and certain of their related entities.

Maritime transport

It will be prohibited to transport (including through ship-to-ship transfers) to countries outside of the EU:

• as of 5 December 2022, crude oil which originates from Russia or has been exported from Russia
• as of 5 February 2023, certain petroleum products which originate from Russia or have been exported from Russia.

The above prohibition (together with the existing prohibition on providing technical or financial assistance in relation to the above) will not apply where the price per barrel of the relevant crude oil or petroleum products does not exceed a price cap (to be set from time to time by the Price Cap Coalition). As of 11 October, this price cap had not yet been set.

Separately, the existing ban on providing access to ports and locks in the EU to any vessel registered under the flag of Russia will be expanded from 8 April 2023 to include any vessel certified by the Russian Maritime Register of Shipping. Furthermore, the EU requires the withdrawal of the Russian Maritime Register of Shipping as a ‘recognised organisation’ under Regulation (EC) No 391/2009 and Directive (EU) 2016/1629.

Iron and steel products

From 30 September 2023, it will be prohibited for EU persons to import or purchase certain iron and steel products which a) have been processed outside of the EU (ie in any third country); and b)  themselves incorporate certain iron and steel products originating in Russia. The range of iron and steel products captured by these new sanctions and the existing sanctions on iron and steel products has been extended through amendments to Annex XVII of Regulation 833/2014.

These sanctions will effectively require EU purchasers acquiring the targeted products from third countries to consider how such products have themselves been produced and, in particular, whether they have been made with the targeted Russian origin materials. This is the first time that export control-related provisions of this type have been explicitly incorporated into the EU’s Russia sanctions regime.

Goods which provide significant revenues to Russia

The range of products captured by the existing prohibitions on importing or purchasing ‘goods which provide significant revenues to Russia’ has been extended by the making of amendments to Annex XXI of Regulation 833/2014. These now include, for example, certain additional cosmetics, chemicals and paper based products.  The sanctions do not apply in this regard to the execution until 8 January 2023 for contracts concluded before 7 October 2022, or of ancillary contracts necessary for the execution of such contracts.

Aircraft parts

The list of products covered by existing sanctions on the sale, supply, transfer or export of goods and technology suited for use in the space and aviation industries (Annex XI of Regulation 833/2014) has been widened to include, for example, lubricating oils and other oils for use in aviation, brake discs and pads for use on aircraft and related aerials and aerial reflectors. The prohibitions targeting the newly targeted items do not apply until 6 November 2022 for contracts concluded before 7 October 2022, or ancillary contracts necessary for the execution of such contracts.

Industrial goods

The list of goods targeted by the existing prohibition on the sale, supply, transfer or export of goods which could contribute to the expansion of Russian industrial capacities (Annex XXIII of Regulation 833/2014) has been expanded to cover, for example, coal, peat, lignite and coke. The sanctions do not apply in this regard to the execution until 8 January 2023 for impacted contracts concluded before 7 October 2022, or of ancillary contracts necessary for the execution of such contracts.

Extension of sanctions to cover the regions of Kherson and Zaporizhzhia

The geographical scope of sanctions already in place against Donetsk and Luhansk (under EU Regulation 2022/263) is extended to cover the non-Ukrainian Government controlled regions of Kherson and Zaporizhzhia.

Firearms

A new prohibition on the sale, supply, transfer or export of firearms, their parts and essential components and ammunition (whether or not originating in the EU) to Russian persons or for use in Russia has been introduced, together with a related prohibition on providing technical or financial assistance in relation to these activities. The list of targeted goods is set out in Annex I to Regulation 258/2012.

New derogations for dealings with NSD and PJSC Kamaz

A new “winding down” licensing derogation has been created which allows for Member States’ competent authorities to authorise the release of frozen funds or economic resources belonging to Russia’s National Settlement Depository (NSD), or the making available of funds or economic resources to such entity, where they have determined that such funds are necessary for the termination by 7 January 2023 of operations, contracts or other agreements concluded with, or otherwise involving, that entity before 3 June 2022.

A similar “winding down” licensing derogation has also been created which allows for the authorisation of releases of frozen funds and economic resources belonging to, or the making available of funds or economic resources to, PJSC Kamaz where it is determined that such funds or economic resources are necessary for the completion of transactions, including sales, which are strictly necessary for the wind-down, by 31 December 2022, of a joint venture or similar legal arrangement concluded before 16 March 2022, involving an entity targeted with the EU’s Article 5aa “transaction bans” (ie an entity listed in Annex XIX to Regulation 833/2014).

Should you have any questions on the matters discussed in this article, please contact Matthew Townsend, Udo Olgemöller, Dr Tim Müller, Jonathan Benson, Tom d’Ardenne or your usual contact at Allen & Overy LLP.