EU adopts tenth sanctions package against Russia

On 25 February 2023, the European Union published the tenth package of sanctions against Russia for its attack on Ukraine in the Official Journal of the European Union.

The new sanctions package represents a considerable expansion and supplementation of the existing measures in the two main sanctions regulations: Regulation (EU) No 833/2014 (amending act available here) as a general sanctions regulation with in particular sectoral trade measures (A.) and Regulation (EU) No 269/2014 (amending acts available here and here) on list-based, personal financial sanctions (B.).

In addition to the expansions, both regulations focus on measures to enforce the sanctions. In particular, information obligations for private individuals were introduced and a considerable number of sanctions were imposed on third-country nationals. The latter concerns Iranian individuals and entities that supply the Russian military with unmanned aerial vehicles (so called Shahed drones) (C.).

Finally, measures have been taken to protect European critical infrastructure, especially in the gas sector (D.).

A. Trade measures in Regulation (EU) No 833/2014

The tenth sanctions package expands the list of goods subject to an export ban because they could contribute to the military and technological enhancement or development of Russia’s defence and security sector. This essentially includes some rare earths, electronic integrated circuits and thermal imaging cameras (Article 2a in conjunction with Annex VII, as amended, of Regulation (EU) No 833/2014).

The export ban on goods from the aerospace industry has been extended to include turbo-jet engines and related components (Article 3c and Annex XI, as amended, of Regulation (EU) No 833/2014). The addition to the export ban on goods that enhance Russia’s industrial capacity, Article 3k and Annex XXIII, as amended, of Regulation (EU) No 833/2014 is particularly comprehensive. Annex XXIII has been given a new Part C, which covers a very broad range of goods from the mechanical and chemical industries. These include, among others: various flat-rolled products in iron or steel variants; structures, structural parts and containers made of iron, steel or aluminium; certain producer gas and water gas generators; steam turbines and their parts; diesel or semi-diesel compression-ignition internal combustion piston engines and their components; components for water turbines; various liquid pumps; vacuum pumps; miscellaneous laboratory equipment; certain centrifuges and their components; engine-driven winches; certain cranes and forklift trucks; industrial robots; various excavators and construction vehicles; foundry tools and machinery; metal and mineral working tools; ball bearings; shafts, cranks and couplings; semiconductor manufacturing machinery and equipment; electric internal combustion engine starters and various electrical components; certain trucks; fibre optic cables; binoculars and telescopes; compasses and certain other navigational tools; material processing machinery; instruments for chemical and physical processes.

Article 3i and Annex XXI, as amended, of Regulation (EU) No 833/2014 also introduce import bans for goods that generate considerable income for Russia. These are mainly bituminous substances and related petroleum products from Chapter 27 of the Combined Nomenclature (“CN”) as well as carbons (heading 2803 CN) and synthetic rubbers (heading 4002 CN).

Finally, the list of military end-users for which exceptional dual-use exports may not be authorised was extended by 96 organisations (Article 2(7) and Annex IV, as amended, of Regulation (EU) No 833/2014).

B. List-based financial sanctions in Regulation (EU) No 269/2014

The tenth sanctions package added 87 individuals and 34 entities to the list of persons, entities and bodies subject to an asset freeze and prohibition to provide funds or economic resources in Regulation (EU) No 269/2014.
Essentially, these are leaders and senior officials in the occupied territories of Kherson, Luhansk, Donetsk and Zaporizhzhia and high-ranking members of the Russian government. Also listed are disinformation agents and those responsible for the abduction of Ukrainian children, as well as high-tech companies whose activities contribute to the war. From the financial sector, three more banks were listed: Alfa-Bank, Rosbank and Tinkoff Bank.

As in the previous sanctions packages, the expansion of restrictive measures is also accompanied by the possibility of derogations for a transitional period (subject to approval). In addition, some exceptions have also been added for certain transactions to be possible, such as with the Jewish Claims Conference or the National Settlement Depository (NSD), amendments in Article 6b of Regulation (EU) No 269/2014.

Additional financial sanctions were imposed on nine natural persons and seven legal entities associated with activities of the Wagner Group in Mali, Libya and the Central African Republic. The relevant listings can be found in the Regulation on restrictive measures in view of the situation in Mali (Regulation (EU) 2017/1770) and the Regulation on restrictive measures against serious human rights violations and abuses (Regulation (EU) 2020/1998).

