On 25 February 2023, the EU adopted its tenth sanctions package against Russia. More industrial, high-tech and aviation goods are now banned for export to Russia, while Russian bitumen and related materials, synthetic rubber and carbon are subject to an import ban. There are new bans on the transit of dual-use and certain other items through Russia, and on allowing Russian nationals or residents to hold posts in governing bodies of owners or operators of the EU's critical infrastructures and critical entities. The EU designated 87 additional individuals and 34 entities (including three more Russian banks) on the asset freeze list. To ensure the effective application of the asset freeze, individuals and companies are now subject to broad reporting and information obligations, also covering pre-listing dealings. Other reporting obligations cover Russian Central Bank assets and private flights between the EU and Russia.
Export ban on more items contributing to Russia's military capabilities and technological enhancement
The scope of products covered by export-related restrictions has been expanded as follows:
- The list of goods in Annex XXIII now covers among others: (i) pumps, (ii) industrial robots, (iii) ball bearings, (iv) flat-rolled products of iron or non-alloy steel, (v) heavy trucks and fork-lifts, (vi) complete industrial plants (except plants for the production of food and drinks, pharmaceuticals, medicines and medical devices).2 Newly listed products are subject to a grandfathering exemption until 27 March 2023 for contracts related to certain restricted goods concluded before 26 February 2023. An additional derogation (subject to prior authorisation) is available for activities strictly necessary for the production of titanium products required in the aeronautic industry, for which no alternative supply is available.
- The list of goods in Annex VII now covers among others: (i) rare-earth metals and compounds, either in organic or inorganic form, and (ii) and thermographic cameras.3 There is no grandfathering exemption in relation to these goods.
- The list of aviation-related goods in Annex XI now covers among others: (i) turbojets, (ii) turbopropellers, (iii) parts of turbojets or turbopropellers.4 For these newly listed products, a grandfathering exemption until 27 March 2023 applies for the execution of contracts concluded before 26 February 2023.
The latest package also introduced a new ban on transit of dual-use goods and technology, firearms, their parts and ammunition through the territory of Russia.5 The authorities may authorise the transit of dual-use items through Russia based on certain existing derogations (e.g. for ensuring cyber-security for technology).6
In addition, 96 entities were added to the list of military end-users that are subject to tighter export restrictions regarding dual-use goods and technology and items contributing to the technological enhancement of Russia's defence and security sector.7
Ban on imports of Russian petroleum, bitumen, carbon and synthetic rubber
The scope of products covered by the import-related restrictions has been expanded to cover: (i) various petroleum products, including petroleum jelly, (ii) petroleum coke, (iii) bitumen and asphalt, (iv) bituminous mastics, (v) carbon, and (vi) synthetic rubber.8
For the newly listed products, a grandfathering exemption until 27 May 2023 applies for the execution of contracts concluded before 26 February 2023, except with respect to carbon and synthetic rubber for which a specific exemption applies until 30 June 2024, if falling below a specified quota.9
Exemptions for Australia, Canada, New Zealand and Norway-owned Russian entities
The existing list of "Partner Countries" (i.e. US, Japan, UK and South Korea), which is relevant for certain exemptions and derogations from the EU ban on professional services and the EU export bans, now includes Australia, Canada, New Zealand and Norway.10 In practice, this means EU businesses and individuals can, for example, provide otherwise restricted professional services (e.g. IT consultancy services, engineering services) for the "exclusive use" of Russian companies that are owned or controlled by a parent company established in these additional Partner Countries.
New ban on Russian nationals/residents in government bodies of critical EU companies
As from 27 March 2023, it will be prohibited to allow Russian nationals and residents to hold any post in the governing bodies of owners and operators of private and public entities operating in the European critical infrastructure and critical entities.11 The concepts "critical infrastructure" and "critical entities" cover various sectors including energy, transport, banking, financial market infrastructure and public administration. The prohibition does not apply in respect of Russian nationals and residents who also hold EU, EEA or Swiss citizenship.
The new prohibition supplements the existing restrictions on EU persons holding any posts in the governing bodies of Russian State Owned Enterprises (SOEs).12
New derogations to enable Russian divestments or wind-downs, and for maritime safety
In order to facilitate divestment from the Russian market by EU operators, the EU has introduced a new temporary derogation (subject to prior authorisation) from the EU ban on certain professional services (e.g. IT consultancy, accounting, auditing services). More specifically, EU operators can obtain an authorisation to continue providing such restricted professional services until 31 December 2023, when this is strictly necessary for the divestment from Russia or the wind-down of business activities in Russia.13 Importantly, such restricted services must be provided for the exclusive benefit of the persons resulting from the divestment, and cannot be provided to military end-users (or have a military end-use in Russia) or to the Russian government.
