On June 23, 2023, the EU released its 11th package of sanctions on Russia. This package is designed to improve enforcement with new anti-circumvention rules, new trade restrictions, and new designations. The anti-circumvention rules are quite a novel aspect and could result in the first extraterritorial reach of European sanctions.
Below we provide a summary of the new restrictions adopted today.
1. A Brand New Anticircumvention Tool
The EU has gained valuable insights on the implementation of sanctions against Russia after almost a year and a half of enforcement. As a result, the EU has implemented a new provision aimed at preventing circumvention, which enables the restriction of the sale, supply, transfer, or export of specific sanctioned goods and technology (added to a new Annex XXXIII to the Regulation) to selected third countries that pose a persistent and heightened risk of circumventing EU restrictive measures.
The EU Commission has announced that this new “anti-circumvention” tool will be “an exceptional and last resort measure when other individual measures and outreach by the EU to concerned third countries have been insufficient to prevent circumvention”.
That new tool shall also be put in perspective with the recent proposal for a directive introducing EU-wide criminal penalties and stricter enforcement for the evasion of EU sanctions. Currently, Member States are not obligated to criminalize sanctions circumvention, however, once finalized, Member States will be required to criminalize certain conduct specified in the proposal. As currently proposed, criminal conduct under the draft proposal for a directive includes:
- helping persons subject to EU restrictive measures to bypass an EU travel ban; and
- trading sanctioned goods and running transactions with States or entities which are targeted by EU restrictive measures.
2. New Trade Restrictions
The EU added additional 87 entities to the list of entities directly supporting Russia’s military and industrial complex in its war of aggression against Ukraine. Those entities are now subject to tighter export restrictions concerning dual use good and technologies related to Russia’s miliary and industrial sectors. The list includes four third-country entities manufacturing unmanned aerial vehicles (drones) and providing them to Russia, other third-country entities involved in the circumvention of trade restrictions, and certain Russian entities involved in the development, production and supply of electronic components for Russia’s military and industrial complex.
In parallel, the EU has also adopted additional import and export restrictions:
- Imports of iron and steel, requiring importers of sanctioned iron and steel goods that have been processed in a third country to prove that the inputs used do not come from Russia.
- Prohibition on the sale, license, transfer or reference to intellectual property rights and trade secrets used in connection with restricted goods.
- A further 15 technological items, found in Ukrainian territory, and related equipment have been added to those restricted from export.
- Export of all new and second-hand cars above an engine size of 1.900 cm³ as well as electric and hybrid vehicles.
- Import and export of certain listed machinery components.
3. Transit and Transport Restrictions
The new restrictive measures now prohibit transit via Russian territory of sensitive goods such as advanced technology, aviation-related materials exported from the EU to third countries.
The EU has also prohibited (i) transport of goods into the EU by road in trailers and semi-trailers registered in Russia as well as (ii) access to EU ports and locks to any vessels that have engaged in ship-to-ship transfers or are suspected of having violated the oil import bans and price caps prohibitions.
4. New Asset Freeze Designations
The EU has designated more than 100 individuals and entities that are now subject to an asset freeze. New designations include senior military officials, decision makers on the war, persons involved in the illegal deportation of Ukrainian children to Russia, judges who took politically motivated decisions against Ukrainian citizens, persons responsible for the looting of cultural heritage, businesspersons, propagandists, as well as Russian IT companies providing critical technology and software to the Russian intelligence, banks operating in the occupied territories and entities working with the Russian armed forces.
5. Energy
The EU has also finally prohibited the supply of Russian crude oil to Germany and Poland trough the northern section of the Druzhba oil pipeline. Import of crude oil from Kazakhstan and other third countries will still be permitted under limited derogations.
* Slaven Hadzic is an intern at Sheppard Mullin