Since the adoption of the first sanctions package against Russia, the Council of the EU and the European Commission (“Commission”) have been working closely together to adopt increasingly severe sanctions to force President Putin back to the negotiating table in view of reaching a ceasefire. Coordination with allies has also been intense. Following our review of the first and second sanctions package, we analyze below the latest restrictive measures.

For more information on how these developments could impact your organization, contact a member of Steptoe’s Economic Sanctions team in Brussels.

For additional resources can be found on Steptoe’s “Sanctions against Russia: Implications for Business and International Trade” page.

Restrictive measures targeting the Central Bank of Russia and the aviation sector

On February 28, the Council of the EU adopted Council Decision (CFSP) 2022/335 and Council Regulation (EU) 2022/334 concerning restrictive measures in view of Russia’s actions destabilizing the situation in Ukraine which include two new prohibitions.

Prohibition on transactions with the Central Bank of Russia

The sanctions prohibit all transactions relating to the Central Bank of Russia’s management of reserves and assets, and include transactions with any legal person, entity or body acting on behalf of, or at the direction of, the Central Bank of Russia.

However, a derogation exists. A transaction may be authorized when it is “strictly necessary” to ensure the financial stability of the EU as a whole or of a Member State. In such instances, the Member State must inform the Commission and other Member States of its intention to grant such authorization.

Prohibition for Russian aircrafts to access the EU’s airspace

The sanctions also target the aviation sector. All Russian aircrafts are prohibited from landing in, taking off from, or overflying the EU’s territory. What constitutes a Russian aircraft is also understood broadly. It covers an aircraft operated by Russian air carriers – including as a marketing carrier in code-sharing or blocked-space arrangements – to any Russian-registered aircraft, and to any non-Russian-registered aircraft which is owned or chartered, or otherwise controlled by any Russian natural or legal person, entity or body.

Also, in this case, the measures include certain derogations. A Russian aircraft may be given access to the EU’s territory or airspace in the case of an emergency landing or an emergency overflight, and for humanitarian purposes or any other purpose consistent with the objectives of these sanctions. The Member State derogating from the prohibition must inform the Commission and the Member States within two weeks of the authorization.

Lastly, to ensure the implementation of this prohibition, the Commission is mandated to appoint a Network Manager. If none of the grounds for derogations are met, the Network Manager will be able to reject flight plans when carried out by a Russian operated aircraft.

Restrictive measures limiting financial ties with Russia

On March 2, the Council of the EU adopted Council Decision (CFSP) 2022/346 and Council Regulation (EU) 2022/345 concerning restrictive measures in view of Russia’s actions destabilizing the situation in Ukraine which include three new prohibitions.

Prohibition to provide SWIFT services to seven Russian banks

Restrictive measures provide that SWIFT can no longer provide its specialized financial messaging services used to exchange financial data to the following banks listed in Annex XIV: Bank Otkritie, Novikombank, Promsvyazbank, Rossiya Bank, Sovcombank, VNESHECONOMBANK (VEB), and VTB BANK’.

Precisely, as of March 12, 2022, it will be prohibited to provide specialized financial messaging services to the legal persons, entities or bodies listed in Annex XIV, or to any legal person, entity or body established in Russia whose proprietary rights are directly or indirectly owned for more than 50 % by an entity listed in Annex XIV.

The Council of the EU may later decide to list additional banks under Annex XIV.

Prohibition to sell, supply, transfer or export euro denominated banknotes to Russia

Restrictive measures provide for the prohibition to sell, supply, transfer or export euro denominated banknotes to Russia or to any natural or legal person, entity or body in Russia, including the government and the Central Bank of Russia, or for use in Russia.

However, two derogations exist to this prohibition. Euro denominated banknotes may be sold, supplied, transferred or exported when it is necessary for: 1) the personal use of natural persons travelling to Russia or members of their immediate families travelling with them; or 2) the official purposes of diplomatic missions, consular posts or international organizations in Russia enjoying immunities in accordance with international law.

Prohibition on involvement in future projects co-financed by the Russian Direct Investment Fund

Restrictive measures prohibit investing, participating or otherwise contributing to future projects co-financed by the Russian Direct Investment Fund. However, a derogation also exists to this prohibition. The competent authority may authorize work on projects co-financed by the Russian Direct Investment Fund, after having determined that such an investment is due under contracts concluded before March 2, 2022, or ancillary contracts necessary for the execution of such contracts.

Additional restrictive measures further expanding the sanctions’ scope

On March 9, 2022, the Council of the EU adopted Council Decision (CFSP) 2022/395 and Council Regulation (EU) 2022/394 concerning restrictive measures in view of Russia’s actions destabilizing the situation in Ukraine. The measures provide for the following:

Prohibition to export of maritime navigation goods and radio communication technology

It is prohibited to sell, supply, transfer or export, directly or indirectly, maritime navigation goods and technology to any natural or legal person, entity or body in Russia, for use in Russia, or for the placing on board of a Russian-flagged vessel. The new rules also prohibit related financing, financial and technical assistance, brokering services and other services.

