EU’s Fifth Wave of Russia sanctions target Russian coal imports, Russia-related trusts and exclude Russian persons from EU road transport, public contracts and EU funding
14 min read
On 8 April 2022, the EU adopted a new round of sanctions against Russia and Belarus. The EU has added 216 individuals and 18 entities to the EU asset freeze. The EU prohibits imports of coal, solid fossil fuels and a range of industrial goods from Russia to the EU as well as exports to Russia of certain industrial goods. The EU also bans Russian and Belarussian road transportation from its territory, prohibits the servicing of certain Russia-related trusts and bans Russian persons from participation in EU public tenders and from receiving EU public funding.
Additions to asset freeze and new exception for divestments by EU sanctioned persons
In line with its previous sanctions packages, the EU imposed additional asset freeze restrictions on a number of individuals and entities.1 More specifically, the EU designated 218 individuals, including various businesspersons, such as Oleg Deripaska and Farkhad Akhmedov, and a number of family members of businesspersons and President Putin, and certain officials. The EU also designated 18 entities, among which four Russian banks, i.e. VTB Bank, Sovcombank, Novikombank, and Bank Otkritie, as well as various companies active in the defence, electronics, shipbuilding and transport sector.
With respect to the newly sanctioned banks, EU Member State authorities may authorise the release and making available of funds and economic resources necessary for a termination by 9 October 2022, as long as it relates to operations, contracts, or other agreements, including correspondent banking relations, concluded with these banks before 8 April 2022.2
The EU also introduced a new derogation from the asset freeze restrictions, allowing the competent authorities to authorise the sale and transfer by 9 October 2022 of assets held by designated parties, under the condition that the proceeds of such sales remain frozen.3
Ban on import of coal and certain solid fossil fuels
Amid debate about potential restrictions on oil and natural gas imports from Russia, the EU imposed a ban from 9 April 2022 on the direct or indirect purchase, import or direct transfer of coal and other solid fossil fuels (as listed in Annex XXII) into the EU if originating in Russia or exported from Russia.4 The ban also applies to related technical, brokering and other services, as well as financings and financial assistance. Contracts concluded before 9 April 2022 (and ancillary contracts necessary for their execution) may still be executed until 10 August 2022, in which case there is no requirement for authorisation or notification.
Ban on imports of wide range of industrial goods
The purchase, imports or transfer of a wide range of goods deemed to generate significant revenues for Russia (as listed in Annex XXI) originating in, or exported from, Russia are also forbidden, as well as related services. This new import ban covers, inter alia, certain fertilisers, wood, cement, glass products, rubber tyres, various chemicals, silver, aluminium, and seafood and liquor.5 Under a wind-down clause, pre-9 April 2022 contracts can be executed until 10 August 2022 (with no need for notification/prior authorisation). With respect to the listed fertilisers, limited imports will continue to be allowed after 10 July 2022 through tariff-rate quotas to be managed by the European Commission and the EU Member States.
Expansion of goods and technologies subject to export ban
From 9 April 2022, EU export restrictions were expanded significantly to cover a wide range of products, as listed in Annex XXIII, and related services.6 This Annex includes more than 500 products, including numerous chemicals and chemical preparations, paints/inks, rubber products, wood and paper products, textile-related items, building materials, glass products, iron/steel/copper/aluminium items, various tools, numerous kinds of and machinery, motors and electronic/electrical appliances, heavy duty and special purpose vehicles, seats for aircraft/motor vehicles, surveying equipment, and many more. Their direct or indirect sale, supply, export or transfer to parties in Russia or for use in Russia, as well as related services, are now generally forbidden.
However, contracts concluded before 9 April 2022 can be executed until 10 July 2022 (without the need for notification or prior authorisation), and the ban does not apply to items necessary for official purposes of diplomatic or consular missions of the EU, the US and Japan in Russia. In addition, the EU Member States can authorise supply and related services for humanitarian purposes.
Existing annexes were also extended, such that the categories of goods and technology subject to export bans include military and dual-use items, various high-tech items (Annex VII), all aircraft/spacecraft (and parts) (Annex XI); key equipment for the oil and gas sector (Annex II); goods and technology suited for use in oil refining and liquefaction of natural gas (Annex X); navigation and radio-communications equipment for marine vessels (Annex XVI); luxury items (Annex XVIII); and now also jet fuel and fuel additives (Annex XX).7
Ban on EU public procurement: new tenders and ongoing contracts
Russian nationals, legal person entities or bodies established in Russia and companies majority-owned by, or acting on behalf, or at the direction of, Russian companies are banned from EU public procurement procedures covered by the EU Public Procurement Directives8 as well as most public contracts and concessions that are subject to exceptions from these directives.9
Importantly, the restriction covers both new contracts but also the continued execution of existing contracts, which will not be allowed after 10 October 2022. The ban also extends to subcontractors, suppliers and other entities whose capacities are being relied on, if they account for more than 10% of the contract value.
