On 15 March, the EU introduced further sectoral measures targeting the Russian economy. The new measures were announced after informal meetings took place between the EU heads of state and the G7 countries’ leaders. The new sectoral restrictions pertain, inter alia, to the following:
- transactions with certain state-owned enterprises;
- provision of credit rating services;
- new investment in the Russian energy sector;
- export of equipment, technology and services for the energy industry;
- import of iron and steel; and
- export of luxury goods.
In addition, the EU decided to impose sanctions against key oligarchs, people considered to be “lobbyists and propagandists” of the Russian government, as well as key companies in the aviation, military and dual use, shipbuilding and machine building sectors.
Targeted restrictive measures
The EU council added another 15 individuals and 9 entities to its designated persons list, entailing asset freezes and a prohibition on making funds or economic resources available to those persons.
The list of individuals includes, inter alia, key oligarchs Roman Abramovich and German Khan, as well as other prominent members of key economic sectors such as iron and steel, energy, banking, media, military and dual-use products and services. The entity list targets companies involved in the aviation, military and dual-use, shipbuilding and machine building sectors.
Sectoral sanctions
The new sectoral sanctions can be divided into the following categories, which are each further explained below:
- Restrictions on transactions with certain state-owned enterprises
- New investment restrictions in the Russian energy sector
- New export restriction on equipment, technology and services for the energy industry
- Further trade restrictions concerning iron and steel
- Restrictions on export of luxury goods
- Restrictions on providing credit rating services, as well as access to subscription services in relation to credit rating activities
Restrictions on transactions with certain state-owned enterprises
The new regulation provides for a blanket ban on directly or indirectly engaging in any transaction with: (a) entities listed in Annex XIX; (b) their non-EU subsidiaries directly or indirectly owned for more than 50%; and (c) persons acting on behalf of (a) and/or (b) above.
The following companies are currently included in Annex XIX:
- OPK OBORONPROM
- UNITED AIRCRAFT CORPORATION
- URALVAGONZAVOD
- ROSNEFT
- TRANSNEFT
- GAZPROM NEFT
- ALMAZ-ANTEY
- KAMAZ
- ROSTEC (RUSSIAN TECHNOLOGIES STATE CORPORATION)
- JSC PO SEVMASH
- SOVCOMFLOT
- UNITED SHIPBUILDING CORPORATION’
The prohibition referred to above does not apply to the execution of contracts concluded before 16 March 2022 until 15 May 2022. Moreover, exceptions are made for transactions
- which are strictly necessary for the purchase, import or transport of fossil fuels, in particular coal, oil and natural gas, as well as titanium, aluminum, copper, nickel, palladium and iron ore from or through Russia into the EU; and
- transactions related to energy projects outside Russia in which a legal person, entity or body listed in Annex XIX is a minority shareholder.
New investment restrictions in the Russian energy sector
The new investment restrictions in the Russian energy sector entail prohibitions on:
- acquiring any new, or extend any existing participation in any legal person, entity or body incorporated or constituted under the law of Russia or any other third country and operating in the energy sector in Russia;
- granting or becoming part of any arrangement to grant any new loan or credit or otherwise provide financing, including equity capital, to any legal person, entity or body incorporated or constituted under the law of Russia or any other third country and operating in the energy sector in Russia, or for the documented purpose of financing such a legal person, entity or body;
- creating any new joint venture with any legal person, entity or body incorporated or constituted under the law of Russia or any other third country and operating in the energy sector in Russia;
- providing investment services directly related to the activities referred to in points (a)-(c) above.
Notwithstanding these new investment prohibitions, the competent national authorities may authorize activities referenced above if it is necessary for ensuring critical energy supply within the EU, as well as transport of fossil fuels from or through Russia into the EU, or it exclusively concerns an entity operating in the energy sector in Russia owned by an entity which is incorporated or constituted under the law of a Member State.
New export restrictions on equipment, technology and services for the energy industry
The EU has now also proscribed the sale, supply, transfer or export (“Supply”), directly or indirectly, of goods or technology, as listed in Annex II, whether or not originating in the EU, to any natural or legal person, entity or body in Russia, including its Exclusive Economic Zone and Continental Shelf, or for use in Russia, including its Exclusive Economic Zone and Continental Shelf. Standard prohibitions on providing technical and financial assistance apply as well.
Exceptions to the above prohibition include Supply (and relating assistance) of Annex II goods and technology necessary for:
- the transport of fossil fuels, in particular coal, oil and natural gas, from or through Russia into the EU; or
- the urgent prevention or mitigation of an event likely to have a serious and significant impact on human health and safety or the environment.
Moreover, the new prohibition shall not either apply to the execution of contracts concluded before 16 March 2022, until 17 September, 2022.
Additionally, the competent national authorities may grant licenses in the event the Supply of Annex II goods and technology is necessary for ensuring critical energy supply within the EU, or if it is intended for the exclusive use of entities owned, or solely or jointly controlled by a legal person, entity or body which is incorporated or constituted under the law of a Member State.
Lastly, subject to similar exceptions as listed above pertaining to the Supply of Annex II goods and technology, the competent national authorities will not grant authorizations for the export of dual-use goods or goods and technology which might contribute to Russia’s military and technological enhancement, or the development of the defense and security sector (Annex VII), if they have reasonable grounds to believe that the Supply of such goods or technology, or the provision of related technical or financial assistance, is intended for the energy sector.
Further trade restrictions concerning iron and steel
As part of the new sanctions package, the EU adopted similar restrictions on the import of iron and steel, that it had previously imposed against Belarus. In particular, it will now be prohibited to import, directly or indirectly, iron and steel products as listed in Annex XVII into the EU if they originate in Russia or have been exported from Russia.
The new restrictions apply as well to the purchase, directly or indirectly, of iron and steel products as listed in Annex XVII, which are located or originate from Russia, or are being exported from Russia to any other country. Standard prohibitions on the provision of technical and financial assistance also apply.
The prohibitions listed above do not apply to the executions of contracts concluded before 16 March 2022, until 17 June 2022.
Restrictions on export of luxury goods
The new sanctions measures include a prohibition on the Supply, directly or indirectly, of luxury goods as listed in Annex XVIII, to any natural or legal person, entity or body in Russia or for use in Russia. This prohibition applies to luxury goods listed in Annex XVIII insofar as their value exceeds EUR 300 per item unless otherwise specified in the Annex.
Restrictions on providing credit rating services, as well as access to subscription services in relation to credit rating activities
As of 15 April, 2022, it will be prohibited to provide credit rating services, and any subscription services in relation thereto, to any Russian national or natural person residing in Russia or any legal person, entity or body established in Russia. This prohibition does not, however, apply to nationals of a Member State or natural persons having a temporary or permanent residence permit in a Member State.
