Credit: Original article can be found here
On 25 February 2022, the EU agreed its 10th package of sanctions measures. The measures have been introduced via amendments made to a number of existing regulations.
What are the key practical implications for Israeli companies doing business with or supplying goods or contingent services to Russia?
- Counter-party screening must be updated to ensure the new asset freezes have been taken into account. Enhanced due diligence on ‘at risk’ transactions must extend to the financial institutions involved in the flow of funds.
- The derogations in respect of divestment activities will have important consequences for professional services providers and in-house personnel alike.
- Those involved in the supply of goods (or contingent services, e.g., financing/insurance) to Russian persons or to or for use in Russia must ensure those products are checked against the updated regulations. Wind-down periods – where they exist – only apply to pre-existing contracts, not to new orders/supply agreements.
A summary of the scope and effect of the new measures is as follows:
ADDITIONAL ASSET-FREEZING MEASURES
Further asset-freezing measures have been imposed on individuals, including:
- 87 individuals and 34 entities designated under Regulation (EU) No 269/2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine (Council Implementing Regulation (EU) 2023/429). The list includes:
- Members of the Federation Council of the Russian Federation, Russian Deputy Ministers and further government officials;
- Lenara Ivanova, Vyacheslav Dukhin, Viktoria Yakimova and other individuals deemed to be responsible for the deportation and forced adoption of Ukrainian children;
- Tinkoff Bank, Alfa-Bank, Rosbank, the National Wealth Fund of the Russian Federation and the Russian National Reinsurance Company and other significant economic actors;
- Individuals and organisations deemed responsible for the spread of misinformation; and
- Certain Iranian nationals, including Abualfazl Nazeri and Ghassem Damavandian, deemed to be involved in the supply of drones to Russian forces.
- Ivan Maslov, the head of the Wagner Group in Mali, who has been designated under the EU’s Mali regime (Council Implementing Regulation (EU) 2023/428); and
- 8 further individuals (including Maxim Shugaley) and 7 entities (including the Foundation for the Defence of National Values (FDNV)) with alleged links to the Wagner Group in Sudan and the Central African Republic, who have been designated under the EU’s Global Human Rights regime (Council Implementing Regulation (EU) 2023/430).
Council Regulation (EU) 2023/427 has imposed additional restrictions on the trade in certain goods and connected services via amendments to Council Regulation (EU) No 833/2014.1 These new measures include:
- Further goods have been added to Annex VII (goods and technology which might contribute to Russia’s military and technological enhancement, or the development of the defence and security sector);
- A new Part D has been added to Annex XI (goods and technology suited for use in aviation or the space industry), thereby extending the restrictions to turbojets, turbopropellers and their parts. In respect of these new goods, a wind-down period applies to the execution until 27 March 2023 of contracts concluded before 26 February 2023;
- A new Part C has been added to Annex XXI (goods which generate significant revenues for Russia), thereby extending the restrictions to items including petroleum jelly, petroleum coke, bitumen and asphalt and synthetic rubber. Specific wind-down periods apply for each of these new items; and
- In Annex XXIII (goods which could contribute in particular to the enhancement of Russian industrial capacities), Part A has been replaced and a new Part C added, including flat-rolled products of iron or non-alloy steel, certain turbines, vacuum pumps, cranes, lathes and boring machines. A wind-down period applies for some but not all of these Part C goods to the execution until 27 March 2023 of contracts concluded before 26 February 2023.
OTHER KEY AMENDMENTS INCLUDE:
- 96 further entities (including non-Russian entities) have been added to the list of military end-users in Annex IV and thus are now subject to tighter export restrictions.
- A prohibition on Russian nationals from holding any position in the governing bodies of EU critical infrastructures and entities.
- A prohibition on providing gas storage capacity in the EU to Russian nationals, natural persons residing in Russia or legal persons or entities established in Russia (or an entity owned by or acting on behalf of the same). A wind-down period applies for operations that are strictly necessary for the termination by 27 March 2023 of pre-existing contracts.
- The list of partner countries which are applying a set of export control measures substantially equivalent to those set out in Regulation (EU) No 833/2014 has been expanded to include Australia, Canada, New Zealand and Norway (Annex VIII).
- The introduction of further restrictions on the imports of goods which generate significant revenues for Russia.
- The extension of the suspension of EU broadcasting licences to RT Arabic and Sputnik Arabic (Annex XV).
- A temporary licensing ground from the professional and business services ban (Article 5n) where such services are “strictly necessary” for the entity’s divestment from the Russian market or the wind-down of such activities. The effective wind-down period will last until 31 December 2023 and has certain exclusions.
- The wind-down period for transactions, including sales, which are strictly necessary for the wind-down of a joint venture or similar legal arrangement concluded before 16 March 2022 involving an entity restricted by virtue of Article 5aa/Annex XIX has been extended to 31 December 2023.
In order to minimise circumvention of these and existing measures, the new Regulation also:
- Prohibits the transit via Russia of dual-use goods and technology exported from the EU.
- Introduces an obligation for aircraft operators to notify non-scheduled flights between Russia and the EU to competent authorities at least 48 hours prior to entering EU airspace.
- Allows customs authorities to refuse the release of goods if they have reasonable grounds to suspect circumvention, and to refuse the re-export of the goods to Russia.
On 24 February 2023, the UK announced a further package of sanctions measures, including asset freezing measures which entered into force with immediate effect and further trade restrictions where the implementing legislation is yet to be published.
ADDITIONAL ASSET-FREEZING MEASURES
92 additional entities and individuals have been added to the UK sanctions list, including:
- Four banks: MTS Bank PJSC, Bank St Petersburg PJSC, Bank Uralsib PJSC, Bank Zenit PJSC.
- Senior executives at Russian state-owned nuclear power company Rosatom, plus executives from Russia’s two largest defence companies Rostec and Almaz-Antey Corporation.
- 6 Russian entities involved in the manufacture or repair of military equipment for Russia’s armed forces, including aviation and navy.
- 20 executives of Gazprom and Aeroflot, including Gazprom Chairman.
- 5 senior Iranian executives in Qods Aviation Industry, the company manufacturing the drones used in Ukraine.
The new measures – which have yet to enter into force – include:
- Export restrictions on “every item Russia has been found using on the battlefield to date”, including aircraft parts, radio equipment, and electronic components that can be used by the Russian military industrial complex, including in the production of UAVs.
- Import restrictions on 140 new goods including iron and steel products processed in third countries.
- Extending existing measures against Crimea, and non-government controlled territory in Donetsk and Luhansk oblasts, to target Russian controlled areas of Kherson and Zaporizhzhia oblasts.