Certain exceptions apply, including where there is no viable alternative to the Russian subject persons.
Russian bodies banned from receiving EU funding
The EU introduced a restriction to providing direct or indirect financial or non-financial support or any other benefit under an EU, Euratom or Member State national programme and contracts within the meaning of Regulation (EU, Euratom) 2018/1046, to any legal person, entity or body established in Russia with more than 50 % public ownership or public control.10 The provision foresees certain, limited exceptions, for instance for humanitarian purposes or phytosanitary and veterinary programmes.
In a related press release, the Commission already announced it would terminate the participation to Russian public bodies or related entities, and suspend all related payments, in all ongoing grant agreement and suspend all related payments under Horizon 2020, Horizon Europe, Euratom and Erasmus+.11
Ban on servicing trusts for Russian beneficiaries
It is now prohibited to register, provide a registered office, business or administrative address as a management services to a trust or any similar legal arrangement if the trustor or a beneficiary is a Russian national or natural person residing in Russia, a company established in Russia, a legal person that is owned or controlled by a subject Russian person, or a natural or legal person acting on behalf, or at the direction of, a subject Russian person.12 There is a wind-down period until 10 May 2022 for the termination of contracts concluded before 9 April 2022 or ancillary contracts necessary for the execution of such contracts.
As of 10 May 2022, it will also be prohibited to act as, or arrange for another person to act as, a trustee, nominee shareholder, director, secretary or a similar position, for a subject trust or similar legal arrangement.
Certain exceptions apply, most notably when the trustor or beneficiary is also a national or a temporary or permanent resident of an EU Member State, e.g. dual EU-Russian nationals.
Ban on road transportation
The EU imposed a prohibition for any road transport undertakings (i.e. any entity engaged with a commercial purpose in the transport of freight by means of motor vehicles or combinations of vehicles) established in Russia on transporting goods by road within the territory of the EU, including in transit.13 Importantly, the prohibition applies to the targeted Russian companies that transport goods by road in the EU, rather than any EU exporters that may use such operators.
Such prohibition does not apply for mail services, nor for goods in transit through the EU between the Kaliningrad Oblast and Russia, if otherwise not prohibited. For vehicles that started transport before 9 April 2022, the prohibition only applies as of 16 April, provided they were already in the EU territory on 9 April and are on transit back to Russia.
By way of derogation, authorisations can be requested when the transport is needed, for instance, for the purchase, import or transport into the EU of natural gas and oil, including refined petroleum products, as well as titanium, aluminium, copper, nickel, palladium and iron ore, and of pharmaceutical, medical, agricultural and food products. Authorisations can also be requested when road transport is necessary for the transfer or export to Russia of cultural goods that are on loan in the context of formal cultural cooperation with Russia.
A similar prohibition, with identical dates of application, was adopted against Belarus.14
Ban on providing access to EU ports
As from 16 April 2022 it is prohibited to provide Russian vessels (i.e. those registered under the flag or Russia) access to EU ports.15 This covers ships, yachts and recreational crafts. Importantly, the prohibition applies to vessels that have changed their Russian flag or their registration, to the flag or register of any other State after 24 February 2022.
By way of derogation, authorisations can be requested if the access to the port is needed; for instance, for the purchase, import or transport into the Union of: natural gas and oil, including refined petroleum products, as well as titanium, aluminium, copper, nickel, palladium and iron ore; pharmaceutical, medical, agricultural and food products; and also coal and other solid fossil fuels (until 10 August 2022).
Existing EU sanctions are fine tuned
Updates to exemption to aircraft
The EU introduced an exemption to the prohibitions relating to the aviation and space industry for aircraft financial leases. Specifically, EU Member State authorities may authorise the execution of an aircraft financial lease concluded before 26 February 2022 if strictly necessary to ensure lease re-payments to an EU legal entity that is not targeted by any other EU sanctions, and provided that no economic resources will be made available to the Russian counterparty, with the exception of the transfer of ownership of the aircraft after full reimbursement of the financial lease.16
Updates to bank deposit limits
The restrictions on deposits of certain Russia-related persons above EUR 100,000 per financial institution, introduced on 28 February 2022, have been extended to crypto-asset wallet, account or custody services to Russian nationals or residents, or any legal entity established in Russia, if the total value of crypto-assets of such person per wallet, account or custody provider exceeds EUR 10,000.17 The same exemptions apply in respect of nationals of, or national persons a temporary or permanent residence permit in, an EU Member State, a country member of the European Economic Area or Switzerland.