This new derogation supplements the existing derogation in relation to activities (e.g. product supplies) that are prohibited by export and import restrictions where such activities are strictly necessary for the divestment from Russia or wind-down of business activities in Russia, which expires on 30 September 2023.14
In addition, the existing derogation for transactions that are strictly necessary for the divestment and wind-down of activities involving the listed Russian SOEs that are subject to a transaction ban is extended by 3 months and now applies until 31 December 2023.15
For maritime safety, the EU has introduced a new exemption from the prohibition on technical assistance under any EU export or import bans to allow the provision of pilot services to vessels in innocent passage.16 In addition, an exemption from the transaction ban on SOEs also applies in respect of the provision of pilot services to such vessels in innocent passage.17
Ban on gas storage capacity provision to Russian persons
The EU now prohibits the provision of gas storage capacity in storage facilities – excluding LNG facilities – in the EU to Russian nationals, residents or companies, including their majority-owned subsidiaries (and certain affiliates).18 The restricted storage services include any combination of providing space and related services (i.e. injectability and deliverability), as defined under the EU Gas Regulation.19 A derogation (subject to prior authorisation) exists in respect of gas storage services that are necessary for ensuring critical energy supply within the EU. Until 27 March 2023, a grandfathering exemption also applies for the execution of contracts concluded before 26 February 2023.
Extended media ban
The EU media ban in relation to Russia has been extended to RT Arabic and Sputnik Arabic.20
Additions to the asset freeze list
The EU has designated another 87 individuals and 34 entities on the EU asset freeze list in relation to Russia,21 focusing on banks, defence-related companies, media figures and government officials. Noteworthy designations include:
- Alfa-Bank JSC;
- Rosbank PJSC;
- Tinkoff Bank JSC;
- National Wealth Fund of the Russian Federation, which is a reserve fund controlled by the Russian Ministry of Finance;
- Russian National Reinsurance Company JSC;
- SUN Ship Management (D) Ltd., which is part of PAO Sovcomflot, Russia's largest shipping company;
- Atomflot, which maintains Russia's icebreaker fleet that serves the Northern Sea Route;
- "Commercial Vehicles – GAZ Group" LLC, Russia's main producer of commercial vehicles; and
- Avrova JSC.
The EU adopted new derogations (subject to prior authorization) from the asset freeze restrictions for the following activities:
- Transactions related to Alfa-Bank JSC, Rosbank PJSC, Tinkoff Bank JSC, and "Commercial Vehicles – GAZ Group" LLC if necessary for the termination by 26 August 2023, of operations, contracts, or other agreements, including correspondent banking relations, concluded with the same entities before 26 February 2023.22
- Transactions related to Alfa-Bank JSC for the disbursement of funds by the Jewish Claims Conference to beneficiaries in the Russian Federation by 26 November 2023.23
- Transactions related to the National Settlement Depository ("NSD") if necessary for the disposal or the transfer by 24 July 2023 by an EU entity of securities currently or previously controlled by VTB Bank, subject to conditions.24
The existing derogation for the sale and transfer by a designated party of its proprietary rights in an EU entity is extended until 31 May 2023.25 The existing derogation from the asset freeze restrictions on certain designated Russian banks in relation to the purchase, import or transport of agricultural and food products, including wheat and fertilisers, has been extended to Alfa-Bank JSC, Rosbank PJSC, and Tinkoff Bank JSC.26
Broad reporting and information obligations
Asset freeze
All individuals and companies under EU jurisdiction must now, "notwithstanding the applicable rules concerning reporting, confidentiality and professional secrecy", provide at least the following information (and cooperate if it is verified) to the competent authority of the Member State where they are resident or located:27
- Information about funds and economic resources belonging to, owned, held or controlled by EU asset freeze parties, whether or not these are frozen, within two weeks of acquiring this information;
- Information about funds and economic resources within the EU belonging to, owned, held or controlled by EU asset freeze parties and which have been subject to any move, transfer, alteration, use of, access to, or dealing in the two weeks preceding the asset freeze listing, within two weeks of acquiring this information;
Such information must include at least data identifying the persons owning, holding or controlling the frozen funds and economic resources (including their name, address, and VAT registration or tax identification number); the amount or market value of such funds or economic resources at the date of reporting and freezing; the types of funds or economic resources; and where available the quantity, location or other relevant features.
