Overview of the latest EU sanctions against Russia: additional measures to prevent evasion?
The European Union (EU) adopted an eleventh package of sanctions restrictions against Russia on 23 June 2023. The new sanctions package includes, inter alia, additional restrictive measures on the sale, export and transit of certain goods and technologies, as well as additional measures to prevent sanctions evasion: a new instrument has been introduced that allows the EU to restrict the sale and export of sanctioned goods to certain third countries that are at risk of using them to evade sanctions in Russian interests.
Prevention of sanctions evasion
The new EU sanctions restrictions prohibit the "sale, supply, transfer or export of goods and technology" to third countries that "risk being used to evade sanctions". Consequently, the EU can now restrict the sale and export of sanctioned goods and technology to countries that are "at a persistent and particularly high risk of being used to circumvent sanctions in favour of Russia". Before imposing such a measure on the relevant jurisdiction, EU countries will receive a "thorough technical analysis" from the Commission, including trade data and information on attempts to resolve the issue with the relevant third country. In addition, before making such a proposal to impose sanctions on third countries, EU countries should consider alternative measures, such as individualised lists aimed at preventing a country from being used as a means of evading sanctions.
The new EU sanctions restrictions also clarify the basis for including individuals and entities in blocking sanctions. Blocking sanctions may now include individuals or legal entities, organisations or bodies "contributing to the violation of the prohibition on evading previously imposed restrictions or otherwise materially violating these sanctions regimes".
With respect to the prevention of sanctions evasion, Package 11 primarily targets individuals and entities that evade EU restrictive measures through activities that have the purpose or effect of violating the prohibitions contained in those measures. This concerns, for example, companies established in third countries that receive sanctioned goods from EU resident companies and which are then supplied to Russia, directly or through intermediaries.
Further restrictions on the sale and export of goods and technology
The EU has expanded the lists of goods and technologies subject to special export and sale ban restrictions, including goods and technologies that may contribute to the technological improvement of the Russian defence and security sector. These include electronic components, semiconductor materials, production and testing equipment for electronic integrated circuits, precursors for energy materials and precursors for chemical weapons, etc.
The new restrictions also include a ban on the transit through Russia of dual-use goods and technologies, including goods and technologies used in the space and aviation industries, jet fuel, etc., as well as a complete ban on the supply of certain types of auto components to Russia, and a ban on the export of any new and used cars with engine displacement above 1.9 litres, as well as on all electric and hybrid cars (except plug-in hybrids).
The 11th package of sanctions also tightens already existing restrictions on the import, transport and supply of Russian oil: the temporary suspension that allowed Germany and Poland to receive Russian oil through the northern section of the "Druzhba" pipeline is terminated.
The EU has added a further 71 individuals and 33 legal entities to the EU blocking sanctions list (Annex I to Regulation (EU) 269/2014). The individuals and entities on the blocking sanctions list are subject to restrictions such as the freezing of their assets and restrictions on the provision of funds and other economic resources in their favour directly or indirectly.
Furthermore, under the 11th package of sanctions, the EU imposed export restrictions on 87 companies from a number of jurisdictions (Uzbekistan, China, UAE, Armenia) involved in evading sanctions against Russia.
As well as the above-mentioned restrictive measures, the EU is also imposing new restrictive measures:
- ohibition on the sale, licensing or transfer of intellectual property rights and trade secrets used in connection with restricted goods;
- prohibition on transporting goods to the EU with trailers and semi-trailers registered in Russia;
- prohibition on the import of steel products from third countries if they contain components of Russian origin. Importers will have to provide the relevant agencies with documentation that the goods have not been imported from the Russian Federation;
- prohibition of entry to EU ports for vessels found to be transshipment of goods (raw materials) from ship to ship, which, while transporting Russian oil, distort data on their location by disabling navigation systems.
The EU's sanctions regime against Russia is significantly expanding with the adoption of the 11th package of sanctions. Significant attention is paid to measures aimed at combating the evasion of sanctions restrictions. Although evasion of sanctions, as well as indirect sales and exports of sanctioned goods and technologies via third countries to Russia are already prohibited, the new anti-evasion tools are designed to ensure more effective compliance with and implementation of EU sanctions.
New measures aimed at countering sanctions evasion should affect the internal compliance programme and risk analysis of EU resident companies. Transactions with third countries will require greater review and scrutiny and careful analysis of the risks associated with onward sale and end utilisation in Russia.
The new restrictions on the prohibition of the sale, licensing or transfer of intellectual property rights and trade secrets used in connection with restricted goods are also of concern. It should be noted that the Regulation does not contain a list of countries to which such restrictions will apply, which leaves open the question of which jurisdictions will be subject to such a prohibition.
In accordance with the legislation of the Republic of Belarus, restrictive measures (sanctions) of third countries have no legal force in the territory of Belarus. The information may be useful when assessing arguments of foreign partners on the presence/absence of restrictions on their side.
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