Clarification of “transferable securities” to include crypto-assets

The latest sanctions modify the definition of “transferable securities” to include those which may come in the form of crypto-assets. This is to ensure sanctions are not undermined from circumventing the sanctions using the relatively new digital assets.

Designation of additional high-profile individuals and entities linked to the Kremlin

On February 28, 2022, the Council of the EU also adopted Council Decision (CFSP) 2022/337 and Council Implementing Regulation (EU) 2022/336 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine.

The new listing essentially targets oligarchs and businessmen active in strategic Russian sectors, in particular oil, banking and finance sectors, as well as ministers, military officials and communication experts spreading disinformation in Russia and Ukraine. While the full list will be available in Annex I to Regulation (EU) No 269/2014, which will be consolidated shortly, the newly listed key individuals are to be found in the Annex of the newly adopted legal texts.

On March 9, 2022, the Council of the EU also adopted as Council Decision (CFSP) 2022/397 and Council implementing Regulation (EU) 2022/396 designating an additional 146 members of the Russian Federation Council and 14 oligarchs and prominent businesspeople.

As can be expected under EU sanctions, such listing involves an asset freeze and a prohibition to make any funds or economic resources available, directly or indirectly, to or for the benefit of the listed individuals and entities. Such prohibitions are very broad and essentially preclude any type of business with the listed individuals or entities, as well as with anyone owned or controlled by such blacklisted individuals or entities.

Additional economic sanctions against Belarus mirroring sanctions adopted against Russia

On March 2, 2022, the Council of the EU adopted additional economic sanctions against Belarus over its involvement in the military aggression against Ukraine in Council Decision (CFSP) 2022/356 and Council Regulation (EU) 2022/355. Putting aside the sectoral measures which are specific to Belarus, these additional sanctions closely mirror the ones adopted against Russia in late February 2022.

Expansion of export controls

The latest sanctions prohibit, the sale, supply, transfer or export of all dual use goods and technology listed in Annex I to Regulation (EU) 2021/821 to any natural or legal person, entity or body in Belarus, whether or not such goods and technology originate in the EU.

In addition, the sanctions also prohibit to sell, supply, transfer or export, directly or indirectly, specified goods and technology which might contribute to the military and technological enhancement of Belarus, or to the development of its defense and security sector. This list seems to match Annex VII of Regulation 833/2014 under sanctions adopted against Russia. The prohibition applies to goods and technology whether or not originating in the EU, and to any natural or legal person, entity or body in Belarus or for use in Belarus. Sanctions also prohibit the provision of technical assistance, brokering services or other services, along with providing financing or financial assistance, to the above-mentioned goods and technologies.

The Regulation however provides for two sets of derogations – identical to the two sets of derogations provided under the second sanctions packages – under which authorizations may be obtained from the competent authority in view of selling, supplying, transferring or exporting dual use goods and technology, or goods and technology which might contribute to the military and technological enhancement of Belarus, or to the development of its defense and security sector.

Importantly, authorizations may be granted in view of executing contracts concluded before March 3, 2022, or ancillary contracts necessary for the execution of such a contract, provided that such authorization is requested before May 1, 2022.

Expansion of trade restrictions against key industries

The new sanctions introduce trade restrictions on wood products, cement products, iron and steel products and rubber products. In particular, it is prohibited to import, directly or indirectly, the products specified in the respective annexes to the Regulation if they originate in Belarus, or have been exported from Belarus, but also to purchase and transport products located in Belarus. As above, it is also prohibited to provide – directly or indirectly – technical assistance, brokering services, financing or financial assistance as well as to provide (re)insurance to such goods.

The restrictive measures also include restrictions on trade with specified machinery. Additionally, they expand the restrictions on trade with goods used for the production or manufacturing of tobacco products, mineral fuels, bituminous substances and gaseous hydrocarbon products and potassium chloride (“potash”) products.

These prohibitions shall be without prejudice to the execution – until June 4, 2022 – of contracts concluded before March 2, 2022, or ancillary contracts necessary for the execution of such contracts.

Additional far-reaching restrictive measures against Belarus

On March 9, 2022, the Council of the EU adopted Council Decision (CFSP) 2022/399 and Council Regulation (EU) 2022/398 concerning restrictive measures in view of the situation in Belarus and the involvement of Belarus in the Russian aggression against Ukraine.

Prohibition to provide SWIFT services to three Belarusian banks

As of March 20, 2022, three Belarusian banks are banned from accessing specialized financial messaging services (SWIFT). These are:

  • Belagroprombank;
  • Bank Dabrabyt; and
  • the Development Bank of the Republic of Belarus (as well as their Belarusian subsidiaries).