Updates to restrictions on euro banknotes and euro-denominated transferable securities
The existing prohibition on the sale of any euro-dominated transferable securities issued after 12 April 2022 or units in collective investment undertakings providing exposure to such securities to any Russian nationals, residents, or any legal entity established in Russia, has been extended to any official currency of an EU Member State.18
Similarly, the existing restriction on the sale, supply, transfer, or export of euro-denominated banknotes (i) to Russia, or (ii) to any natural or legal person, entity or body in Russia, including specifically the government and Central Bank of Russia, or (iii) for use in Russia, was extended to any official currency of an EU Member State.19
The restrictions on banknotes and transferable securities that exist under the EU's framework against Belarus were similarly amended.20
Updates to exemption relating to ban on transactions with certain Russian SOEs
With respect to the broad ban on direct and indirect transactions with certain Russian SOEs, the exemptions have been amended. The exemption for transactions that are "strictly necessary" for the direct or indirect purchase, import or transport of natural gas and oil, including refined petroleum products, as well as titanium, aluminium, copper, nickel, palladium and iron ore from or through Russia into the EU, has been extended to a country member of the European Economic Area, Switzerland, or the Western Balkans.21 Further, in light of the ban on the import of coal, an exemption is available for transactions for the purchase, import or transport into the EU of restricted coal and other solid fossil fuels until 10 August 2022. The exemption for transactions related to energy projects outside Russia in which a sanctioned SOE is a minority shareholder, remains unchanged.
1 Council Implementing Regulation (EU) 2022/581 of 8 April 2022 implementing Regulation (EU) No 269/2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine, available here.
2 Article 6b(2) of Council Regulation (EU) 269/2014, as replaced by Council Regulation (EU) 2022/580, available here.
3 Article 6b(3) of Council Regulation (EU) 269/2014, as replaced by Council Regulation (EU) 2022/580.
4 New Article 3j of Regulation (EU) No 833/2014, added by Council Regulation (EU) 2022/576 of 8 April 2022, available here.
5 New Article 3i of Regulation (EU) No 833/2014, added by Council Regulation (EU) 2022/576 of 8 April 2022.
6 New Article 3k of Regulation (EU) No 833/2014, added by Council Regulation (EU) 2022/576 of 8 April 2022.
7 See also previous alerts of 28 February 2022, 13 March 2022, and 21 March 2022.
8 New Article 5k of Regulation (EU) No 833/2014, added by Council Regulation (EU) 2022/576 of 8 April 2022.
9 Article 10, paragraphs 1, 3, 6(a) to 6(e), 8, 9 and 10, Articles 11, 12, 13 and 14 of Directive 2014/23/EU, Article 7 and 8, Article 10 (b) to (f) and (h) to (j) of Directive 2014/24/EU, Article 18, Article 21 (b) to (e) and (g) to (i), Articles 29 and 30 of Directive 2014/25/EU and Article 13 (a) to (d), (f) to (h) and (j) of Directive 2009/81/EC.
10 New Article 5l of Regulation (EU) No 833/2014, added by Council Regulation (EU) 2022/576 of 8 April 2022.
11 European Commission Press release of 8 April 2022, see here.
12 New Article 5m of Regulation (EU) No 833/2014, added by Council Regulation (EU) 2022/576 of 8 April 2022.
13 New Article 3l of Regulation (EU) No 833/2014, added by Council Regulation (EU) 2022/576 of 8 April 2022.
14 New Article 1zc of Regulation (EU) No 765/2006, added by Council Regulation (EU) 2022/577 of 8 April 2022.
15 New Article 3ea of Regulation (EU) No 833/2014, added by Council Regulation (EU) 2022/576 of 8 April 2022.
16 New Article 3c(6) of Regulation (EU) No 833/2014, added by Council Regulation (EU) 2022/576 of 8 April 2022.
17 Article 5b of Regulation (EU) No 833/2014 as amended by Council Regulation (EU) 2022/576 of 8 April 2022.
18 Article 5f of Regulation (EU) No 833/2014 as amended by Council Regulation (EU) 2022/576 of 8 April 2022.
19 Article 5i of Regulation (EU) No 833/2014 as amended by Council Regulation (EU) 2022/576 of 8 April 2022.
20 Articles 1y and 1za of Regulation (EU) No 765/2006 as amended by Council Regulation (EU) 2022/577 of 8 April 2022.
21 Article 5aa(3) of Regulation (EU) No 833/2014 as amended by Council Regulation (EU) 2022/576 of 8 April 2022.
This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2022 White & Case LLP