The new measures include further restrictions on: (i) dual-use goods and technology to specified entities, (ii) the provision of services in relation to projects regarding deep water oil exploration and production, arctic oil exploration and production, or shale oil projects in Russia, (iii) services related to goods and technology listed in the Common Military List, and (iv) access to capital markets. They also introduce a new prohibition on certain types of loans and credit to specific Russian entities. The list of designated parties has also been expanded.
The main changes, as introduced by Council Regulation (EU) No 960/2014 (the “New Regulation“), which amends Council Regulation (EU) No 833/2014 (“Reg. 833/2014“), are as follows:
1. Product controls: dual-use goods and technology for specific targeted companies
The previous controls regarding dual-use goods and technology only applied insofar as they were sold, supplied, transferred or exported (directly or indirectly) to, or for use, in Russia if those items were intended for military use or to a military end-user.
There is now also an outright prohibition of dual-use goods and technology as listed in the EU Dual-Use Regulation (Regulation (EC) No 428/2009) where the sale, supply, transfer or export is to one of the listed Russian businesses. Under this new control, it does not matter if the targeted entity is a military end-user or whether the item will have a military end-use. At the moment, however, the targeted companies (as listed in Annex I of the New Regulation) are a mixture of defence companies and mixed defence companies, although this leaves it open to the EU to expand the list at a later date. The list currently includes: JSC Sirius, OJSC Stankoinstrument, OAO JSC Chemcomposite, JSC Kalashnikov, JSC Tula Arms Plant, NPK Technologii Maschinostrojenija, OAO Wysokototschnye Kompleksi, OAO Almaz Antey and OAO NPO Bazalt.
The New Regulation includes a prohibition on the provision of related services (technical assistance, brokering services, financial assistance etc.) in connection with dual-use items to the same listed entities.
This ban applies to any dual-use goods or technology to these entities, whether or not the items originate from the EU (provided, of course, that the jurisdictional threshold set out in Reg. 833/2014 is met). The restriction is subject to, inter alia, (i) a grand-fathering provision, which applies to contracts concluded before 12 September 2014; and (ii) the provision of assistance that is necessary to the maintenance and safety of existing capabilities within the EU.
2. Controls regarding the provision of services
a. Services in relation to projects regarding deep water oil exploration and production, arctic oil exploration and production, or shale oil projects in Russia
Whilst the previous services restrictions regarding the projects listed in the heading covered only the provision of technical assistance or brokering services related to certain oil-related equipment and technology as listed in Annex II of Reg. 833/2014, the New Regulation provides for a much wider prohibition on the direct or indirect provision of services associated to such projects. The New Regulation lists these type of services: drilling, well testing, logging and completion services and the supply of floating vessels. These services are now prohibited, irrespective of whether Annex II items are involved.
Again, grand-fathering provisions would apply in this context with respect to contracts entered into before 12 September 2014. The prohibition also does not apply where the services are necessary to prevent a serious impact on human health and safety or the environment.
b. Services related to goods and technology listed in the Common Military List
The New Regulation expands the prohibition included in Reg. 833/2014 to prohibit the provision of insurance and reinsurance services for the sale, supply, transfer or export of goods and technology listed in the Common Military List.
c. Access to capital markets
Under Reg. 833/2014 there were strict restrictions on access to capital markets in respect of transferable securities and money-market instruments with a maturity exceeding 90 days, issued after 1 August 2014 by certain listed banks (currently: Sberbank, VTB bank, Gazprombank, Vnesheconombank (VEB), Rosselkhozbank). The New Regulation expands these restrictions to cover transferable securities and money-market instruments with a maturity exceeding 30 days where these are issued after 12 September 2014 by the same banks.
In addition, the New Regulation prohibits the direct or indirect purchase, sale or provision of investment services for, or assistance in the issuance of, or otherwise deal with transferable securities and money-market instruments with a maturity exceeding 30 days and issued after 12 September 2014 by, specific entities:
(i) Providing military equipment or services (i.e., the New Regulation lists the following entities: OPK OBORONPROM, United Aircraft Corporation and Uralvagonzavod), or
(ii) Publicly controlled or with over 50% public ownership, with estimated total assets of over 1 trillion Roubles and its estimated revenues originating for at least 50% from the sale or transportation of crude oil or petroleum products (i.e., the New Regulation lists the following entities: Rosneft, Transneft and Gazprom Neft).
All of these restrictions also apply to entities that (i) are directly or indirectly more than 50% owned by the listed entities, or (ii) act on behalf of or at the direction of any listed entity.
d. Provision of loans
In addition, no new (syndicated) loans or credit with a maturity exceeding 30 days can be made directly or indirectly to the persons targeted by the access to capital markets restrictions (see above). This prohibition is subject to some limited exceptions.
3. Changes to the List of Designated Persons
24 new individuals (but no new entities) have been added to the designated party list under Council Regulation (EU) No 961/2014. This brings the total of individuals subject to sanctions under this specific regime to 119. The number of designated entities remains 23.
By way of a reminder, it is prohibited to make available, directly or indirectly, funds and economic resources to or for the benefit of a designated person. This prohibition is interpreted widely and would capture dealings with designated suppliers, banks, agents, distributors, other intermediaries etc., or those entities that are owned or controlled by a designated person.
A full list of EU/UK designated parties is available here.
The EU has publicly stated that it is closely monitoring the implementation of the current cease-fire. Thus the EU Council has invited the Commission to put forward proposals to amend, suspend or repeal the set of sanctions in force, in whole or in part. Whether or not formal steps will be taken in this direction will depend on the success of the cease-fire and other developments on the ground.
