EU Adopts Eighth Package of Sanctions Against Russia in Response to the Illegal Annexation of Ukraine's Donetsk, Luhansk, Zaporizhzhia and Kherson Regions

October 7, 2022 – On October 6, 2022, the European Union (“EU”) adopted an eighth package of restrictive measures (sanctions) against Russia in response to “Russia's continued escalation and illegal war against Ukraine, including by illegally annexing Ukrainian territory based on sham “referenda”, mobilizing additional troops, and issuing open nuclear threats”. The new sanctions include a series of measures intended to increase the pressure on the Russian government and economy, weaken Russia's military capabilities and make the Kremlin pay for the recent escalation.

The new measures were imposed through four Council Regulations and three Council Decisions.

1.       Individual restrictive measures

New designations

On October 6, 2022, the EU added 30 individuals and seven entities to its restricted parties list through Council Implementing Regulation 2022/1906. The new designations cover primarily those involved in illegal referenda in occupied regions of Ukraine, the Russian defense sector or propaganda and disinformation efforts.

In total, as of today, 1236 individuals and 115 entities have been added to the EU restricted parties list under the Russian program in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine.

Newly-designated individuals and entities are subject to an asset freeze and a prohibition from making funds and economic resources available to them, as well as, for individuals, a travel ban in the EU as of October 6, 2022.

New derogations

Pursuant to Council Regulation 2022/1905, competent authorities may now authorize the release of certain frozen funds or economic resources of, or the making available of certain funds or economic resources to:

• The Russian developer and manufacturer of vehicles and military equipment “PJSC KAMAZ”, for the wind-down, by December 31, 2022, of a joint venture or similar legal arrangement concluded before March 16, 2022, involving one of the Russian state-owned entities listed in Annex XIX to Council Regulation 833/2014.
• Russia’s central securities depository “National Settlement Depository (NSD)”, for the termination by January 7, 2023, of operations, contracts or other agreements concluded with, or otherwise involving that entity before June 3, 2022.

New listing criteria

Council Regulation 2022/1905 also broadened the designation criteria based on which individual sanctions can be imposed. Sanctions could now be imposed on natural or legal persons who facilitate the circumvention of EU sanctions.

2.       State-owned entities

Sanctions targeting the Russian Maritime Shipping Register

Pursuant to Council Regulation 2022/1904, the Russian Maritime Shipping Register, which performs activities related to the classification and inspection of Russian and non-Russian ships and crafts, has been added to Annex XIX of Council Regulation 833/2014, prohibiting EU operators to engage in any transaction with this entity and certain of its affiliates.

In addition, the recognition of the Russian Maritime Register of Shipping under rules and standards for ship inspection and survey investigation, as well as technical requirements for inland waterway vessels, is withdrawn.

Exemptions

New exemptions allow:

• The execution until January 8, 2023, of contracts concluded with the Russian Maritime Shipping Register before October 7, 2022.
• The reception of payments due from the Russian Maritime Shipping Register pursuant to contracts performed before January 8, 2023.

Prohibition on holding posts in governing bodies

Council Regulation 2022/1904 also prohibits, as from October 22, 2022, EU nationals from holding any posts in the governing bodies of State-owned entities listed in Annex XIX of Council Regulation 833/2014 and certain of their affiliates.

3.       Trade sanctions

Council Regulation 2022/1904 makes significant amendments to the lists of items that are subject to import- or export-related restrictions, while also providing for new exemptions and/or derogations.

Iron and steel (import-related sanctions)

• Extension of the list of iron and steel products – The list ofiron and steel productsin Annex XVII of Council Regulation 833/2014 has been broadened through a Part B that covers all products categorized in the EU’s Combined Nomenclature as “iron and non-alloy steel” (headings 7206 to 7217), “stainless steel” (headings 7218 to 7223), “other alloy steel; hollow drill bars and rods, of alloy or non-alloy steel” (headings 7224 to 7229) and “articles of iron or steel” (headings 7301 to 7326).
• Extension of import, purchase and related services prohibition to iron and steel products processed in third countries incorporating iron and steel products originating in Russia – This new prohibition applies as from September 30, 2023, with longer phase-in periods for:
  • Products incorporating steel products originating in Russia of CN code 7207 11, covered as from April 1, 2024;
  • Products incorporating steel products originating in Russia of CN code 7207 12 10, covered as from October 1, 2024.
• New exemptions for:
  • Items listed in part B only, until January 8, 2023, for “prior contracts” concluded before October 7, 2022, except for goods falling under CN codes 7207 11 and 7207 12 10;
  • Goods falling under CN code 7207 11 are subject to a specific exemption based on quotas until March 31, 2024;
  • Goods falling under CN code 7207 12 10 are subject to a specific exemption based on quotas until September 30, 2024.
• New derogation for all items in Annex XVII of Council Regulation 833/2014, for certain necessary transactions related to civil nuclear capabilities or facilities, medical radioisotopes and similar medical applications, environmental radiation monitoring and civil nuclear cooperation.

