EU adopts 11th Sanctions Package against Russia

On 23 June, the EU published its latest package of restrictive measures against Russia, which includes a new anti-circumvention tool that aims to stop third countries and companies from circumventing existing EU sanctions and imposes a transit ban via Russia on additional goods and technology, which might aid Russia’s military or security sectors. As part of the package, the EU has listed an additional 104 Russian individuals and entities, plus added 87 new entities to the list of those directly supporting Russia’s military and industrial complex, including entities registered in Russia, China, Uzbekistan, the United Arab Emirates, Syria, and Armenia.

The 11th package represents a significant milestone in EU sanctions efforts, as it empowers Member States to – unanimously and as a last resort – punish third countries assisting Russia in circumvention with trade restrictions. Consequently, the package has undergone a long negotiation period, as the Commission introduced its original proposal on 5 May. The negotiations centred around the issue of blacklisted Hungarian and Greek companies by Ukraine, and several Member States’ apprehensions regarding reactions from third countries to the anti-circumvention tool.

Key Measures of the 11th Sanctions Package

I.              Trade Measures

• Anti-circumvention tool

The provisions of the 11th package enable the EU to restrict the sale, supply, transfer, or export of specified sanctioned goods and technology to certain third countries whose jurisdictions are at continued and particularly high risk of circumvention. This should only be invoked as a last resort and unanimously by Member States, and prior to the restrictions the EU needs to diplomatically engage third countries and introduce individual measures against third-country operators.

• Extended transit ban

The EU has extended the prohibition of transit via Russia for certain sensitive goods and technology (e.g., advanced, aviation-related materials) which might contribute to Russia’s military and technological enhancement or its defence and security sectors.

• Import-export control

The Council added 87 entities to the list of entities supporting Russia’s military complex, subjecting them to tighter export restrictions. The expanded list includes entities from third countries, such as Iranian drone manufacturers, businesses evading trade restrictions, and Russian entities involved in producing electronic components.

II.            Listings & Derogations

• Individual listings

The Council has sanctioned 71 individuals and 33 entities as part of the package, including businesspersons, propagandists, as well as Russian IT companies providing critical technology to Russian intelligence, banks operating in the occupied territories, and entities working with the Russian armed forces.

• New listing grounds

New listing grounds for persons and businesses circumventing or “otherwise significantly frustrating” EU sanctions have been introduced, which can be applied to third-country operators as well. It is not clear at the moment, what activities could qualify as “significantly frustrating”, therefore it will be necessary to monitor how the practice of the Council on sanctions imposed under this criterion will develop[1].

 Entities in the Russian IT sector with licenses administered by the FSB or by the Russian Military of Industry and Trade can also be sanctioned under the new listing criterion[2].

• New derogations

Derogation for EU holders of depository receipt on Russian securities: There is a new exemption for EU holders of depositary receipts of Russian shares, allowing them to apply until 25 September for permission to receive the proceeds from the unwinding of these depositary receipts and the sale of the Russian underlying securities in Russia.

Derogation for firewalls: A new derogation allowing for the setting-up, certification or evaluation of a firewall that removes the control exercised by a listed person over the assets of a non-listed EU entity which the listed person owns or controls has also been introduced. This derogation applies both to the individual asset freeze and to the services ban.

Derogation for divestment: A new derogation has been introduced for certain listed entities to allow for divestment from Russian companies and the disposal of certain types of securities.

Derogation from the services ban: A new temporary derogation from the professional service’s ban, with the aim of further facilitating divestment from the Russian market by EU operators, has also been introduced. As part of this derogation, legal service providers are allowed to provide services that are necessary for Russian companies to sell their European subsidiaries.

III.         Other measures

·      Ban on transferring IP rights

A new provision includes the prohibition to sell, license, transfer or refer IP rights and trade secrets used in connection with restricted goods to prevent the sanctioned goods from being manufactured outside the EU.

·      Prohibition to transfer securities

To avoid circumvention of the prohibition on providing transferable securities to persons in Russia, the 11th package extended that prohibition to financial instruments denominated in any currency, issued after 6 August 2023. 

• Broadcasting

The suspension of broadcasting licences has been extended to five additional media outlets (RT Balkan, Oriental Review, Tsargrad, New Eastern Outlook and Katehon).

• Transport via EU roads and ports

A prohibition to transport goods into the EU by road to trailers and semi-trailers registered in Russia has been introduced. Access to EU ports and locks to vessels engaging in ship-to-ship transfers is prohibited if national authorities deem that there is a risk of circumvention.

·      Import ban on Russian oil by pipeline

The temporary derogation granted to Germany and Poland for the supply of crude oil by pipeline from Russia through has been terminated. The import of oil which originates in Kazakhstan or another third country and is transiting through Russia via the Druzhba oil pipeline is not prohibited.

[1] In the 11th package, only one company was sanctioned under this criterion (CJSC SPS) which was engaged in the supply of semiconductors from the EU.

[2] As part of the 11th package, several Russian companies have been listed under this criterion (NTTS VULKAN LLC, OKENIT JSC, Echelon JSC, etc.).