Prohibition to accept deposits from Belarusian nationals or residents

It is prohibited to accept deposits exceeding EUR 100,000 per credit institution from Belarusian nationals or residents. However, this rule does not apply to deposits which are necessary for non-prohibited cross-border trade in goods and services between the EU and Belarus. The competent authorities in the EU are moreover allowed to authorize such deposits in certain cases specified in the Regulation, such as for instance, deposits, necessary to satisfy the basic needs of natural or legal persons, including payments for food, rent or mortgage, medicines and medical treatment, taxes, insurance premiums, and public utility charges or intended exclusively for the payment of reasonable professional fees or the reimbursement of incurred expenses associated with the provision of legal services.

Clarification of “transferable securities” to include crypto-assets

As under the latest sanctions against Russia, the definition of “transferable securities” is modified to include those which may come in the form of crypto-assets.

Prohibition to carry out transactions related to the Central Bank of Belarus

As under the latest sanctions against Russia, it is prohibited to carry out transactions with the Central Bank of Belarus related to the management of reserves or assets and the provision of public financing for trade with and investment in Belarus. The transaction may be authorized provided it is strictly necessary to ensure the financial stability of the EU as a whole or of the Member State concerned.

Prohibition to list and provide services on trading venues

As of April 12, 2022, it will be prohibited to list and provide services on trading venues registered or recognized in the EU for the transferable securities of any legal person, entity or body established in Belarus and with over 50% public ownership.

Prohibition to provide public financing or financial assistance for trade with, or investment in, Belarus

The provision of public financing or financial assistance for trade with, or investment in, Belarus prohibits the provision of public financing or financial assistance for trade with, or investment in, Belarus is prohibited. However, this prohibition does not apply to:

  • binding financing or financial assistance commitments established prior to March 10, 2022;
  • the provision of public financing or financial assistance up to the total value of EUR 10,000,000 per project benefiting SMEs established in the Union; or
  • the provision of public financing or financial assistance for trade in food, and for agricultural, medical or humanitarian purposes.

Prohibition to provide services for transferable securities

It is prohibited to EU central securities depositories to provide any services – as defined in the Annex to Regulation (EU) No 909/2014 for transferable securities – issued after April 12, 2022, to any Belarusian national or natural person residing in Belarus or any legal person, entity or body established in Belarus.

Prohibition to sell euro denominated transferable securities

It is prohibited to sell euro denominated transferable securities issued after April 12, 2022, or units in collective investment undertakings providing exposure to such securities to any Belarusian national or natural person residing in Belarus or any legal person, entity or body established in Belarus.

Prohibition to sell, supply, transfer or export euro denominated banknotes

It is prohibited to sell, supply, transfer or export euro denominated banknotes to Belarus or to any natural or legal person, entity or body in Belarus, including the Government and the Central Bank of Belarus, or for use in Belarus. The Regulation however allows certain exceptions to this rule.

Designation of an additional 22 high ranked Belarusian military officials

On March 2, 2022, the Council of the EU adopted Council Decision (CFSP) 2022/354 and Council Implementing Regulation (EU) 2022/353 list an additional 22 individuals. All the newly listed individuals work in Belarus’ Ministry of Defence, the Air Force and Air Defence Forces, the Army for Ideology, or work on armaments, military operations and logistics in the government.

Suspension of Sputnik and Russia Today’s broadcasting activities

For completeness, we also note that the third sanctions package includes the prohibition for Russian state-owned media outlets Russia Today and Sputnik to broadcast in the EU until the end of the aggression against Ukraine. The measures aim to prevent the Russian Federation from engaging in disinformation campaigns and manipulating facts to support its destabilization strategy against Ukraine. These restrictions are provided for under Council Decision (CFSP) 2022/351 and Council Regulation (EU) 2022/350 adopted on March 1, 2022.

Conclusion

The series of sanctions adopted against Russia and Belarus constitute the largest and most severe restrictive measures ever adopted by the EU. With these latest measures, the EU is seeking to weaken Russia’s economy by limiting financial flows both in and out of Russia, while also sending a clear message to those close to President Putin. To date, the restrictive measures apply to a total of 862 individuals and 53 entities.

The Council of the EU announced that more sanctions may be adopted to continue to deter Russia from pursuing the military aggression against Ukraine. The big question facing the EU is whether to ban imports of Russian gas and oil. At this point in time, however, Member States remain divided, and are unlikely to follow suit with the United States and the UK, although the EU Commission has come forward with a plan designed to phase out dependence on Russian fossil fuels over the next five to eight years. Lastly, the EU, together with the United States and G7 partners, is seeking to deprive Russia of Most Favored Nation (MFN) status at the World Trade Organization (WTO) possibly leading to, inter alia, higher import duties for Russian exports.