Goods which generate significant revenues for Russia (import-related sanctions)

• Extension of the list of goods that generate significant revenues for Russia – The list ofgoods that generate significant revenues for Russia in Annex XXI of Council Regulation 833/2014 has been broadened through a Part B that covers inter alia cigars and cigarettes; chemicals; personal care products and cosmetics; wood pulp and paper; elements used in the jewelry industry; machineries and appliances; plastics and vehicles and parts.
• New exemptions for:
  • Purchases in Russia necessary for EU and Member States diplomatic and consular representations or for the personal use of Member States nationals and their immediate family members;
  • For items listed in part B, until January 8, 2023, for “prior contracts” concluded before October 7, 2022.
• New derogation for all items listed in Annex XXI of Council Regulation 833/2014, for certain necessary transactions related to civil nuclear capabilities or facilities, medical radioisotopes and similar medical applications, environmental radiation monitoring and civil nuclear cooperation.

Oil and petroleum products transport and the G7-led oil price cap (import-related sanctions)

• Previously, prohibitions only applied to services related to the transport to third countries of Russian crude oil or petroleum products, as listed in Annex XXV of Council Regulation 833/2014 – Transport to third countries, as such, was not prohibited.
• Introduction of legal basis for an oil and petroleum products transport ban, based on the G7-led oil price cap – Provisions have been added to prohibit transport to third countries of Russian crude oil or petroleum products, as listed in Annex XXV of Council Regulation 833/2014 as of December 5, 2022, for crude oil (CN 2709 00) and as of February 5, 2023, for petroleum products (CN 2710). However:
  • This prohibition only enters into force once the first Council decision relating to the G7-led oil price cap is adopted;
  • This prohibition would not apply if the purchase price per barrel does not exceed a price to be set in annexes to be adopted.
• New exemptions for transport to third countries of Russian oil and petroleum products and related services – Prohibitions would not apply in the following cases:
  • The purchase price per barrel of such products does not exceed a price to be set in annexes to be adopted;
  • The goods originate in a third country and are only being loaded in, departing from or transiting through Russia, provided that both the origin and the owner of those goods are non-Russian; or
  • Transport or services relating to products mentioned in Annex XXIX of Regulation 833/2014, to the third countries mentioned therein, for the duration specified in that Annex. Currently, this covers transport to Japan and related services for crude oil originating in the Sakhalin-2 Project until June 5, 2023.
• Extension of existing exemption for services related to the transport to third countries of Russian petroleum products listed in Annex XXV of Council Regulation 833/2014 – The validity of the “prior contract” exemption for contracts concluded before June 4, 2022, has been extended until February 5, 2023, for petroleum products falling under CN code 2710 (the exemption is still valid until December 5, 2022, for crude oil falling under CN code 2709 00);
• New exemptions for services related to the transport to third countries of Russian petroleum products listed in Annex XXV of Council Regulation 833/2014 – New exemptions have been introduced to allow for:
  • The payment of insurance claims after December 5, 2022, for crude oil (CN 2709 00) and after February 5, 2023, for petroleum products (CN 2710) on the basis of insurance contracts concluded before June 4, 2022, provided the insurance coverage has ceased by the relevant date;
  • The provision of pilot services necessary for reasons of maritime safety.

Firearms, parts and essential components and ammunition (export-related sanctions)

• New export prohibition – It is now prohibited to sell, supply, transfer or export, as well as provide technical assistance, brokering services, other services, financing or financial assistance to or for use in Russia related to firearms, their parts and essential components and ammunition as listed in Annex I to Regulation (EU) No 258/2012.

Defense sector (export-related sanctions)

• Extension of the list of “advanced technology” items – The list of “advanced technology” in Annex VII of Council Regulation 833/2014 has been expanded to cover:
  • Goods which have no practical use other than for capital punishment, torture or other cruel, inhuman or degrading treatment or punishment, which are also covered by Regulation 2019/125;
  • Certain chemical substances and nerve agents;
  • A part B covering certain semiconductor devices, electronic integrated circuits and photographic cameras.

Aviation and Space Sector (export-related sanctions)

• Extension of the list of goods and technology suited for use in aviation or the space industry – The list ofgoods and technology suited for use in aviation or the space industry in Annex XI of Council Regulation 833/2014 has been broadened through a Part B that covers certain oils, tires, brakes, reflectors, aerials parts and control and testing machineries, instruments and apparatus.
• New exemption – For items listed in Part B, an exemption applies until November 6, 2022, for “prior contracts” concluded before October 7, 2022.
• New derogation – For items listed in Part B, a derogation can be obtained for transactions necessary for the production of titanium goods required in the aeronautic industry, for which no alternative supply is available.

Goods which could contribute to the enhancement of Russian industrial capacities (export-related sanctions)

• Extension of the list of goods which could contribute to the enhancement of Russian industrial capacities – The list ofgoods which could contribute to the enhancement of Russian industrial capacities in Annex XXIII of Council Regulation 833/2014 has been broadened to include certain coal, lignite, peat and coke products.
• New exemption – For the newly added items, an exemption applies until January 8, 2023 for “prior contracts” concluded before October 7, 2022.
• New derogation – Forall items covered by Annex XXIII of Council Regulation 833/2014, a new derogation can be obtained for necessary transactions related to civil nuclear capabilities or facilities, medical radioisotopes and similar medical applications, environmental radiation monitoring and civil nuclear cooperation.

