After weeks of going back and forth, the Council of the European Union (“Council”) was finally able to adopt the 10th package of sanctions against Russia in time to coincide with the first anniversary of Ukraine’s invasion on Friday, 24 February. Since a unanimous decision by the Member States is required in order to move forward with the sanctions, the adoption of the tenth package was delayed due to differences between certain countries over parts of the package.
The new set of measures include additional designations, trade and financial restrictions, reporting obligations, and further restrictions on Russian nationals. Most of the rules entered into force on 26 February 2023, the day following their publication in the Official Journal of the EU. The key measures described below can be found in the following documents:
Overview of the 10th package
- Additional trade restrictions
- Exports restrictions
The new package added 96 entities in the list of direct supporters of Russia’s military and industrial complex in its war against Ukraine, thereby imposing dual use good export restrictions on them. For the first time ever, seven Iranian entities manufacturing military unmanned aerial vehicles (i.e., drones), which have been used by Russia’s military including against civilian infrastructure, were included in the list.
Export bans are now also imposed on critical technology and industrial goods that could contribute in particular to the enhancement of Russian industrial capacities or are suitable for use in aviation or the space industry, namely:
- Vehicles: heavy trucks not previously banned (and their spare parts), semi-trailers, and special vehicles such as snowmobiles;
- Electric generators, binoculars, radars, compasses, etc.;
- Construction goods such as bridges, structures for buildings, fork-lifts, trucks, cranes, antennas, etc.;
- Electronics, machine parts, pumps, machinery for working metals, etc.;
- Complete industrial plants (this category has been added to avoid loopholes);
- Goods used in the aviation industry (turbojets).
The list of restricted items that could contribute to the technological enhancement of Russia’s defence and security sector is also extended. It now includes new electronic components that are used in Russian weapons systems retrieved from the battlefield, such as drones, missiles, helicopters, as well as specific rare earth materials, semiconductor devices, electronic integrated circuits, and photographic cameras.
In order to avoid circumvention, the package also introduces a prohibition on the transit through Russia of EU exported dual use goods and technology or arms and components, with limited exceptions provided for in Article 2 of Council Regulation (EU) No 833/2014, such as the sale, supply, transfer, or export of those dual-use goods intended for humanitarian purposes, health emergencies, software updates, or for the personal use of natural persons travelling to Russia, among others.
- Import restrictions
The new package extends the import restrictions to cover products such as petroleum jelly; petroleum coke; bitumen and asphalt; and carbon and synthetic rubber, the imports of which generate significant revenues for Russia. Among them, Russian imports of carbon and synthetic rubber are still possible until 30 June 2024, subject to specific quotas.
Importantly, the new package clarified the rules applicable to goods brought into the EU in good faith at a time when they were not yet subject to any import restrictive measures, including when their import was still allowed during a wind-down period, to the benefit of EU importers. The new Article 12c introduced by the new package authorises the release by the customs authorities of the Member States of goods which are physically in the EU and which had already been presented to customs authorities when they became subject to such restrictions in order to ensure legal certainty for EU importers concerning the treatment of their imports from Russia. This rule applies regardless of the procedures under which the goods were placed after presentation to customs (transit, inward processing, release for free circulation, etc.) or of the procedural steps and formalities pursuant to the Union Customs Code necessary for the release. Practically, as long as the goods are already physically in the EU and declared for customs purposes (yet to be customs cleared) before any relevant import prohibition becomes applicable, they are not covered by the prohibition. However, in case custom authorities refuse to release the goods, these cannot be re-exported to Russia. Also, payment related to the import of the goods is still subject to the applicable rules of Council Regulation (EU) No 833/2014.
- Expansion of the list of sanctioned individuals and entities
The EU has included 121 new names (87 individuals and 34 entities) to the sanction list, making them subject to an assets freeze and a travel ban. Those include Russian senior government officials and military leaders, decision-makers as well as proxy authorities placed by Russia in the occupied territories in Ukraine. In addition, members and supporters of Russia’s Wagner mercenary group and its activities in other countries, such as Mali or the Central African Republic, are also targeted.
Among the entities listed are three Russian banks: Alfa-Bank, Rosbank, and Tinkoff Bank, in addition to the National Wealth Fund of the Russian Federation, and the Russian National Reinsurance Company.
- Energy Sector
The new package introduced a prohibition to provide gas storage capacity to Russian nationals, natural persons residing in Russia, or legal persons or entities established in Russia or any persons under their control, aiming at protecting the security of gas supply in the EU, and avoiding Russia’s weaponisation of its gas supply and risks of market manipulation. This provision, however, does not apply to the part of LNG storage facilities, and foresees that national competent authorities may authorise the provision of storage capacity if necessary for ensuring critical energy supply within the EU.
