EU’s 8th sanctions package imposes oil price cap; expands bans on imports, export, and professional services; Asset freeze designations and sanctions on non-government controlled areas of Zaporizhzhia and Kherson
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On 6 October 2022, the EU adopted its eighth sanctions package against Russia.1 It includes a ban on the maritime transport to third countries of Russian crude and petroleum oil products, subject to a price cap. It also extends the list of professional services that cannot be provided to Russian entities or the Russian Government, directly or indirectly: these now include architectural and engineering, legal advisory in non-contentious matters, and IT consulting services. Furthermore, the EU expanded the list of products subject to import- and export-related restrictions to various steel and iron products, semiconductors, technical circuits etc. Finally, the EU designated 30 more individuals and seven entities on the asset freeze list and extended the geographical scope of the EU sanctions imposed against the non-government controlled areas of the Donetsk and Luhansk oblasts of Ukraine to the non-government controlled areas of the Kherson and Zaporizhzhia oblasts of Ukraine.
Prohibition on maritime transport to third countries of crude oil and petroleum products from Russia, subject to price cap
As part of its 6th sanctions package, the EU already introduced a ban on the direct or indirect purchase, import, or transfer into the EU of crude oil or petroleum products originating in Russia or exported from Russia.2
As agreed with the G7, the EU now also bans the maritime transport (and related technical assistance, brokering services or financing or financial assistance to such maritime transport) to third countries of crude oil (as of 5 December 2022) or petroleum products (as of 5 February 2023) which originate in or are exported from Russia. This is unless the respective crude oil or petroleum products are purchased at or below a pre-established price cap that is still to be determined by Council Decision.
New exemptions (not requiring any authorisation) apply to the restriction relating to the import and transport of Russian crude oil and petroleum products. For example, certain crude oil and petroleum products originating in a third country and only loaded in, departing from or transiting through Russia are exempted, provided that both the origin and the owner of the products are non-Russian. The EU can also grant a wider exemption for the transport (or related services) of certain crude oil and petroleum products to third countries. On this basis, the EU has exempted the transport by vessels to Japan of certain crude oil products falling under CN 2709 00 commingled with condensate, originating in the Sakhalin-2 Project in Russia until 5 June 2023.
Ban on architectural and engineering, non-contentious legal advisory, and IT consulting services to Russian companies and the Russian Government; Ban on management function in listed Russian SOEs
Already, the provision of accounting, auditing, bookkeeping, tax consulting services, business and management consulting or public relations services may not be provided, directly or indirectly, to Russian entities and the Government of Russia. This was extended to architectural and engineering services, non-contentious legal advisory services and IT consultancy services.3
A wind-down exemption allows the provision of this last category of services if strictly necessary for the termination by 8 January 2023 of non-compliant contracts concluded before 7 October 2022 (and any ancillary contracts necessary for their execution).
Also exempt are services provided for the exclusive use of Russian entities that are owned or controlled by entity incorporated in the EU, the EEA, Switzerland, the US, Japan, UK or South Korea.4
Derogations (subject to prior authorisation) also exist for services that are necessary for humanitarian purposes, civil society activities that promote democracy, human rights or the rule of law in Russia, the functioning of certain diplomatic and consular representation of the EU, EU and partner countries in Russia, and ensuring critical energy supplies and infrastructure.5
As from 22 October 2022, any person falling within EU sanctions jurisdiction (e.g. EU nationals or residents) will also be prohibited from maintaining any post in the governing bodies of the Russian State-owned entities (and certain of their affiliates) that are the subject of prohibition on broader dealings with them.6
More products subject to import ban: iron and steel products, jet fuel and goods generating significant revenue for Russia
The current import ban on iron and steel is extended to all products classified under the EU'’s Combined Nomenclature as “iron and non-alloy steel” (CN headings 7206 to 7217), “stainless steel” (CN headings 7218 to 7223), “other alloy steel; hollow drill bars and rods, of alloy or non-alloy steel” (CN headings 7224 to 7229) and “articles of iron or steel” (CN Chapter 73).7 With respect to these products, an exemption (not requiring an authorisation) allows the execution of contracts concluded before 7 October 2022 (or of ancillary contracts necessary for the execution of such contracts) until 8 January 2023 (with the exception of semi-finished products or iron or non-alloy steel under CN headings 7207 11 and 7207 12 10). Semi-finished products or iron or non-alloy steel under CN headings 7207 11 and 7207 12 10 benefit from a specific exemption based on quotas until 31 March 2024 and 30 September 2024, respectively.8
As from 30 September 2023, the existing restrictions on iron and steel will also extend to iron and steel products that have been processed in a third country with the incorporation of listed iron and steel products originating in Russia.9
The current import ban on jet fuels and goods generating significant revenue for Russia has been expanded. Restricted products include inter alia (i) cigars and cigarettes, (ii) chemicals, (iii) cosmetics, (iv) plastic raw materials and products, (v) paper, (vi) machinery parts and electric motors and generators, (vii) electronic integrated circuits and parts thereof. For these new products, an exemption allows the execution of contracts concluded before 7 October 2022 until 8 January 2023. A derogation (subject to a prior authorisation) exists or the establishment, operation, maintenance, fuel supply and retreatment and safety of civil nuclear capabilities, and the continuation of design, construction and commissioning required for the completion of civil nuclear facilities, the supply of precursor material for the production of medical radioisotopes and similar medical applications, or critical technology for environmental radiation monitoring, as well as for civil nuclear cooperation, in particular in the field of research and development.
Export ban on firearms, military and technological goods, aviation-related goods and industrial goods
The EU now also prohibits the sale, supply, transfer, or export (as well as related services) of firearms, their parts and essential components and ammunition as listed in Annex I to Regulation (EU) 258/2012 to a person in Russia or for use in Russia.
