EU Adopts Two New Sanctions Packages

Following their publication in the Official Journal on February 25, 2022,⁷ the following restrictive measures are now applicable:

• Additional asset freeze measures have been imposed against Russian politicians, members of the National Security Council and Belarusian individuals who facilitated the invasion of Ukraine, thereby prohibiting virtually all transactions with them and the entities they own or control.⁸

High-profile targets of these new asset freeze measures include Russian President Vladimir Putin, Russian Foreign Minister Sergei Lavrov, Russian Prime Minister Mikhail Mishustin, Russian Minister of the Interior Vladimir Kolokoltsev and former Russian President, now Deputy Chairman of the National Security Council, Dmitry Medvedev.

Exceptions or authorizations may nonetheless be obtained to receive, deal with or make available funds or economic resources that would otherwise be subject to an asset freeze measure, based on specific grounds listed in the relevant legal texts.

No such exception or authorization has, however, been introduced to allow for the winding down of operations with newly designated asset freeze targets.

• Travel ban measures against the individuals that have been designated as subject to asset freeze measures, except for President Putin and Foreign Minister Lavrov.
• New and revised grounds for imposing asset freeze and travel ban measures. Asset freeze measures can now be imposed against:

(i) Natural or legal persons, entities or bodies supporting, materially or financially, or benefitting from the Government of the Russian Federation, which is responsible for the annexation of Crimea and the destabilization of Ukraine;

(ii) Leading businesspersons or legal persons, entities or bodies involved in economic sectors providing a substantial source of revenue to the Government of the Russian Federation, which is responsible for the annexation of Crimea and the destabilization of Ukraine; and

(iii) Natural or legal persons, entities or bodies associated with them.

Similar amendments have been made to the grounds for imposing travel ban measures, although the latter only concern individuals.

These changes have notably been introduced to facilitate the imposition of travel ban and asset freeze measures against Russian oligarchs.

In addition, certain grounds for listing were eased by no longer requiring “active” support or implementation of actions or policies undermining or threatening the territorial integrity, sovereignty and independence of Ukraine, or stability or security in Ukraine” or “active” support to Russian decision-makers responsible for the annexation of Crimea or the destabilization of Eastern Ukraine (i.e., sanctions can be imposed where such support exists, even if not “active”).

• Restrictions on the export of goods and related services to or for use in Russia, which cover the sale, supply, transfer or export of and the provision of technical assistance, brokering services, other services, financing or financial assistance related to:

(i) Dual-use items, regardless of end-users.

This extends the existing restrictions on dual-use items, which previously targeted only specifically listed entities and military end-users.⁹

(ii) Goods and technology which might contribute to Russia’s military and technological enhancement or the development of the defense and security sector (“Strategic Items”).¹⁰

The list of Strategic Items covers a wide array of goods, technology and software, which can also have civilian applications, including electronics, computers, telecoms, information security, sensors and lasers, navigation and avionics, marine and aerospace and propulsion applications.

To a large degree, this list replicates (part of) the US list of end-used controlled items for anti-terrorism purposes.

(iii) Goods and technology suited for use in oil refining.¹¹

The purpose of these controls is to limit Russia’s capacities to upgrade oil refineries to meet Euro-6 standards, thereby limiting the access of Russian refined oil to the EU market.

(iv) Goods and technology suited for use in aviation or the space industry.¹²

This covers, in broad terms, aircraft, spacecraft and parts thereof, as covered by Chapter 88 of the EU’s Combined Nomenclature (i.e., its tariff classification schedule).

The relevant legal texts provide for limited exceptions or authorization mechanisms to enter into transactions that would otherwise be prohibited under the above restrictive measures.

Of particular relevance, the EU introduced:

(i) For dual-use items and Strategic Items:

– Exceptions to controls based on end-use, which can apply by simply declaring in customs declarations the use of that exception and notification of the competent authorities but without requiring a prior authorization.

These exceptions cover, for instance, humanitarian or medical purposes, temporary exports by news media or use as consumer communication devices.

– An authorization scheme for exports and services for the exclusive use of entities owned, or solely or jointly controlled by entities established in the EU or a “partner country,” currently defined as covering the US.

– An authorization scheme for contracts concluded before February 26, 2022, or ancillary contracts necessary for the execution of such contracts, provided that the authorization is requested before May 1, 2022.¹³

(ii) For goods and technology suited for use in oil refining, an exception for the execution until May 27, 2022, of contracts concluded before February 26, 2022, or ancillary contracts necessary for the execution of such contracts.

(iv) For goods and technology suited for use in aviation or the space industry, an exception for the execution until March 28, 2022, of contracts concluded before February 26, 2022, or ancillary contracts necessary for the execution of such contracts.

Except for goods and technology suited for use in aviation or the space industry, other authorization schemes are also available, based on specific grounds listed in the relevant legal texts.

