Member Article

More than a month after the G7 meeting in Hiroshima, the EU has reached an agreement on the 11th sanctions package against Russia following the Russian invasion of Ukraine. The key focus in the novel sanctions package is the mitigation of diversion and circumvention risks.

The 11th sanctions package has been much anticipated since the G7 meeting at the end of May 2023. It has been no secret that the main focus for the EU (and its partner countries) in terms of the Russia-related sanctions lately has been how to prevent the current circumvention of the sanctions. 

This has led to speculation as to the extent to which the EU would include secondary sanctions as under the US sanctions regime (i.e. penalizing persons/entities in third countries for not following EU sanctions even though such third countries are not subject to EU jurisdiction) as a means to support the EU's efforts to prevent circumvention of the sanctions. 

In an FAQ issued by the EU Commission in connection with the new 11th sanctions package, the EU Commission makes it clear that EU sanctions do not apply extra-territorially, and that the EU is "not asking operators who are outside EU jurisdiction to comply with our sanctions". Instead, the new measures are meant to target foreign operators who "partake in the circumvention of EU sanctions, for instance by re-exporting sanctioned EU goods to Russia." 

The measures implemented in the new sanctions package include, inter alia: 

• The introduction of a circumvention tool where the EU can prohibit the sale, supply, transfer or export of dual-use goods and certain other advanced goods and technologies, to third countries (other than Russia) that have been identified by the EU Council as having systematically and persistently failed to prevent the sale, supply, transfer or export to Russia of goods and technology, exported from the Union, despite the Union’s prior outreach and assistance to the country in question. Specifically, such prohibitions will be set out in Annex XXXIII to Council Regulation (EU) No 833/2014 of 31 July 2014 concerning restrictive measures in view of Russia's actions destabilising the situation in Ukraine, where the CN code of the product, a description of the product, and what country the prohibition concerns will be listed. Currently, there are no listings on Annex XXXIII. 
• As a further action to prevent circumvention, the transit ban prohibiting the transfer of products through Russia is extended to also cover i) goods and technology which might contribute to Russia’s military and technological enhancement or to the development of its defence and security sectors and ii) goods and technology suited for use in aviation or space industry and jet fuel additives.
• The implementation of additional export prohibitions, including restrictions on the sale, supply, transfer or export of certain type of machinery and certain technology items found on the battlefield in Ukraine or equipment needed to produce such items. Notably, 87 entities - including entities from China, the United Arab Emirates, Uzbekistan, Syria and Armenia - have been added to the list of entities supporting Russia's military and industrial complex in its war against Ukraine, for which tighter restrictions apply for dual-use and advanced technology items. 
• A prohibition on the sale, license or transfer in any other way (including by granting rights to access or re-use) of intellectual property rights or trade secrets related to sanctioned goods and technologies, or to the provision, manufacture, maintenance and use of those goods and technology, to Russian entities/persons or for use in Russia. This further extends the scope of the export prohibitions. 
• In addition to the current prohibitions on import, purchase and transfer of Russian iron and steel products, importers of iron and steel products that have been processed in a third country must now at the time of import provide proof that the iron and steel products do not incorporate banned steel inputs from Russia. 
• Additional listing of 71 individuals and 33 entities on the list of natural and legal persons subject to asset freeze and the prohibition to make funds and economic resources available. The newly listed entities include Russian IT companies and two banks (MRB Bank and CMRBank).
• A ban of five additional Russian media outlets (RT Balkan, Oriental Review, Tsargrad, New Eastern Outlook and Katehon).
• New prohibitions in the area of maritime transport (e.g. in relation to access to ports) and energy (e.g. in relation to exemptions on the import ban on crude oil). 

Further to the new restrictive measures, the EU has also extended the deadline for obtaining an approval to sell sanctioned products in Russia for the purpose of divesting Russian activities, from 30 September 2023 to 31 December 2023. 

With the continued focus from the EU Commission on the circumvention of the EU sanctions, companies should review their current export control and trade sanctions compliance programmes in order to evaluate whether further restrictive measures should be taken to prevent re-exporting sanctioned goods to Russia.

Plesner's international trade team is ready to assist with such compliance exercise, and to provide suggestions for which further restrictive measures that could and should be taken into consideration. 
 
Read the Official Journal of the European Union, L 159I, 23 June 2023 

Read the EU Commission Questions and answers on the 11th package of restrictive measures against Russia