Furthermore, the scope of products covered by export-related restrictions has been expanded as follows:
- The list of goods and technologies which may contribute to Russia’s military and technological enhancement also covers (i) semiconductors, (ii) electronic integrated circuits, (iii) photographic cameras, (iv) certain chemical substances and nerve agents, and (iv) goods which have no practical use other than for capital punishment, torture or other cruel, inhuman or degrading treatment or punishment.
- The list of aviation-related products now also covers inter alia (i) various types of oil, (ii) tyres, and (iii) brake discs and pads. An exemption (not requiring an authorisation) allows the execution of contracts concluded before 7 October 2022 until 6 November 2022.
- The list of goods which could contribute in particular to the enhancement of Russian industrial capacities now also covers inter alia (i) coal, (ii) lignite, (iii) peat, (iv) coke of coal, etc.10 An exemption (not requiring an authorisation) allows the execution of contracts concluded before 7 October 2022 until 8 January 2023.
Russian Maritime Register of Shipping
The Russian Maritime Register of Shipping ("RMRS"), which carries out activities related to the classification and inspection, including in the field of security, of Russian and non-Russian ships, has been added to Annex XIX of Council Regulation 833/2014, making it subject to the transaction ban in Article 5aa. An exemption (not requiring an authorisation) allows the execution of contracts concluded with the RMRS before 7 October 2022 until 8 January 2023. 11
In line with this prohibition, the EU also requires EU Member States to withdraw any authorisation provided to the RMRS to perform any tasks relating to maritime safety, including inspections and surveys related to statutory certificates.12 Any statutory certificates issued by the RMRS on behalf of an EU Member State before 7 October 2022, need to be revoked by 8 April 2023.
As from 8 April 2023, the prohibition on access to EU ports and locks for any vessel registered under the flag of Russia will also extend to any vessel certified by the RMRS.13
There is now a complete ban on the provision of crypto-asset wallet, account or custody services to Russian nationals, resident and entities, removing the previous threshold of EUR 10,000.14
Measures targeting non-controlled areas of Zaporizhzhia and Kherson
The EU also extended the geographical scope of its broad trade and investment ban to the non-government controlled areas of the Zaporizhzhia and Kherson oblasts of Ukraine (previously just the non-government controlled areas of the Donetsk and Luhansk oblasts of Ukraine). As a result, the Zaporizhzhia and Kherson territories are subject to (i) an import ban on goods from these territories, as well as a prohibition on related services (e.g. financing, financial assistance, or (re-)insurance), (ii) restrictions on investments, (iii) an export ban regarding certain listed goods and technology used in key sectors (e.g. transport, telecommunications, energy or mineral resources), (iv) a prohibition on services related to infrastructure in those key sectors, and (v) a prohibition on the supply of tourism services.15
The EU further extended the list of individuals and entities subject to asset freeze restrictions.16 The new designations focus on persons that have played a role in the organisation of the “referenda”, politicians, propagandists and defence companies and cover 30 individuals and seven entities (including JSC Goznak, JSC Irkut Corporation and MMZ Avangard).
The EU also introduced two specific derogations (subject to a prior authorisation) to the asset freeze it previously imposed on:
- PJSC KAMAZ, a Russian developer and manufacturer of vehicles and military equipment, for the completion of transactions, including sales, which are strictly necessary for the wind-down, by 31 December 2022, of a joint venture or similar legal arrangement concluded before 16 March 2022, involving a Russian SOE listed in Annex XIX to Regulation (EU) No 833/2014.
- The National Settlement Depository (“NSD”), Russia's central securities depository, for the termination by 7 January 2023 of operations, contracts or other agreements concluded with, or otherwise involving, that NSD before 3 June 2022.
Finally, the EU introduced a new basis to designate on the EU asset freeze list any natural person or legal entity that has facilitated the circumvention of EU sanctions.17 To date no designations have been made under this legal basis.
1 See here for previous White & Case client alerts relating to sanctions.
2 See White & Case client alert on the 6th Package, available here.
3 Art. 5n Regulation 833/2014, as amended by Regulation 1904/2022.
4 Art. 5n(7) Regulation 833/2014, as added by Regulation 1904/2022, with partner countries listed in Annex VIII: the US, Japan, UK or South Korea.
5 Art. 5n(10-11) Regulation. 833/2014, as inserted by Regulation 1904/2022.
6 Art. 5aa(1a) Regulation. 833/2014, Annex XIX, as amended by Regulation 1904/2022.
7 Annex XVII Regulation. 833/2014 – Part B, as inserted by Regulation 1904/2022.
8 Tariff headings: 7207.11 and 7207.12.10. Art. 3g(4-5) Regulation 833/2014, as inserted by Regulation. 1904/2022.
9 Art. 3g(1)d Regulation. 833/2014, as inserted by Regulation 1904/2022.
10 Art. 3k, Annex XXIII Regulation 833/2014, as amended by Regulation 1904/2022. The new products are covered by the EU CN headings 2701- 2704.
11 Art. 5aa Regulation 833/2014, as amended.
12 Art. 5aa(4) Regulation 833/2014, as amended, Art. 1ab Council Decision 2014/512/CFSP, as amended by Council Decision (CFSP) 2022/1909.
13 Art. 3ea(1a &5b)) Regulation 833/2014, as amended.
14 Art. 5b Regulation. 833/2014 as amended by Regulation 1904/2022.
15 Arts. 2 to 6 Regulation 2022/263.
16 Annex I, Regulation 269/2014, as amended based on the Council Decision (CFSP) 2022/1907 and Council Decision (CFSP) 2022/1909.
17 Revised Art. 3(1)(h) Regulation 269/2014, as amended by the Implementing Regulation 2022/1905.
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