The EU suspended the broadcasting licences of two additional media outlets under the permanent control of the Russian leadership, i.e., RT Arabic and Sputnik Arabic. The prohibition will apply as from 10 April 2023 provided that the Council, having examined the respective cases, so decides by implementing act. However, such prohibition will not prevent them and their staff from carrying out activities other than broadcasting, such as research and interviews, in the EU.
- Russian state-owned entities
The EU extended until 31 December 2023 the duration of the exceptional permission to enter into any transactions with certain Russian state-owned entities, if such a transaction is strictly necessary for the wind-down of a joint venture or similar legal arrangement.
Likewise, the duration of the period in which the competent authorities of the Member States may authorise transactions which are necessary for the divestment and withdrawal by those Russian state-owned entities from EU companies was also extended to the same date.
- Restrictions on the provision of services
Aiming at facilitating divestment from the Russian market by EU operators, the new package provides a temporary derogation from the prohibition on providing certain services set out in Article 5n of Council Regulation (EU) No 833/2014, including IT consultancy services. This derogation enables the continuation of the provision of services to and for the exclusive benefit of the legal persons, entities, or bodies resulting from the divestment until 31 December 2023, provided that the services are not provided to the Government of Russia or benefit military end-users or have a military-end use.
- Critical infrastructures and entities
As of 27 March 2023, Russian nationals or natural persons residing in Russia (with the exclusion of nationals of a Member State, of an EEA country, or of Switzerland) will be prohibited from holding any posts in the governing bodies of the owners or operators of critical infrastructures, European critical infrastructures, and entities in the EU.
- Reporting obligations
The new package introduces detailed reporting obligations on natural and legal persons, entities, and bodies concerning information they held on funds and economic resources belonging to, owned, held or controlled by listed individuals and entities, which have been frozen or should have been frozen, or which were subject to any move, transfer, alteration, use, access, or dealing shortly before their listing. It also introduces new reporting obligations simultaneously to the Member States and to the Commission on immobilized reserves and assets of Central Bank of Russia or any entity acting on its behalf or at its direction such as the Russian National Wealth Fund. Relevant natural and legal persons, entities, and bodies will also have to cooperate with the component authorities or the Commission in any verification of such information. These obligations become effective one month after the entry into force of the new package.
Aircraft operators will also have to notify non-scheduled flights between Russia and the EU, operated directly or via a third country, to their national competent authorities at least 48 hours prior to their operation, in order to avoid circumvention of and ensure compliance with the prohibition on any non-Russian-registered aircraft which is owned, chartered, or otherwise controlled by any Russian natural or legal person, entity, or body from landing in, taking off from, or overflying, the EU territory.
- Partner countries
Finally, the new package extended the list of partner countries which are applying a set of export control measures substantially equivalent to those set out in Council Regulation (EU) No 833/2014. The partner country exception now also applies to Australia, Canada, New Zealand and Norway, in addition to the US, UK, Japan and Korea.
The tenth package was less ambitious than initially expected, as several controversial points were reportedly left out of the package due to opposition from some EU Member States. In particular, among the elements left out were sanctions on Russia’s nuclear sector, a ban on Russian diamond imports, making it easier to sanction the family members and associates of oligarchs, or sanctioning certain employees of Russian nuclear company Rosatom. It is also reported that some EU countries pushed back against a proposal by the Commission to impose fines on persons and entities for failing to report on the whereabouts of Russian frozen assets, forcing the Commission to remove this aspect of the measures from the package. It remains to be seen whether EU countries can reach agreement on any of these measures in the next round of sanctions.
In addition, even with tough measures now in force in the EU, concerns over circumvention are increasing and countries see the need to strengthen enforcement mechanisms in the EU. Various proposals are being discussed in this regard, including the idea of setting up a new EU sanctions enforcement body to tackle sanctions circumvention. It is also reported that Germany is planning to push for measures to be enacted as part of the EU’s 11th package to crack down on practices such as false export declarations. These could include requirements such as providing transparent “end-use statements” as part of export declarations, with the penalty of a criminal conviction in case of non-compliance. Germany will also seek to sanction individuals or companies that use entities in third countries to circumvent sanctions, as well as propose that some form of trade countermeasures are imposed against third countries that fail to co-operate with the EU on enforcing the bloc’s sanctions against Russia.