The relevant EU Member States must transmit the information received within two weeks to the Commission. Such information may be transmitted in an anonymised form if an investigating or judicial authority has declared it to be confidential in the context of pending criminal investigations or criminal judicial proceedings.28
Central securities depositories
Central securities depositories must provide the information above, and information on extraordinary and unforeseen loss and damage concerning the relevant funds and economic resources, to both the competent authority of the EU Member State where they are located and the Commission, within two weeks of acquiring it and every three months thereafter.29
Russian Central Bank
Under the new reporting obligation, EU businesses and individuals, including national and European Central banks, are obliged to report on held or controlled assets and reserves of the Russian Central Bank. These reports should be submitted to competent national authorities and to the Commission.30 Such information shall also be updated every three months.
Non-scheduled flights between Russian and EU
Aircraft operators of non-scheduled flights between Russia and the EU, operated directly or via a third country, must notify all relevant flight information to the competent authorities prior to their operation, and at least 48 hours in advance. The refusal of such flights by an EU Member State will be communicated to other EU Member States, the Network Manager and the Commission.
First meeting of International Sanctions Coordinators Forum discusses implementation and circumvention
On 23 February 2023, the EU's Sanctions Envoy, David O'Sullivan, convened the first Sanctions Coordinators Forum, bringing together a broad coalition of like-minded countries including the US, the UK, Japan, Canada, Australia, New Zealand, Norway, Switzerland, as well as Ukraine, to focus on ensuring that sanctions are implemented fully and effectively, while considering in particular circumvention patterns and routes and potential solutions.31
1 See here for previous White & Case client alerts relating to sanctions.
2 Article 3k and new Annex XXIII, Part C of Regulation 833/2014, as amended by Regulation (EU) 2023/427.
3 Revised Annex VII – Part B and new entry X.C.IX.012 for raw materials relating to Article 2a of Regulation 833/2014, as amended by Regulation (EU) 2023/427.
4 Article 3c and new Annex XI, Part D of Regulation 833/2014, as amended by Regulation (EU) 2023/427.
5 New Articles 2(1a) and 2aa(1a) added by Regulation (EU) 2023/427.
6 New Article 2a(4a) added by Regulation (EU) 2023/427.
7 Revised Annex IV, as amended by Regulation (EU) 2023/427.
8 Revised Article 3i, New Annex XXI – Part C.
9 New Article 3i(3da) added by Regulation (EU) 2023/427.
10 Annex VIII of Regulation 833/2014, as amended by Regulation (EU) 2023/427 and Articles 2(4)(f), 2a(4)(f), and Article 5n(7) of Regulation 833/2013.
11 New Article 5o(1) added by Regulation (EU) 2023/427.
12 Article 5aa(1b) Regulation 833/2013.
13 New Article 12b(2a) as added by Regulation (EU) 2023/427.
14 Article 12b(1) Regulation 833/2014.
15 Revised Articles 5aa(3)(d) and 5aa(3a) amended by Regulation (EU) 2023/427.
16 Article 19 of the United Nations Convention on the Law of the Sea defines innocent passage as not prejudicial to the peace, good order or security of the coastal State.
17 New Article 12d and Article 5aa(3)(h) added by Regulation (EU) 2023/427.
18 New Article 5p, recital (19) added by Regulation (EU) 2023/427.
19 Article 1(28) Regulation (EC) No 715/2009 on conditions for access to the natural gas transmission networks ("EU Gas Regulation"). ‘Injectability' means the rate at which the storage facility user is entitled to inject gas into the storage facility, whilst ‘deliverability' means the rate at which the storage facility user is entitled to withdraw gas from the storage facility.
20 Revised Annex XV amended by Regulation (EU) 2023/427.
21 Article 1 of Regulation (EU) 2023/429 amending Annex I to Regulation (EU) 269/2014.
22 Revised Articles 6b(2d) and (5b) of Regulation 269/2014 as amended by Regulation (EU) 2023/426.
23 Revised Article 6b(2d) of Regulation 269/2014 as amended by Regulation (EU) 2023/426.
24 Revised Article 6b(5a) of Regulation 269/2014 as amended by Regulation (EU) 2023/426.
25 Revised Article 6b(3) of Regulation 269/2014 as amended by Regulation (EU) 2023/426.
26 Revised Article 6(e) of Regulation 269/2014 as amended by Regulation (EU) 2023/426.
27 Revised Article 8(1) and (1a) of Regulation 269/2014 as amended by Regulation (EU) 2023/426.
28 Revised Article 8(1b) of Regulation 269/2014 as amended by Regulation (EU) 2023/426.
29 Revised Article 8(1b) of Regulation 269/2014 as amended by Regulation (EU) 2023/426.
30 New Article 5a(4a) as added by Regulation (EU) 2023/427, amending Regulation 833/2014.
31 European Commission, Directorate General for Financial Stability, Financial Services and Capital Markets Union, News Article dd. 23 February 2023, link here.
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