• Introduction of a definition of “financing or financial assistance,” which reads as follows:

“financing or financial assistance” means any action, irrespective of the particular means chosen, whereby the person, entity or body concerned, conditionally or unconditionally, disburses or commits to disburse its own funds or economic resources, including but not limited to grants, loans, guarantees, suretyships, bonds, letters of credit, supplier credits, buyer credits, import or export advances and all types of insurance and reinsurance, including export credit insurance; payment as well as terms and conditions of payment of the agreed price for a good or a service, made in line with normal business practice, do not constitute financing or financial assistance.

• Specific authorization requirements for the export of and the provision of services related to dual-use items and Strategic Items to 64 Russian State-owned entities in the military and defense sectors.¹⁴ Such exports and services are only possible if authorized by the competent authorities based on specific grounds, i.e.:

(i) 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

(ii) Operations due under contracts concluded before February 26, 2022, provided an authorisation is requested before May 1, 2022.

• Restrictions on specific services related to goods and technology suited for use in aviation or the space industry, which cover, insofar as they relate to items subject to export controls:¹⁵

(i) Insurance and reinsurance; and

(ii) Overhaul, repair, inspection, replacement, modification or defect rectification of an aircraft or component, with the exception of pre-flight inspection.

• Restrictions on public financing or financial assistance for trade with or investment in Russia, subject to limited exceptions for (i) commitments established prior to February 26, 2022, and (ii) projects below 10 million EUR for EU-established small and medium-sized enterprises or for trade in food or for agricultural, medical or humanitarian purposes.
• Extension of restrictions on access to capital to four Russian State-owned and private banks,¹⁶ as well as eight Russian State-owned companies in the aerospace and defense, automotive, military, infrastructure, shipping and shipbuilding sectors.¹⁷

These restrictions prohibit:

(i) The purchase, sale, provision of investments services for, assistance in the issuance or otherwise dealing with certain transferable securities and money-market instruments issued by them after April 12, 2022; and

(ii) The making or being part of any arrangement to make new loans or credit to them after February 26, 2022.

These restrictions in addition extend to:

(i) Any non-EU legal entity whose proprietary rights are directly or indirectly owned for more than 50 percent by the newly targeted companies; and

(ii) Any EU or non-EU legal entity acting on behalf or at the direction of the newly targeted companies or entities they own for more than 50 percent.

The legal texts nonetheless provide for certain exceptions to the prohibition on new loans and credits for:

(i) Trade finance loans, i.e., loans or credit that have a specific and documented objective to provide financing for non-prohibited imports or exports of goods and non-financial services between the Union and any third state.

(ii) Drawdown or disbursements made under a contract concluded before February 26, 2022, subject to certain conditions regarding the terms and conditions of such drawdown or disbursements, as well as the existence of a contractual maturity date for repayment and for the cancellation of commitments, rights and obligations under the contract.

• Reinforcing existing restrictions on access to capital, as applicable to Sberbank, VTB Bank, Gazprombank, VEB, Rosselkhozbank, OPK Oboronprom, United Aircraft Corporation, Uralvagonzavod, Rosneft, Transneft and Gazprom Neft by targeting:

(i) All transferable securities and money-market instruments issued by them after April 12, 2022, regardless of their maturity date.¹⁸

(ii) All loans or credits granted to them after February 26, 2022, regardless of their maturity date.¹⁹

• Restrictions on the listing and provision of services on EU-registered or -recognized trading venues for transferable securities of Russian entities with over 50 percent public ownership as of April 12, 2022.
• Restrictions on financial inflows and investments from Russia to the EU, which consist of:

(i) A prohibition on deposits by Russian nationals, residents and entities exceeding 100 000 EUR per credit institution, coupled with specific reporting requirements for credit institutions;²⁰

(ii) A prohibition for EU central securities depositories from providing certain services for transferable securities issued after April 12, 2022, to any Russian national, resident or entity;²¹ and

(iii) A prohibition on the selling of euro-denominated transferable securities issued after April 12, 2022, or units in collective investment undertakings providing exposure to such securities to any Russian national, resident or entity.

The relevant legal texts provide for limited exceptions and/or authorization mechanisms to enter into transactions that would otherwise be prohibited under the above restrictive measures, based on specific grounds listed in the relevant legal texts.

• Restrictions on visa policies through the partial suspension of the application of the EU-Russia Agreement on the facilitation of the issuance of visas. The EU notably suspended certain provisions, which provide for:

(i) Documentary evidence requirements and multiple-entry visas for certain Russian officials, business people and representatives of business organisations;

(ii) Visa applications processing fees and waivers thereof, as well as length of procedures for processing visa applications; and

(iii) Visa-free travel for Russian diplomatic passports holders.

This suspension applies as from February 28, 2022.