C. Enforcement measures

Measures that can be grouped under the heading of sanction enforcement have been added to both main sanction regulations.

According to the new Article 3d(5) and (6) of Regulation (EU) No 833/2014, non-scheduled flights between the EU and Russia must now be declared. The export ban on dual-use goods from Article 2 and on firearms from Article 2aa of Regulation (EU) No 833/2014 was supplemented by a ban on the transit of these goods through Russia, Art. 2 (1a), 2aa (1a) of Regulation (EU) No 833/2014 as amended.

A special reporting obligation was also newly introduced: natural and legal persons, entities and bodies, including, in particular, companies in the financial and insurance sectors must disclose to the competent national authorities information on the (indirect) assets of the Central Bank of Russia which they hold or control no later than two weeks after 26 February 2023, Article 5a(4a) to (4e) of Regulation (EU) No 833/2014, as amended.

The financial sanctions of Regulation (EU) No 269/2014 are also supplemented by a significant expansion of the obligations of private individuals to inform public authorities where the private individuals become aware of sanction breaches, Article 8(1a) to (1c) of Regulation (EU) No 269/2014, as amended. The obligation to disclose includes information on the frozen funds and economic resources, such as the type and amount, but also such information to identify those who own, hold or control those funds and resources. This particular provision will apply from 26 April 2023 on.

In addition, both regulations penalise Iranian natural and legal persons for their involvement in the supply of so called Shahed drones to Russia. Regulation (EU) No 833/2014 established a presumption of onward transfer to the Russian military for deliveries to listed Iranian entities pursuant to Article 2(7) and Annex IV Regulation (EU) No 833/2014, as amended.

Four Iranian individuals working for Paravar Pars Company and Qods Aviation Industry, which are involved in the drone programme, are now listed in Annex I to Regulation (EU) No 269/2014 and thus subject to the financial sanctions of that regulation. This extends the listing of Iranian entities, which first began on 30 January 2023 with Implementing Regulation (EU) 2023/192.

The listing of a shipping company in Dubai for its role in the transport of Russian oil under Regulation (EU) No 269/2014 has a similar aim of preventing circumventions.

D. Other measures

In addition, the amendments to Regulation (EU) No 833/2014, in particular, include measures beyond the traditional instruments of sanctions law.

The list of partner countries whose representations and companies in Russia are exempt from sanctions and with which information is shared has been expanded to include Canada, Australia, New Zealand and Norway; see Annex VIII of Regulation (EU) No 833/2014, as amended.

The broadcasting bans and the suspension of broadcasting licences according to Article 2f and Annex VI of Regulation (EU) No 833/2014 now also affect RT Arabic and Sputnik Arabic.

The new Article 5o of Regulation (EU) No 833/2014, as amended, prohibits Russian nationals or Russian residents from holding positions on the governing bodies of critical infrastructure undertakings within the EU; this does not apply to nationals of a Member State of the EU or the EEA or Switzerland.

Another new Article 5p of Regulation (EU) No 833/2014, as amended, means that gas storage capacity may not be provided to Russian nationals, natural or legal persons residing in Russia, or entities and bodies established in Russia – except for the part of liquefied natural gas (LNG) facilities used for storage . Member states may authorise derogations to ensure critical energy supplies.

E. Evaluation

The new sanctions package again significantly expands the number of companies and economic sectors subject to sanctions. For European companies, careful consideration of the goods-related embargo measures is very important in order to avoid sanctions breaches.

With regard to sanctions enforcement measures, the extensions of the private sector’s obligations to inform are of high relevance. Here, too, European companies must be vigilant in order to avoid compliance breaches. The German Federal Ministry for Economic Affairs and Climate Action also wants to focus more on private-sector players and has announced that it will advocate for mandatory disclosure of sanction breaches, which will be subject to penalties.

The EU expands the global reach of its sanctions measures with the new listing of Iranian natural and legal persons. The sanctioning of third-country nationals has echoes of the so-called secondary sanctions in US sanctions law. The EU is thus taking another step in this direction after including the option of listing persons who facilitate infringements of the ban on circumventing sanctions (eighth sanctions package, as Noerr reported). Whether such arrangements will be extended remains to be seen.