Further EU sanctions against Russia
Over the weekend, further EU sanctions against Russia went into force as a reaction to Russia's continued armed entry into Ukraine. This second wave of EU sanctions is noticeably broader than the first wave and calls for additional attention among EU companies with activities in or related to Russia.
While the first wave of sanctions was primarily targeted at members of the Duma, a few major banks, certain Russian military leaders, and the areas of the Donetsk People's Republic and the Luhansk People's Republic, this second wave has a much wider scope and impact.
EU companies should carefully consider whether they are currently exporting any of the newly targeted goods or technologies to Russia (either directly or indirectly) and examine whether any of their current business relations (including ultimate owners and the management) or activities have become subject to sanctions. Generally, thorough screening of both business partners, banks, end-users and end-uses has hardly ever been as relevant as now, and it may be wise to revisit and fine-tune sanctions policies and internal compliance programs in light of the latest developments.
Below is a non-exhaustive overview of some of the most important aspects of the new EU sanctions comprised by the second wave. All export-related sanctions apply to the sale, supply, transfer or export, directly or indirectly, of the goods and technology in question, whether or not originating in the EU, to any natural or legal person, entity or body in Russia or for use in Russia (in the following, such activities are collectively referred to as simply "exporting" or an "export"):
Export prohibition on dual-use items
Perhaps one of the most impactful sanctions which EU companies should be aware of is the ban on exporting dual-use goods and technology to Russia.
The term "dual-use goods and technology" encompasses all goods and technologies listed in Annex I to Regulation (EU) 2021/821 (the "Dual-Use Regulation"), which contains a large number of goods and technologies which can be used for both civil and military purposes.
Further, it is also prohibited to provide technical assistance, brokering services, financing or financial assistance related to dual-use goods or technology.
Notwithstanding the above, and without prejudice to the authorisation requirements in the Dual-Use Regulation, exceptions to the prohibition apply for the export of dual-use goods or technology which are exported for certain purposes such as (among others) humanitarian purposes, medical purposes, temporary exports for news media, etc.
Further, an authorisation may be obtained to perform contracts that have been concluded before 26 February 2022 or ancillary contracts necessary for the execution of such contracts. However, such authorisation must be requested before 1 May 2022.
Export prohibition on goods and technology that can contribute to Russia's military and technological enhancementFurther to the prohibition on exporting dual-use goods and technology, a ban is imposed on the export of a long list of goods and technology which are not listed on the dual use list, but which can contribute to Russia's military and technological enhancement (such as semiconductors and other high-tech electronics). A new list of the targeted goods and technologies can be found in a new Annex VII to the EU Regulation 833/2014.
The same exceptions as those described for the export of dual-use goods and technology apply to the export of the goods and technology listed in Annex VII.
Export prohibition on goods and technology suited for use in oil refiningIt is prohibited to export goods and technology suited for use in oil refining, and to provide technical assistance, brokering services, financing or financial assistance related to such goods and technology.
A new Annex X to EU Regulation 833/2014 has been added which contains a list of goods and technology which are affected by the prohibition.
The prohibition does not apply to contracts concluded before 26 February 2022 or to ancillary contracts necessary for the execution of such contracts, provided that such contracts are executed before 27 May 2022.
Certain exemptions apply if the export is necessary for the urgent prevention or mitigation of an event likely to have a serious and significant impact on human health and safety or the environment.
Export prohibition on goods and technology suited for the aviation or space industryA prohibition against exporting goods and technology suited for the aviation or space industry, and to provide technical assistance, brokering services, financing or financial assistance related to such goods and technology is imposed. The prohibition also includes prohibitions of for instance overhaul, repair, inspection or defect rectification of an aircraft or component in relation to the goods and technology in question.
A new Annex XI is added to EU Regulation 833/2014 which contains a list of goods and technology that are affected by the prohibition.
Specific parts of the prohibition do not apply to contracts concluded before 26 February 2022 or ancillary contracts necessary for the execution of such contracts, provided that such contracts are executed before 28 March 2022.
Unlike the above-mentioned export prohibitions, the new sanctions regime does not provide for any other exemptions from the prohibition against export of goods and technology suited for the aviation or space industry.
Prohibitions on investments and trade with financial instrumentsFurther to the prohibition of the export of specific goods and technology as listed above, elaborate prohibitions targeting the Russian capital markets are also adopted, including prohibitions on investments in (or sale of) transferable securities and money-market instruments issued by major Russian banks and prohibitions against selling such instruments to or purchasing such instruments from certain Russian entities.
Further, the new sanctions set out prohibitions on providing loans to certain Russian entities and the receipt of deposits from certain Russian entities.
Targeted sanctions against further legal and physical Russian personsIn addition to the above restriction on the export of goods and technology and sanctions targeting the capital markets, an additional 98 Russian persons have been added to the sanctions list of persons subject to targeted sanctions (including asset freeze, travel ban and prohibition against making funds available). The newly added persons include the Russian president, Vladimir Putin and the Russian Minister of Foreign Affairs, Sergey Lavrov.
Following these latest additions, a total of 670 Russian persons and entities are now included on the EU sanctions list.
What's next?While the latest sanctions are certainly extensive, it can be expected that further sanctions will be launched if Russia continues its advancement in Ukraine. The EU Commission first issued two press releases in this regard over the weekend: First, a press release with a joint statement from the leaders of the EU Commission, France, Germany, Italy, the UK, Canada and the US on 26 February 2022 and, secondly, a press release with a statement from President Ursula von der Leyen on 27 February 2022.
Most notably, it was stated in the press release on 26 February 2022 that the EU (and its allies) are committed to ensuring that certain Russian banks are removed from the SWIFT messaging system, effectively disconnecting these banks from the international financial system.
Further, the press release of 26 February 2022 describes anticipated measures limiting the sale of "golden passports", which let wealthy Russians purchase citizenship in other countries, and further steps to prevent the Russian Central Bank from deploying their international reserves in ways that undermine the impact of the sanctions.
On 27 February, another press release was issued, stipulating that the EU will shut down its airspace for all Russian-owned, Russian registered or Russian-controlled aircraft, take measures to ban Russian propaganda in the EU, and freeze all assets of the Russian central bank.
Further, Ursula von der Leyen criticised Lukashenko's regime in Belarus for its complicit in Russia's attack on Ukraine. In connection with this, the EU is planning to hit Belarus with sectoral sanctions hindering Belarus' exports of for instance mineral fuels, tobacco, wood and timber, cement, iron and steel, in addition to an extension to Belarus of the export restrictions regarding dual-use goods and technology already imposed on Russia.
We note that none of the two press releases mention any current concrete plans to cut off the supply of Russian natural gas and oil. That being said, the Danish Prime Minister, Mette Frederiksen, hinted at a press conference on 27 February that the energy supply could be on the table for future sanctions.
The new sanctions regarding the export of goods and technology (including relevant Annexes) as well as prohibitions related to the financial markets are set out in Council Regulation (EU) 2022/328 of 25 February 2022 amending Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia's actions destabilising the situation in Ukraine:
A list of the newly sanctioned persons and entities is attached as an annex to the Council implementing regulation (EU) 2022/332 of 25 February 2022 implementing Regulation (EU) No 269/2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine:
Annex 1 to the Dual-Use Regulation (Regulation (EU) 2021/821 setting up a Union regime for the control of exports, brokering services, technical assistance, transit and transfer of dual-use items (recast)) containing a list of dual-use items (Annex 1 begins on page 26):
The press release from the EU Commission of 26 February 2022 regarding further future sanctions:
The press release from the EU Commission of 27 February 2022 regarding further future sanctions against Russia and Belarus: