EU Adopts 10th Package Of Sanctions – Export Controls & Trade … – Mondaq News Alerts

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After weeks of going back and forth, the Council of the European
Union (“Council”) was finally able to adopt the 10th
package of sanctions against Russia in time to coincide with the
first anniversary of Ukraine’s invasion on Friday, 24 February.
Since a unanimous decision by the Member States is required in
order to move forward with the sanctions, the adoption of the tenth
package was delayed due to differences between certain countries
over parts of the package.

The new set of measures include additional designations, trade
and financial restrictions, reporting obligations, and further
restrictions on Russian nationals. Most of the rules entered into
force on 26 February 2023, the day following their publication in
the Official Journal of the EU. The key measures described below
can be found in the following documents:

Overview of the 10th package

  1. Additional trade restrictions

The new package added 96 entities in the list
of direct supporters of Russia’s military and industrial
complex in its war against Ukraine, thereby imposing dual use good
export restrictions on them. For the first time ever, seven Iranian
entities manufacturing military unmanned aerial vehicles (i.e.,
drones), which have been used by Russia’s military including
against civilian infrastructure, were included in the list.

Export bans are now also imposed on critical technology
and industrial goods
that could contribute in particular
to the enhancement of Russian industrial capacities or are suitable
for use in aviation or the space industry, namely:

  • Vehicles: heavy trucks not previously banned (and their spare
    parts), semi-trailers, and special vehicles such as
  • Electric generators, binoculars, radars, compasses, etc.;
  • Construction goods such as bridges, structures for buildings,
    fork-lifts, trucks, cranes, antennas, etc.;
  • Electronics, machine parts, pumps, machinery for working
    metals, etc.;
  • Complete industrial plants (this category has been added to
    avoid loopholes);
  • Goods used in the aviation industry (turbojets).

The list of restricted items that could contribute to the
technological enhancement of Russia’s defence and security
sector is also extended. It now includes new electronic
that are used in Russian weapons systems
retrieved from the battlefield, such as drones, missiles,
helicopters, as well as specific rare earth materials,
semiconductor devices, electronic integrated circuits, and
photographic cameras.

In order to avoid circumvention, the package also introduces a
prohibition on the transit through Russia of EU
exported dual use goods and technology or arms and components, with
limited exceptions provided for in Article 2 of Council Regulation
(EU) No 833/2014, such as the sale, supply, transfer, or export of
those dual-use goods intended for humanitarian purposes, health
emergencies, software updates, or for the personal use of natural
persons travelling to Russia, among others.

  1. Import restrictions

The new package extends the import restrictions
to cover products such as petroleum jelly; petroleum coke; bitumen
and asphalt; and carbon and synthetic rubber, the imports of which
generate significant revenues for Russia. Among them, Russian
imports of carbon and synthetic rubber are still possible until 30
June 2024, subject to specific quotas.

Importantly, the new package clarified the rules
applicable to goods brought into the EU in good faith at a time
when they were not yet subject to any import restrictive
, including when their import was still allowed
during a wind-down period, to the benefit of EU importers. The new
Article 12c introduced by the new package authorises the release by
the customs authorities of the Member States of goods which are
physically in the EU and which had already been presented to
customs authorities when they became subject to such restrictions
in order to ensure legal certainty for EU importers concerning the
treatment of their imports from Russia. This rule applies
regardless of the procedures under which the goods were placed
after presentation to customs (transit, inward processing, release
for free circulation, etc.) or of the procedural steps and
formalities pursuant to the Union Customs Code necessary for the
release. Practically, as long as the goods are already physically
in the EU and declared for customs purposes (yet to be customs
cleared) before any relevant import prohibition becomes applicable,
they are not covered by the prohibition. However, in case custom
authorities refuse to release the goods, these cannot be
re-exported to Russia. Also, payment related to the import of the
goods is still subject to the applicable rules of Council
Regulation (EU) No 833/2014.

  1. Expansion of the list of sanctioned individuals and

The EU has included 121 new names (87 individuals and 34
entities) to the sanction list, making them subject to an assets
freeze and a travel ban
. Those include Russian senior
government officials and military leaders, decision-makers as well
as proxy authorities placed by Russia in the occupied territories
in Ukraine. In addition, members and supporters of Russia’s
Wagner mercenary group and its activities in other countries, such
as Mali or the Central African Republic, are also targeted.

Among the entities listed are three Russian banks: Alfa-Bank,
Rosbank, and Tinkoff Bank, in addition to the National Wealth Fund
of the Russian Federation, and the Russian National Reinsurance

  1. Energy Sector

The new package introduced a prohibition to provide gas
storage capacity
to Russian nationals, natural persons
residing in Russia, or legal persons or entities established in
Russia or any persons under their control, aiming at protecting the
security of gas supply in the EU, and avoiding Russia’s
weaponisation of its gas supply and risks of market manipulation.
This provision, however, does not apply to the part of LNG storage
facilities, and foresees that national competent authorities may
authorise the provision of storage capacity if necessary for
ensuring critical energy supply within the EU.

  1. Broadcasting

The EU suspended the broadcasting licences of
two additional media outlets under the permanent control of the
Russian leadership, i.e., RT Arabic and Sputnik Arabic. The
prohibition will apply as from 10 April 2023 provided that the
Council, having examined the respective cases, so decides by
implementing act. However, such prohibition will not prevent them
and their staff from carrying out activities other than
broadcasting, such as research and interviews, in the EU.

  1. Russian state-owned entities

The EU extended until 31 December 2023 the
duration of the exceptional permission to enter
into any transactions with certain Russian state-owned entities, if
such a transaction is strictly necessary for the wind-down of a
joint venture or similar legal arrangement.

Likewise, the duration of the period in which the competent
authorities of the Member States may authorise transactions which
are necessary for the divestment and withdrawal by those Russian
state-owned entities from EU companies was also extended to the
same date.

  1. Restrictions on the provision of services

Aiming at facilitating divestment from the Russian market by EU
operators, the new package provides a temporary
from the prohibition on providing certain
services set out in Article 5n of Council Regulation (EU) No
833/2014, including IT consultancy services. This
derogation enables the continuation of the provision of services to
and for the exclusive benefit of the legal persons, entities, or
bodies resulting from the divestment until 31 December 2023,
provided that the services are not provided to the Government of
Russia or benefit military end-users or have a military-end

  1. Critical infrastructures and entities

As of 27 March 2023, Russian nationals or natural persons
residing in Russia (with the exclusion of nationals of a Member
State, of an EEA country, or of Switzerland) will be
prohibited from holding any posts in the governing
bodies of the owners or operators of critical infrastructures,
European critical infrastructures, and entities in the EU.

  1. Reporting obligations

The new package introduces detailed reporting
obligations on natural and legal persons
, entities, and
bodies concerning information they held on funds and
economic resources belonging to
, owned, held or controlled
by listed individuals and entities, which have been frozen or
should have been frozen, or which were subject to any move,
transfer, alteration, use, access, or dealing shortly before their
listing. It also introduces new reporting obligations
simultaneously to the Member States and to the Commission on
immobilized reserves and assets of Central Bank of Russia or any
entity acting on its behalf or at its direction such as the Russian
National Wealth Fund. Relevant natural and legal persons, entities,
and bodies will also have to cooperate with the component
authorities or the Commission in any verification of such
information. These obligations become effective one month after the
entry into force of the new package.

Aircraft operators will also have to notify
non-scheduled flights between Russia and the EU
, operated
directly or via a third country, to their national competent
authorities at least 48 hours prior to their operation, in order to
avoid circumvention of and ensure compliance with the prohibition
on any non-Russian-registered aircraft which is owned, chartered,
or otherwise controlled by any Russian natural or legal person,
entity, or body from landing in, taking off from, or overflying,
the EU territory.

  1. Partner countries

Finally, the new package extended the list of partner countries
which are applying a set of export control measures substantially
equivalent to those set out in Council Regulation (EU) No 833/2014.
The partner country exception now also applies to Australia,
Canada, New Zealand and Norway, in addition to the US, UK, Japan
and Korea.

Looking ahead

The tenth package was less ambitious than initially expected, as
several controversial points were reportedly left out of the
package due to opposition from some EU Member States. In
particular, among the elements left out were sanctions on
Russia’s nuclear sector, a ban on Russian diamond imports,
making it easier to sanction the family members and associates of
oligarchs, or sanctioning certain employees of Russian nuclear
company Rosatom. It is also reported that some EU countries pushed
back against a proposal by the Commission to impose fines on
persons and entities for failing to report on the whereabouts of
Russian frozen assets, forcing the Commission to remove this aspect
of the measures from the package. It remains to be seen whether EU
countries can reach agreement on any of these measures in the next
round of sanctions.

In addition, even with tough measures now in force in the EU,
concerns over circumvention are increasing and countries see the
need to strengthen enforcement mechanisms in the EU. Various
proposals are being discussed in this regard, including the idea of
setting up a new EU sanctions enforcement body to tackle sanctions
circumvention. It is also reported that Germany is planning to push
for measures to be enacted as part of the EU’s 11th package to
crack down on practices such as false export declarations. These
could include requirements such as providing transparent
“end-use statements” as part of export declarations, with
the penalty of a criminal conviction in case of non-compliance.
Germany will also seek to sanction individuals or companies that
use entities in third countries to circumvent sanctions, as well as
propose that some form of trade countermeasures are imposed against
third countries that fail to co-operate with the EU on enforcing
the bloc’s sanctions against Russia.

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