4.       Transport:

• Vessels certified by the Russian Maritime Register of Shipping will be prohibited access to EU ports and locks after April 8, 2023 (in addition to Russian-flagged vessels and previously Russian-flagged vessels re-flagged after February 24, 2022).
  • The definition of “vessels” does not apply to vessels certified by the Russian Maritime Register of Shipping, meaning that any vessel certified thereby would be covered by the prohibition.
• A new derogation is foreseen for previously Russian-flagged vessels re-flagged after  February 24, 2022, in case the relevant vessel a) has flown the Russian Federation flag under a bareboat charter registration initially effected prior to February 24, 2022, b) has resumed its right to fly the flag of the underlying Member State registry before  January 31, 2023, and c) is not owned, chartered, operated or otherwise controlled by a Russian national or any legal person, entity or body incorporated or constituted under the law of the Russian Federation.

5.       Financial sector/Crypto-assets:

The value threshold is no longer applicable for restrictions on the provision of crypto-asset wallet, account or custody services to Russian nationals, residents or entities (previously such services were allowed if the total value of crypto-assets did not exceed €10,000).

6.       Trusts:

The exemption for restrictions on services related to trusts and similar legal arrangements has been extended to situations where the trustor or beneficiary is an EEA or Swiss citizen, in addition to EU citizens and EU, EEA or Swiss residents.

7.       Services restrictions:

New prohibitions target the provision of architectural and engineering services, legal advisory services and IT consultancy services to the Government of Russia or Russian entities.

• Exemptions apply for the provision of the aforementioned services, if:
  • Strictly necessary for the termination by January 8, 2023, of “prior contracts” concluded before October 7, 2022;
  • Strictly necessary for the exercise of the right of defense in judicial proceedings and the right to an effective legal remedy;
  • Strictly necessary to ensure access to judicial, administrative or arbitral proceedings in a Member State, or for the recognition or enforcement of a judgment or an arbitration award rendered in a Member State, provided that such provision of services is consistent with the objectives of Regulations 833/2014 and Regulation 269/2014;
  • Intended for the exclusive use of legal persons, entities or bodies established in Russia that are owned by, or solely or jointly controlled by, a legal person, entity or body which is incorporated or constituted under the law of a Member State, a country member of the European Economic Area, Switzerland or a partner country as listed in Annex VIII;
  • Necessary for public health emergencies, the urgent prevention or mitigation of an event likely to have a serious and significant impact on human health and safety or the environment, or as a response to natural disasters;
  • Necessary for software updates for non-military use and for a non-military end user, where permitted under export-related restrictions (with reference made to Articles 2(3)(d) and 2a(3)(d) in relation to goods listed in Annex VII of regulation 833/2014).
• Derogations apply for the provision of the aforementioned services, whereby authorizations can be requested where the aforementioned services are necessary for:
  • Humanitarian purposes;
  • Civil society activities that directly promote democracy, human rights or the rule of law in Russia;
  • The functioning of diplomatic and consular representations of the EU, Member States or partner countries in Russia;
  • Ensuring critical energy supply within the Union and the purchase, import or transport into the Union of titanium, aluminum, copper, nickel, palladium and iron ore;
  • Ensuring the continuous operation of infrastructures, hardware and software which are critical for human health and safety, or the safety of the environment;
  • The establishment, operation, maintenance, fuel supply and retreatment and safety of civil nuclear capabilities, and the continuation of design, construction and commissioning required for the completion of civil nuclear facilities, the supply of precursor material for the production of medical radioisotopes and similar medical applications, or critical technology for environmental radiation monitoring, as well as for civil nuclear cooperation, in particular in the field of research and development; or
  • The provision of electronic communication services by Union telecommunication operators necessary for the operation, maintenance and security, including cybersecurity, of electronic communication services, in Russia, in Ukraine, in the Union, between Russia and the Union, and between Ukraine and the Union, and for data center services in the Union.
• Alignment of exemptions and derogations – Exemptions and derogations in relation to the prohibitions on accounting, auditing, bookkeeping, tax consulting services or business and management consulting or public relations services have been aligned, with the exception of:
  • The exemption for “prior contracts”, which was only valid until July 5, 2022;
  • The exemption for services necessary for public health emergencies, the urgent prevention or mitigation of an event likely to have a serious and significant impact on human health and safety or the environment, or as a response to natural disasters; and
  • The exemption for software updates for non-military use and for a non-military end user, where permitted under export-related restrictions.

8.       Extension of restrictive measures to annexed Ukrainian territories

Pursuant to Council Regulation 2022/1903, sanctions applicable to the non-Ukraine-government-controlled areas of Donetsk and Luhansk have been extended to the non-Ukraine-government-controlled areas of Zaporizhzhia and Kherson.

9.       EU FAQs

Since June 13, the European Commission has issued a consolidated version of its FAQs, last updated on September 19, 2022, on the implementation of Council Regulation 833/2014 and 269/2014 on its dedicated webpage.